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The Impact – Carbon Policies, Goals, and Gas Prices

Mike McClanahan profile by Mike McClanahan

Senate energy policy leaders from opposite sides of the aisle weigh in on the Climate Commitment Act’s carbon pricing program and greenhouse gas reduction deadlines. 

The Climate Commitment Act requires covered entities to reduce their total greenhouse gas emissions to 95% below 1990 levels by the year 2050. 

The law calls for faster reductions in carbon emissions than any other similar state program. 

It applies to industries that produce more than 25,000 metric tons of greenhouse gas emissions annually, as well as transportation related gasoline and diesel exhaust, residential and commercial electricity, and residential and commercial natural gas. 

About 25% of the state’s total carbon emissions are not covered by the act. That includes fuel exhaust from airlines and most ships.

The 2021 law established a form of cap-and-trade program in Washington, officially titled a “cap-and-invest” program due to the specific spending guidelines built into the law. Spending priorities outlined by the law include an emphasis on transit, electrification, and energy efficiency projects. Some of the funding is also required to be directed towards communities disproportionately impacted by pollution.  Some industries which were designated emissions-intensive trade exposed entities aren’t required to cut their emissions as quite as much from year to year during the first phase of the program.  

The Washington State Department of Ecology is in charge of administering the program, which requires covered entities to cover all of their emissions with allowances, which are essentially permits equal to one metric ton of CO2 or its equivalent each. The program calls for electric and natural gas utilities to receive a certain amount of cost-free allowances for their emissions, with some conditions.

The sale of allowances during the first four auctions raised more than $1.4 billion. State proceeds totaled around $1.2 billion and $184 million in proceeds went to consigning entities, according to Ecology.

So far the settlement price of allowances has been high enough to trigger a follow up cost containment auction in two of the first three quarterly auctions.  Two more auctions are planned before the end of the year.

The role of the new program on increased gasoline and diesel fuel prices has been a point of contention and debate between critics and supporters of the law.

“When you look at the price of auctions themselves, certainly it will have an impact. How much is up for debate, just because these are credits, they are assets that people are buying. Some companies might actually profit off of them,” said Sen. Joe Nguyen, D-White Center. “In terms of how things operate in Washington state or in California, it’s the same. There’s only one oil pipeline that goes from Alaska and Canada, through those states. We only have a handful of refineries, so there’s less competition.”

“Hawaii has lower fuel prices than we do. I was there a month ago on a business trip and Hawaii doesn’t have refineries and they’ve got lower fuel prices than we do. We are third in the nation in fuel prices,” said Sen. Drew MacEwen, R-Shelton. “What I know is that Washington families are suffering, especially in my district. In many of the rural areas it is unaffordable, and we can do better.”

“Historically, for the past few decades. Washington state has always been one of the top five fuel costs in the United States way before any climate policies are ever in place. When it comes to fuel costs, we’ve been held hostage for a long time. Part of the programs that we’re doing here is to release that hostage situation that we’re in and give us alternatives,” said Nguyen.

“When you look at how we’re spending the money from the CCA, I believe that we’re putting a lot of money towards things that are not going to lessen that burden,” said MacEwen. “We have a transmission system that’s not going to be able to support the goals that are in here. We don’t have the charging capability, especially in rural areas, and putting it in a town or a park and ride isn’t enough. It’s just not practical. Transit systems and the like, that works in a metro area, absolutely. But take the guy that works in the shipyard in Bremerton, but lives in Matlock. There’s not a transportation system for that.”