The Washington Farm Bureau estimates farmers have paid at least $153 million and likely far more this year in cap-and-trade fees, even though lawmakers intended to exempt agriculture from the tax on fossil fuels.

Farm Bureau director of governmental relations Breanne Elsey told the Senate Agriculture and Natural Resources Committee Nov. 30 that refunds to farmers shouldn’t be viewed as costing the state money.

“We hear that if we have a reimbursement program, the state is going to lose money,” she said. “This is money the state will end up with that they never should have had to begin with.”

Lawmakers in 2021 told the state Department of Ecology to devise a method for excluding fuel used for producing and transporting farm goods from cap-and-trade, a hard task because of complicated supply chains linking refineries to retailers.

The program went into effect Jan. 1 without Ecology devising a way. Ecology has resisted reimbursing farmers and has largely left it up to oil companies, fuel distributors and farms to sort out the problem.

The Farm Bureau estimates farmers have paid between $153 million and $172 million in cap-and-trade fees for on-farm fuel. The estimate doesn’t include fuel to truck or barge agricultural products, or some types of fuel such as propane and kerosene.

“I imagine the actual damages are well in excess of $200 million,” Elsey said.

Ecology doesn’t know costs

Ecology climate section policy manager Joel Creswell told the committee the department doesn’t have the information to issue refunds. Ecology doesn’t know how much cap-and-trade is costing fuel users, he said.

“We don’t set the (cap-and-trade) surcharges, and we don’t actually collect information on what those surcharges are,” Creswell said.

“The pricing has always been in the direct control of the fuel suppliers. They’re making decisions based on what they’re estimating their compliance costs to be,” he said.

Cap-and-trade taxes carbon emissions, but the tax is not transparent and it changes with every cap-and-trade auction of carbon allowances. The state has collected more than $1.5 billion so far this year.

The law’s design guarantees the public can’t know exactly how the increase in state revenue is affecting pump prices. A fair, but rough, estimate is that it’s adding 50 cents a gallon to gasoline and 62 cents a gallon to diesel.

Cap-and-trade foes have submitted a petition to discard the law. The Secretary of State’s Office is checking whether the citizens’ initiative has enough valid signatures to qualify for the November 2024 ballot.

Farm Bureau: Small farms pinched

Creswell said he was optimistic more farmers will be exempt from cap-and-trade fees as fuel distributors and farms work out the problem.

“Everytime we check in on this, we’re hearing that more and more people are getting their refunds,” he said.

Elsey agreed some farms with storage tanks and that have fuel delivered are seeing relief. Farmers who get fuel at retail stations are still paying for cap-and-trade, she said.

“For agriculture, the hard part about this is it disproportionately impacts the smallest farmers in the state,” she said. “So when you hear this is mostly resolved, I say you’re not even close.”

Elsey said in an interview that she hopes lawmakers will develop a bipartisan plan to fix the problem. While some farmers have gotten refunds, others have been left out. “Because there is no program, there is no uniformity,” she said.