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News / Northwest

Washington cap-and-trade program brings in $1.3B, fueling calls to address windfall

By JERRY CORNFIELD, Washington State Standard
Published: September 7, 2023, 5:19pm
2 Photos
Gov. Jay Inslee tours the garden at Hockinson Heights Elementary School with students Wednesday morning. He highlighted examples of what can be done with carbon auction dollars.
Gov. Jay Inslee tours the garden at Hockinson Heights Elementary School with students Wednesday morning. He highlighted examples of what can be done with carbon auction dollars. (amanda cowan/The Columbian) Photo Gallery

SEATTLE – As millions more in state revenue rolls in from Washington’s marquee policy to combat climate change, discussions are heating up over what to do with the windfall.

The cap-and-trade program has brought in $1.3 billion so far. At this pace, the state will have a billion more than expected by next year.

On Wednesday, a coalition of environmental groups, oil refiners, and utilities urged lawmakers to steer some of the bounty into boosting sales of electric vehicles and reducing the hit to consumers’ wallets, possibly with energy rebates for lower-income households.

Around the same time the group was holding a press event in Seattle to highlight its proposals, Gov. Jay Inslee was in southwest Washington, touting how the money could be used to help subsidize solar energy and retrofit buildings with heat pumps.

But amid talk of what to do with all of the money, others are raising alarm about how companies are passing the cost to consumers, including with higher gasoline and energy prices. And some, including a Democratic state senator who is running for governor, are calling for reforms to rein in the price of the pollution allowances central to the “cap-and-invest” program.

Michael Mann, the executive director of Clean and Prosperous Washington, the coalition that held the Seattle event, made the case that while the program is having an effect on expenses for Washington residents and businesses, it’s not as serious as the threat of letting carbon emissions go unchecked.

“The existential crisis we face is climate,” he said at the news conference. “What we need now is a surge in our climate commitment expenditures.”

Other supporters of the program agree and note that, while it has economic costs, so do carbon emissions and climate change, which can have consequences like harm to public health from air pollution and property damage from more extreme weather.

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Raking it in from pollution

Mann and others unveiled the coalition group’s wish list a short time before it was learned the state expects to net $357 million from its Aug. 30 auction of pollution allowances.

On Wednesday, the Department of Ecology reported 8,585,000 pollution allowances sold for $63.03 apiece – the highest price thus far. One allowance equals one metric ton of carbon emissions.

The auction will generate $541.1 million, of which $356.6 million will go into the state treasury and $184.5 million will be distributed to natural gas utilities.

The smaller amount is from the sale of free allowances provided to utilities under the law. It must be spent to assist ratepayers, such as with a credit or rebate against any increase tied to the utility’s cost of compliance with the climate law.

With its share, Washington will have raised $1.28 billion from its first three quarterly auctions and one special sale from what’s known as the Allowance Price Containment Reserve. The reserve auctions are triggered when allowance prices pass a certain level. A second one is set for Nov. 8 and the year’s final regular auction is scheduled for Dec. 6.

The current two-year state budget is the first in which the governor and lawmakers are spending auction proceeds.

They spread roughly $2 billion among the operating, capital and transportation budgets. That money will go toward electrifying ferries and ports, lowering costs for heat pumps, investing in transit, and assisting tribal communities dealing with disproportionate fallout from climate change.

During a visit to Hockinson School District in Clark County on Wednesday Inslee touted examples of what can be done with the dollars.

Hockinson recently installed new heat pump systems and solar panels. These will reduce energy usage, save taxpayers money and provide students a safer, healthier future, he said.  And they can be replicated in other communities across the state.

“Anybody who says the Climate Commitment Act isn’t working oughta come to Hockinson,” he said.

Proposals for spending and reforms

Mann predicted the state will wind up with at least a billion dollars more than budgeted given the pace of auction proceeds thus far.

A portion could be used to buy down the sales tax on every electric or zero-emission vehicle sold in the next two years and to expand incentives made available to buyers at the time of purchase.

The state also could reduce or rescind car tab and electric vehicle fees, and tap Climate Commitment Act dollars to fill the gap. He also suggested lower-income households receiving a Working Families Tax Credit be provided a one-time bonus payment to offset higher energy costs.

“A billion dollars can buy a lot of infrastructure and it can provide a lot of incentives and we are calling on the Legislature to use that money wisely to move us toward lower transportation costs,” he said.

The cap-and-trade program, a component of Washington’s Climate Commitment Act, puts a price on emissions which the state hopes will motivate large industrial polluters, such as oil refineries and energy utilities, to reduce their emissions. Washington has a goal of erasing fossil fuel emissions statewide by mid-century.

Nine months into the program, the cost of those allowances is soaring, and regulated businesses are making consumers share in the financial burden.

This shows the law is working and regulated companies are taking it seriously, Mann argued.

“The higher settlement prices have had an impact on gas prices because oil companies are no longer able to use our skies and our waters to pollute for free,” he said “There is a cost to that.”

Sen. Mark Mullet, D-Issaquah, on Wednesday, released proposed legislation to modify compliance schedules in the law for companies and align the auction price of allowances with California where they are about half as expensive. He said it would achieve the same climate goals with less economic pain for residents.

“The climate crisis is real, and the investments made possible by the [Climate Commitment Act] in clean energy, green jobs, and protecting folks from pollution are important,” Mullet, who is running for governor in 2024, said in a statement. “It’s clear the CCA could use some work to lower the impact it’s having on gas prices and help the families and small businesses who are feeling the hit.”

His bill also would establish a remittance program for farmers to provide them cash or credits to cover compliance costs they incur. He, too, would use the higher-than-anticipated revenues to lower car tabs statewide for two years.

A ‘broken’ law

Sheri Call, president and CEO of the Washington Trucking Associations, expressed concern the coalition’s ideas could reduce a source of dollars for maintaining the state’s highway system and result in truckers getting tapped to make up the difference.

“Speaking on behalf of an industry that already feels like it’s in a chokehold with the highest fuel prices in the nation, we can’t take anymore and do not look forward to being asked to ante up to meet highway obligations when a large chunk of the CCA money that is committed to the transportation budget is dedicated to alternative transportation,” she wrote in an email.

Todd Myers, environmental director at the Washington Policy Center, a conservative think tank, said the climate law “needs a pretty significant overhaul” beginning with an easing of the aggressive emission reduction targets that drive up allowance prices. That leads to higher fuel, natural gas and electricity bills, he said.

“The Climate Commitment Act is broken,” he began in an email.

And using the auction proceeds to try and boost electric vehicle sales is not going to clean up Washington’s air, he said.

“Of all the ways to effectively cut emissions at a reasonable cost, more money for $58,000 cars is probably one of the worst,” he said.

Paula Sardinas, founder of the nonprofit Purpose Driven Girl and member of a state panel helping draft a transportation electrification strategy for Washington, joined Mann at the news conference to push for “pocketbook incentives” including for electric vehicle sales.

“We know that people are complaining that the gas prices are hurting. We’ve got billions of dollars with more coming in,” she said. “Those dollars need to be returned to seven million Washingtonians in a way that they can talk about and feel at their kitchen table.”

Reporter Laurel Demkovich contributed to this report.


The Washington State Standard is a nonprofit, nonpartisan news outlet that provides original reporting, analysis and commentary on Washington state government and politics. We seek to keep you informed about Washington’s most pressing issues, the decisions elected leaders are making, how they are spending tax dollars and who is influencing public policy.

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