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Washington’s Emission Auction Collects $1.5 Billion

The state’s fourth carbon emissions allowances auction brought the program’s revenue to an all-time high in the first year, far outpacing early estimates. The state is still deciding how the money will be spent.

The price of Washington's carbon emission allowances reached an all-time high in the state's fourth auction last week, with revenue from the program nearing $1.5 billion in its first year.

The revenue has far outpaced early estimates, and now a group that helped advocate for and pass the legislation that created the carbon-pricing market is calling on lawmakers to get more of the collected money back in the hands of Washingtonians.

The program, which was designed to make it costlier to pollute, has been linked to an increase in prices at the gas pump as refiners, suppliers and other businesses may pass along their compliance costs.

The group, Clean & Prosperous Washington, is advocating for lawmakers to infuse the extra revenue in programs to lower the cost of transportation, reduce car-tab fees for two years and increase incentives for electric-vehicle purchases.

State Sen. Mark Mullet, D- Issaquah, who voted for the program and is running for governor, also released a legislative proposal aimed at reining in any impact of the climate policy on fuel prices and reducing car-tab fees.

"I really worry we won't see other governments following Washington's leadership on climate if we can't show that it's possible to fight carbon pollution while still balancing it with affordability," he said in a news release.

Acknowledging the high price of gas and its relationship to the carbon auctions, Clean & Prosperous Executive Director Michael Mann said the Climate Commitment Act is working: putting a price on polluting skies, air and waterways in a year of record global heat.

"This is certainly an economic impact to Washington residents and businesses, but it's not an existential crisis. The existential crisis we face is climate," he said.

Business and nonprofit leaders associated with Clean & Prosperous gathered Wednesday morning at charter bus company MTR Western's facility in Seattle's Delridge neighborhood. They spoke in front of Amtrak's first all-electric bus, two ADA-accessible electric vans and an electric Ford F-150 owned by the Nisqually Tribe.

Lawmakers this year budgeted about $2 billion in anticipated revenue from the carbon allowance auctions over the next two years for projects intended to reduce emissions and improve air quality.

That money is destined to help overburdened communities and people with lower incomes electrify their homes, provide rebates and incentives to people buying electric bikes and cars, and help the trucking and freight industries decarbonize, among other things.

The state is still laying the framework for how the money will be disbursed. The most prominent direct benefit of the program is free transit for youth.

Allowance auctions could raise an additional $1 billion or more over the biennium. Those extra dollars have yet to be appropriated.

"We've got billions of dollars with more coming in," said Paula Sardinas, founder of nonprofit Purpose Driven Girl. "Those dollars need to be returned to 7 million Washingtonians in a way that they can talk about and feel at their kitchen table."

Clean & Prosperous also pitched expanding sales tax exemptions, eliminating fees for electric vehicle purchases and establishing rebates for low-income people buying EVs or medium- and heavy-duty zero-emission vehicles. The group is also calling for Washington's carbon market to be linked with California and Quebec's to help reduce compliance costs for Washington businesses.

The Washington State Department of Ecology, the state agency tasked with overseeing the carbon-pricing program, said it is moving "rapidly" to pursue linkage with California and Quebec's existing joint carbon market "if it is determined to be beneficial to our state's environment, economy, and communities."

The market in California and Quebec is about six times the size of Washington's, and Washington estimates that linking would bring down compliance costs in the state.

The most recent auction in the California- Quebec market settled at just over half of the cost of Washington's latest price per allowance.

Clean & Prosperous claimed that Washington is behind other states when it comes to incentives for electric vehicles. Whereas the details around how money will trickle down to consumers for heat pumps and electric bikes are still being determined, Mann said the expansion of tax exemptions for EVs could be accomplished quickly in the next legislative session.

The calls come as the Department of Ecology announced Wednesday the results of its latest quarterly auction held last week. The roughly 8.6 million allowances each sold for $63.03, triggering a second price-containment auction that will offer allowances with no expiration date at a fixed price.

Mullet's proposal calls for an increase to the current supply of allowances to align the price closer to California's auction price — around $30 and $35 — and to exempt agricultural emissions.

Over 14 percent of those who won allowances in the latest auction were investors, a rise from 10 percent in the previous quarterly auction. The others eligible to participate were businesses required to cover their emissions like Puget Sound Energy and other energy providers, oil companies like Shell and BP.

In all, about 26 million carbon allowances have been sold this year, hauling in an estimated more than $1.4 billion. Each allowance represents 1 metric ton of emissions from the state's biggest greenhouse gas polluters.

The carbon-pricing program is the cornerstone of the 2021 Climate Commitment Act, requiring the state's biggest-polluting businesses to reduce their emissions or purchase allowances to cover their emissions. The number of allowances available at auctions will ratchet down over time, ramping up pressure on industries to lower their emissions.

The aim is to be mostly carbon-free by 2050, in an effort to meet the targets of the Paris Agreement, which sets out an international framework to limit global warming to 1.5 degrees Celsius (or 2.7 degrees Fahrenheit).

When the state passed the legislation, Ecology estimated it would bring in around $220 million in 2023 and close to $500 million every year after that through 2040. Those estimates were based on the prices fetched at auctions in California and Quebec.

Revised estimates based on the rising cost of the allowances in 2022 suggested the state would bring in over $480 million in 2023. But Washington has blown those initial estimates out of the water.

Before the state's first auction, some fuel suppliers were raising the price of gas and diesel in anticipation of their compliance costs with the new program.

At least one oil company has added a line item listed as "cap at the rack," a reference to the state's new program, of more than 50 cents per gallon of diesel sold at the wholesale level. That amount is similar to estimates of compliance costs from industry and academic sources.

After a tour Wednesday of Hockinson School District, where school leaders have made energy efficiency retrofits similar to programs that will be funded by the Climate Commitment Act, Gov. Jay Inslee said he'd continue to stand behind the legislation.

"We're not going to allow the rapacious oil and gas industry to continue to have this profiteering going on, having such outrageous profits holding us victim to their prices," he told reporters outside a school building. "We're going to get to the bottom of this and we're going to stand by our antipollution efforts."

Inslee reiterated his commitment to introducing legislation that would provide more transparency around oil and gas industry profits. Mullet's proposal also called for transparency measures on gas pricing by convening a work group to come up with recommendations, a measure that had been left out of the Senate's transportation budget proposal last session.

(c)2023 The Seattle Times. Distributed by Tribune Content Agency, LLC.

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