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08
June 2023
By Adam Aton
Tensions, gas prices rise as Washington state auctions carbon
Washington Gov. Jay Inslee (D) talks to
reporters on April 19, 2017, at the Capitol in Olympia, Wash. Ted
S. Warren/AP Photo
Washington state’s new cap-and-invest system is
raising hundreds of millions of dollars for climate action while
pricing emissions at a much steeper cost than California, the only
other state with this kind of system.
Climate hawks are thrilled that — after years of
failed proposals — the Evergreen State has a path to meet the Paris
climate agreement’s goals. But anger is rising among other groups,
including some that had supported passage of the climate law, which
say Democratic officials did not prepare the public for the costs.
Since the law went into effect in January,
Washington’s gasoline prices have climbed more steeply than
neighboring Oregon.
Farmers and fishermen say they’re paying
surcharges on fuel deliveries despite the law exempting them. And some
Native American leaders are publicly clashing with Gov. Jay Inslee (D)
over his refusal to exempt tribal gas stations from the law.
Meanwhile, Washington’s auctions of carbon
allowances are selling out. Companies bought all 8.6 million
allowances the state offered last week at its second-ever auction,
after buying all 6.2 million allowances the state auctioned in
February. And the latest settlement price of roughly $56 per allowance
— compared with about $30 charged by California — was high enough to
trigger an extra auction of allowances later this summer.
Progressives are trying to tout the policy’s
early successes while blaming its initial costs on industry.
Environmentalists say high demand for allowances
validates the strength of Washington’s model. The revenues from those
auctions will pay for mostly climate programs. And subsidies from the
Inflation Reduction Act will make it cheaper for businesses to cut
emissions and require fewer allowances.
“The bottom line is it’s going overwhelmingly
very, very well,” said Reuven Carlyle, a Democrat who sponsored the
cap-and-invest program’s parent law, the Climate Commitment Act,
before leaving the state Senate earlier this year.
The market is valuing Washington’s emissions
allowances as an appreciating asset, or something that will be more
valuable in the future, he said, meaning businesses are taking
seriously Washington’s plans to ratchet down emissions.
The state’s cap-and-invest system applies to
businesses that emit more than 25,000 metric tons of greenhouse gases,
though lawmakers exempted agriculture, aviation and some other sectors
exposed to international trade.
Despite the exemptions, operators in those
sectors have complained that fuel companies are still making them pay
a surcharge to cover the costs of the climate law. Some of those
companies were referred to the attorney general, and two have
reportedly stopped, but most continue to charge farmers extra, according
to NBC’s KING 5.
The Washington Farm Bureau blamed the state for
the fuel company surcharge. The law imposes a fine of $10,000 per day
per violation for businesses that don’t cover their emissions with
allowances. Exempting farmers is too risky for suppliers, according to
the Farm Bureau.
“The threat of such steep penalties is what
compels suppliers to continue charging the carbon price as they have
not been provided by the Department of Ecology with the tools to do
otherwise,” the group said in a statement.
Inslee last year predicted the climate law would
have a negligible impact on gas prices. “We’re talking about pennies,”
he said.
But the impact seems to be greater than that.
Native American leaders last week met with Inslee to ask for an
exemption for their gas stations, saying the higher prices were
squeezing tribes with few resources. Inslee declined, saying it would
undercut the law and that tribes stand to benefit from the revenue it
would generate.
Tom Wooten, chair of the Samish Nation, told
the Seattle
Times that when tribes “expended our political capital” to
help pass the climate law, “we didn’t realize, no one realized” what
the costs might be.
‘An enormous difference’
Washington’s gas prices typically have moved in
tandem with Oregon’s, but in January the two states started to
diverge, said Patrick De Haan, head of petroleum analysis at GasBuddy.
As of Wednesday, Washington’s average gas price had climbed to $4.73,
about 41 cents higher than Oregon’s, according to AAA.
“I would blame Washington’s carbon tax,
absolutely,” De Haan said, referring to the carbon cap.
The Department of Ecology recently drew criticism
after quietly editing its webpage describing the climate law’s
impacts: First, it said the program was expected to affect
Washington’s gas prices by 1 to 3 percent; it was changed
to say the department expects an impact of 1 to 3 percent on the
entire state economy.
Claire Boyte-White, a spokesperson for the
department, said officials had made some “small changes” that were
“editorial in nature and do not represent any change in Ecology’s
prior analysis, or our understanding of the economic impacts of these
programs.”
Todd Myers of the conservative Washington Policy
Center, who first flagged that change, said it amounted to “an
enormous difference in terms of the impact.” And he said it fit a
pattern of the Inslee administration trying to cover up the shortfalls
in his policies.
“I think what’s going on in Washington is the
politics of these rules … five months in are catching up with the
governor,” he said, adding that the governor relied on “falsehoods” in
order to pass the law.
Progressives argue that fossil fuel companies are
using the new law as cover to price gouge. Firms don’t have to start
turning in their allowances for this year’s emissions until November
2024, but they’re already levying surcharges without disclosing what
that extra money is actually paying for.
“We don’t know whether that surcharge is paying
dollar-for-dollar what the basic costs of allowances will be, or
whether it’s a complete fabrication, or whether they’re eating some of
those costs,” said Carlyle, the former state senator, who is now a
co-founder of Earth Finance.
He also noted that the oil sector booked record
profits in 2022. “So the fact that they’re arguing that they have to
pass on every penny, when they don’t, shows that it’s a business
decision, and they’re charging what the market will bear,” he said.
The Inslee administration says it’s too soon to
assess the true impact of cap-and-invest on the marketplace, but
Washington already has included $2.1 billion of revenues from the law
into the state budget.
Mike Faulk, Inslee’s deputy communications
director, said fuel prices move for a variety of factors but that they
have nevertheless declined about 70 cents over the past year.
“No one is surprised that rapacious oil companies
experiencing record profits are choosing to pass their compliance
costs to customers — sometimes even for fuels that are exempt under
the law,” he said. “These companies also expect us to take on the
costs of continued reliance on fossil fuels, costs that come in the
form of homes destroyed by fire, asthma in children, crops destroyed
by drought and streets wiped out by floods.”
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