Advanced BioFuels USA – Washington State Is Moving to Cap Carbon Emissions

by Maxine Joselow (Washington Post) ... In 2021, after mounting a climate-centric presidential campaign, (Governor Jay) Inslee signed into law the Climate Commitment Act, which established an ambitious program to cap the state’s carbon emissions. The “cap-and-invest” program took effect in January, and today, the state will take a key step toward implementing it.

Cap-and-invest programs can seem complicated, but their main function is simple: They make it expensive to emit climate pollution. At the moment, companies don’t have to pay any federal fines for emitting carbon pollution in most of the country, since Congress has never approved a carbon tax or another mechanism for pricing carbon.

Washington’s program sets a limit, or “cap,” on overall greenhouse gas emissions in the state and requires businesses to buy “allowances” for their emissions that will become increasingly expensive.
Businesses that emit more than 25,000 metric tons of carbon dioxide per year must purchase allowances at auctions held by the Washington Department of Ecology or on the secondary market. The department will hold its first auction today.
The state legislature will eventually invest the revenue from the sale of allowances — an estimated $1.7 billion over the next two years — in efforts to further reduce greenhouse gas emissions.

California became the first state to launch a cap-and-trade program in 2013, while Oregon established one last year. But until now, a similar program hasn’t existed in Washington, which has an aggressive goal of cutting emissions 95 percent below 1990 levels by 2050.

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Environmental justice

Washington policymakers designed the Climate Commitment Act to not only prioritize combating climate change, but also helping communities that have been disproportionately affected by pollution.

In addition to addressing greenhouse gases, the law directs the Washington Department of Ecology to reduce harmful air pollutants — such as ozone and fine particles — in communities that have breathed dirty air for decades.
The law also requires the department to invest at least 35 percent of the revenue in projects that reduce emissions in disadvantaged communities, while another 10 percent must go toward projects that benefit Native American tribes.
The department must also consult with an environmental justice council when deciding how to spend the revenue. READ MORE

Tensions, gas prices rise as Washington state auctions carbon (E&E News Climatewire)

Excerpt from E&E News Climatewire: 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.

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.

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.

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. READ MORE