The costs of WA’s cap-and-trade law are just getting started

  • When the Legislature passed the Climate Commitment Act in 2021, the fiscal note for the law projected prices for carbon credits starting at $20 and increasing by a dollar or so a year.
  • Instead, prices shot up in this year’s auctions, to more than three times that level.
  • Washington’s carbon credits are selling for prices that the official fiscal note said weren’t projected to hit until 2036.The Climate Commitment Act needs to be fixed so that prices are predictable and stable for employers.

Structural problems with the state’s new Climate Commitment Act have sent fuel prices soaring — and the costs have only gotten started.

As carbon auction prices spiked this year, fuel prices followed the California example and increased in line with credit prices. Employers say it’s time for honest conversations about costs and benefits, and it’s time for practical legislative solutions to keep future costs under control.

It’s been a rough start for Washington’s cap- and-trade bill, with costs far exceeding early estimates. Consumers are seeing major increases to gasoline and energy prices as businesses pass on the new costs they are facing under the Climate Commitment Act. …

When the Climate Commitment Act was put before the Legislature in 2021, the proposed law — and its official fiscal note — envisioned a gradual increase in prices, with a floor of around $20 per credit in 2023 auctions, slowly ramping up by a dollar or so a year for the next few decades.

That’s not what happened. Despite warnings from AWB and the business community that the program did not have enough initial allowances, legislators passed the law. The first auction of the year in February had a “floor price” of $22.20 but credits quickly sold for more than twice that much, with a final price of $48.50 per credit.

Not to worry, the Department of Ecology said in a press release soon after that first sale: “The settlement price (when adjusted for inflation) is in the range projected by an independent economic analysis commissioned by Ecology last summer.”

Further auctions, however, kept pushing up the price. …

“We’re sitting at the 10-year mark for projected program costs, six months in,” said AWB Government Affairs Director Peter Godlewski. “That’s not a healthy program.” …

A fix for the CCA would start by looking at the science and would move on to an honest conversation on costs and benefits — serious conversations that aren’t blame-driven.

Washington produces only 1% of U.S. carbon emissions and only 0.01% of international emissions. Even as Washington sets a goal of a zero-net-carbon economy, that reduction itself will have negligible impacts on national or international global emissions.

“That’s not enough to move any sort of needle,” Godlewski said. “But what we can do is prove that the model of regulating emissions through pricing emissions can be accomplished in ways that allow our economy to continue to grow and provide jobs while reducing emissions. That should be the goal for legislators, not a race to net zero but creating a policy that can be adopted as a model to reduce emissions while responsibly managing price increases.” …

As Washington consumers see fuel and energy costs increase far beyond projections due to the CCA, those costs are clear — and so is the need to fix this program.

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