OLYMPIA — Two House Republicans have introduced a bill to set up an independent watchdog to police Washington’s emerging multibillion-dollar carbon-credit market.

The Department of Ecology has no experience regulating what will amount to speculating in a commodity, said Rep. Mary Dye, R-Pomeroy. She is co-sponsoring the bill with Rep. Mark Klicker, R-Walla Walla.

If market manipulation inflates allowance prices, energy prices also will balloon, said Dye, the top-ranking Republican on the House Environment and Energy Committee.

“It (cap-and-trade) is an economy-wide price on the cost of fossil fuels,” she said. “It hits at the base of the economy, and we want to make sure people have confidence in how it’s being run.”

The Legislature passed the Climate Commitment Act to cap and force reductions in greenhouse gas emissions from oil refineries, natural gas suppliers and some other manufacturers.

Businesses covered by the law must acquire allowances to match their emissions. Each allowance equals one ton of carbon. The first of four auctions this year will be Feb. 28.

In filings with the Securities Exchange Commission, some energy suppliers have indicated they anticipate passing on cap-and-trade compliance costs to customers.

Ecology projects the cap-and-trade auctions will raise $3.66 billion over the next five years. Gov. Jay Inslee and Democratic-budget writers expect the revenue to expand state spending.

The auctions will be open to investors who could resell allowances on an unregulated secondary market to businesses that must acquire allowances to keep operating.

House Bill 1659 calls for the nonpartisan Washington State Institute for Public Policy to recommend the makeup and duties of a watchdog agency.

Dye and Klicker compared what they had in mind to the federal SEC. Without a watchdog, Ecology may have a conflict of interest in reporting bad news about cap-and-trade’s success or administration, according to their bill.

“The people who wrote the rules are the people who are receiving the revenue from the auction and who are distributing the revenue,” Dye said.

Ecology declined to comment on the bill.

In writing auction rules, Ecology acknowledged the possibility of market manipulation and bidder collusion.

Ecology addressed collusion by prohibiting bidders from making public any information about their participation in auctions, including how many allowances they bid for and at what price.

Ecology will not name the companies and investment firms that buy allowances.

The Legislature should ensure that withholding the information doesn’t stop the public from judging the program, according to Dye and Klicker’s bill.

Legislators sought to shield agriculture from higher fuel prices by exempting from the cap emissions from fuel used on-farms and to transport farm goods.

Farm groups, however, say their members are seeing cap-and-trade surcharges on fuel deliveries. Ecology and farms groups are meeting to find a way for farmers to claim exemptions or file for rebates.

Dye said the problem highlights the need for an independent agency to watch Ecology. “They’ve started out with a pretty big stumble,” she said.

Klicker said he’s hearing from farmers about fuel increases believed to be related to cap-and-trade. “We’ve got to contain this before it goes too far,” he said.

The Western Climate Initiative has a two-year, $2.9 million contract with Ecology to run the online auctions. The Sacramento-based group conducts cap-and-trade auctions for California, Nova Scotia, Ontario and Quebec.