SEATTLE — Washington state is likely to collect more than twice as much money from a new carbon credit system over the next three years as originally estimated, possibly setting the Legislature up to spend more on carbon reductions in its transportation and building sectors next session.
Although the exact dollar amount the state will reap is uncertain, the new projections have given environmental and transportation advocates reason to hope that more can be spent on reducing emissions from heavy-duty vehicles like freight and garbage trucks, as well as toward converting homes to more energy-efficient heating and cooling systems like heat pumps. Democratic lawmakers are also eyeing rebates for the purchase of electric vehicles and the construction of more charging stations as the state scrambles to phase out sales of new gas cars by 2030.
Republicans, meanwhile, continue to slam the carbon pricing system ahead of the midterms as a hidden gas tax, even as members of the caucus call for spending the new windfall on road maintenance.
The cornerstone of the 2021 Climate Commitment Act, the new carbon “cap and invest” program requires the state’s largest emitters to either reduce their emissions or purchase carbon allowances at auction if they exceed a set limit. The number of allowances available to buy will taper off over several years, likely increasing their price and putting greater pressure on the industries to reduce their emissions.
When the complicated carbon reduction program was passed in 2021, the Department of Ecology estimated it would bring in around $220 million in 2023 and close to or just over $500 million every year after that through 2040. Those estimates were based on the prices being fetched at auctions in California and Quebec, which both have similar carbon pricing systems. In May 2021, the price was $18.80 a ton.
But Washington revised those numbers this month as it collected more information on the amount of carbon allowances likely to be sold and based on recent increases in their cost, which climbed to $27 per ton in August. The department now estimates the state will bring in over $480 million in 2023, $957 million in 2024 and $900 million in 2025, with prices gradually decreasing again in the following years.
The program, set to launch early next year, will apply to nearly 100 of the state’s largest emitters, from transportation, electricity, natural gas, refining and other industrial sectors. Agriculture, maritime and aviation industries will be exempt.
The goal of the program, a centerpiece of the climate agenda of Gov. Jay Inslee and fellow Democrats, is to drive down carbon emissions on two fronts — by pressuring industry into making reductions and spending auction revenue on efforts to phase out the use of fossil fuels.
The Climate Commitment Act dedicates a large portion of the money toward transportation, which accounts for roughly 45% of the state’s carbon emissions. A 16-year, nearly $17 billion transportation funding package passed last session includes $5.4 billion in Climate Commitment Act dollars, to be spent on expanding transit service, building four new hybrid electric ferries, studying high-speed rail and funding more bike and pedestrian projects.
In light of the higher projections, Rep. Jake Fey, D-Tacoma, chair of the House Transportation Committee, said he’d like to have a conversation about reducing emissions from heavy-duty vehicles, including school buses, garbage trucks and drayage trucks coming and going from the state’s ports.
“There is progress that’s been made with making passenger vehicles more efficient, but there’s still a lot of work to do and a lot of challenges with heavier-duty vehicles,” he said.
His counterpart, Sen. Marko Liias, D-Lynnwood, doesn’t anticipate the transportation committees will make a play to claim the extra money and increase the $5.4 billion. Rather, Liias said he’d like to find areas in the general fund that intersect with transportation where there’s broad support, including possible subsidies for the purchase of electric vehicles. With money coming in from the recently passed Inflation Reduction Act, Liias said they can leverage state dollars with federal.
“The EV transition is happening,” he said. “If we want to meet the 2030 goal, how do we do that?”
Kelly Hall, policy manager with the environmental advocacy group Climate Solutions, agreed that electric and heavy-duty vehicles are important. She added that the state should look to spend more on helping homeowners convert their spaces to efficient heating and cooling systems, mostly by way of heat pumps. Federal dollars could soon help drive that switch and layering state dollars could take that further, she said.
“Heat pumps provide an opportunity to transition off of gas, but they’re also a climate resilience measure,” she said, cooling and purifying homes in hotter and smokier summers.
Republicans broadly opposed the passage of the Climate Commitment Act and have been using it as a cudgel in ads leading up to the midterms. Ranking member of the House Transportation Committee, Rep. Andy Barkis, R-Olympia, said he’s still “extremely concerned” the costs will passed to consumers.
At the same time, he acknowledged the “ship has sailed” and the act is now law. In that context, Barkis said he’d like to find ways to move the money around to various pools and spend more on maintenance of the state’s roads and highways. Barkis has unsuccessfully pushed his colleagues in recent years to lower the walls between general fund and transportation spending on an ongoing basis.
“I think we need to have a broader conversation about the priorities and how do we look at the nexus of that money and being able to use it for additional transportation needs,” he said.
Katelyn Roedner Sutter, director of California’s Environmental Defense Fund, said the amount the state collects at auction is likely to continue to fluctuate. Current projections should be taken as a “snapshot of possibilities.”
Still, that doesn’t mean legislators shouldn’t plan for how to put the money to use, she said.
“I’m really excited to see how the first auction goes,” she said. “I will be excited to see what the emissions look like. Are we starting to see some emissions reductions? Are we starting to see meaningful investments in underserved communities?”
