Olympia Update

OLYMPIA–Washington held its first carbon allowance auction on March 7 under the new cap-and-invest law passed in 2021. Results from the first auction were announced on March 14, in which industry participants and speculators bid on a limited number of "allowances" offered by the state.

California implemented the nation's first multi-sector cap-and-trade program in 2015, which covers virtually its entire economy. Washington's Climate Commitment Act sets more aggressive goals than California. The final tally on Washington's first auction of "allowances" resulted in a $48.50 per metric ton of carbon dioxide equivalent, double the price of carbon credits in the California market.

Industry estimates the impact on fuel prices to add 38.4 cents for unleaded gasoline and 47.4 cents for diesel. As the cap is tightened and fewer "allowances" are offered in future markets, prices are expected to increase up to 51 cents for gasoline and 63 cents for diesel by 2027.

When fuel prices rise, effects are felt economy-wide. The impacts of Washington's new cap-and-invest are already being felt as fuel distributors began adding a fee onto fuel prices in anticipation of the first auction. Previously, Washington state had the nation's third-highest gas tax at 49.4 cents. With the added 38.4 cents for emissions caps, Washingtonians are paying a whopping 87.8 cents in fees and taxes for gas and an added 96.8 cents for diesel. These are the highest in the nation. Subsequent trades by speculators are inching those prices even higher.

Ecology failed to exempt fuels for aviation, marine and agriculture use. While absorbing these unexpected costs, air travel will be more expensive, and shipping costs will drive prices of things you need. The farming community cannot pass their carbon fees to customers, and some will be unable to survive the added expense to their operations.

The auction also included natural gas producers and suppliers. Food processing requires fuel to prepare food for grocery stores and restaurants at home and abroad. Homeowners and apartment dwellers will feel the pinch if served by a utility dependent on natural gas for electricity generation and providing gas service for home heating and other appliances.

Revenues from the sale of allowances are to be used to help overburdened communities, but the boundaries are not clearly defined. How those dollars are spent may not relieve the difficulties most will have in balancing the added costs to their family budgets.

Rep. Joe Schmick and I introduced a bill (House Bill 1780) to recover losses incurred by farms that were not supposed to pay the carbon fee. I have introduced bills that direct funding to build durable improvements to our infrastructure and keep jobs here in Washington. These include House Bill 1190, House Bill 1365, and House Bill 1381.

We must correct the number of allowances by calculating the emissions and offsets more fairly. The market needs transparency and oversite. I introduced a proposal (House Bill 1659) to develop a security and exchange type commission to assure that speculation on the market does not create artificially high prices for greenhouse gas emissions in the Washington market, currently run exclusively by the Department of Ecology.

Keeping Washington affordable as we incorporate an economy-wide cost for greenhouse gas emissions is a daunting challenge. I wanted to make you aware of what is happening.

Rep. Mary Dye, R-Pomeroy.