Published 9:30 am Thursday, July 6, 2023
A Washington Republican state senator said July 5 the Department of Ecology should act to bring down the cost of cap-and-trade allowances to ease the upward pressure on fuel prices.
Sen. Chris Gildon of Puyallup outlined several ideas in a letter he plans to send to Ecology Director Laura Watson. Gildon has circulated the letter to Republican and Democratic lawmakers and asked them to sign it.
“I’m offering this up in the spirit of opening a conversation with the Department of Ecology,” Gildon said.
Washington displaced California in mid-June as the state with the highest gasoline prices in the U.S. Washington’s run to the top has coincided with the state implementing cap-and-trade on Jan. 1, though cap-and-trade’s exact role is unclear.
Cap-and-trade may be adding 45 cents a gallon to gas in Washington, according to a formula used by the California Legislative Analyst’s Office to help lawmakers judge cap-and-trade costs in that state.
The formula is based on the carbon content of fuel. It doesn’t take into account undisclosed business decisions individual oil companies make. Oregon gas prices also have surged recently, without cap-and-trade.
Senate Environment and Energy Committee Chairman Joe Nguyen, D-Seattle, said he has never denied that cap-and-trade could influence fuel costs.
Oil companies, however, have other options besides passing along costs to motorists, including investing in projects to reduce carbon emissions or taking lower profits, he said.
“We’re not talking about mom-and-pop companies trying to get by,” Nguyen said.
Gildon rejected claims that oil companies are gouging motorists.
Cap-and-trade was supposed to increase fuel costs, but would not have had as much support if legislators “knew it was going to be this bad,” he said. “I think the thing that concerns me is the rate of increase.”
Gildon’s proposals include delaying emissions-reduction targets, increasing the number of emission allowances and even suspending cap-and-trade if other measures fail to lower fuel costs.
“I think all of these things are worthy of discussing,” Gildon said.
Ecology spokeswoman Claire Boyte-White said in an email that the department has not received Gildon’s letter yet. “We want to make sure we have the senator’s final thoughts before we respond,” she said.
Cap-and-trade presumably raises fuel prices by imposing a per-ton fee on carbon emissions from fossil fuels. Fees are set at quarterly auctions. The current fee in Washington is $56.01, compared to $30.33 in California.
Nguyen said legislators could look at ways to bring Washington’s carbon fee more in line with California’s, but Washington won’t back down from cap-and-trade, he said.
“We’re not going to suspend the program. That’s not a thing,” he said. “We are very passionate about climate policy.”
Oil companies, pipeline operators and others must bid for emission allowances. Auctions also are open to investment firms speculating that allowances can be bought now and sold later for a profit.
In a recent auction, investors bought about 26% of the allowances sold to cover emissions in 2026.
Auctions have been competitive, raising $857 million for climate-related programs and surpassing Ecology’s expectations. Ecology does not reveal who buys allowances.
In response to high allowance prices, Ecology will hold a special auction Aug. 9 closed to investors. The next regular auction is Aug. 30.
Oil companies must begin turning in allowances to cover their emissions in October 2024.
