By BRETT DAVIS
THE CENTER SQUARE SENIOR REPORTER
(The Center Square) — Washington state’s new tax on carbon dioxide emissions under the Climate Commitment Act is projected to add 46 cents per gallon to the cost of gas next year, nearly doubling the amount of taxes Washingtonians will pay at the pump. The current state gas tax is nearly 50 cents per gallon.
Passed by the state Legislature in 2021, the Climate Commitment Act — Senate Bill 5126 — directs the Washington State Department of Ecology to develop and implement a statewide cap-and-trade program to cut carbon pollution by requiring emitters to obtain “emissions allowances” equal to their covered greenhouse gas emissions.
Similar to stocks and bonds, these allowances can be obtained through quarterly auctions hosted by the Ecology Department.
The program will start on Jan. 1, 2023.
The thinking behind this setup is that since most emitters will need to purchase their allowances, that will translate into reducing emissions becoming a benefit to their bottom line.
However, as first reported by the Washington Research Council, an analysis from Vivid Economics and its parent McKinsey & Company for the state Department of Ecology projected the cost of a metric ton of carbon dioxide to be $58.21 next year.
That’s much higher than the $20.60 per metric ton figure used for the cap-and-trade legislation’s fiscal note provided to lawmakers.
“That would add a tax of about 52 cents per gallon or just over 46 cents per gallon for fuels required to include 10% ethanol in accordance with Washington state law,” Todd Myers, environmental director for the free market Washington Policy Center think tank, explained in a Tuesday blog.
He added, “For diesel, the tax on CO2 emissions would increase the cost of a gallon by about 59 cents per gallon, or 56 cents per gallon for fuels that include 5% biodiesel.”
And it’s only going to get worse from there, according to Mr. Myers.
“That amount would climb to $100.23 per MT in 2030, equating to 89 cents per gallon, or 80 cents per gallon for the 10% ethanol mix,” he noted. “For diesel, it would add more than a dollar, $1.02, per gallon, or 97 cents for gas mixed with biofuel.”
Mr. Myers addressed the discrepancy between current projected costs and the costs in the cap-and-trade bill’s fiscal note.
“Well, the fiscal note had minimum prices and did say their estimates were ‘conservative,’” he told The Center Square. “But this is a very big jump and bigger than I expected.”
A couple of factors account for higher predicted costs, Mr. Myers pointed out, including more expensive prices in California’s cap-and-trade system.
“I assume it reflects the California market where prices have jumped 30% in the last year,” Mr. Myers said.
He pointed to another factor: the Climate Commitment Act’s emissions-reduction targets the state must meet by law.
“Also, Washington’s targets for 2030 are super aggressive, and we have to cut emissions radically and very fast,” Mr. Myers said.
Using 1990 emissions levels as the baseline, Washington is required to reduce its emissions by 45% by 2030, by 70% by 2040 and by 95% by 2050.
In his blog, Myers warns that environmental activists are trying to remove protections from the cap-and-trade law for core industries, primarily manufacturing, that release large amounts of greenhouse gas emissions and face significant global competition for their products.
Such industries are exempt from the tax on emissions through 2026, with 97% of their emissions exempt starting in 2027. Denying exemptions, according to Mr. Myers, could translate into business failures and a reliance on Chinese alternatives that cause harm to the environment and are detrimental to human rights.
“Even with the phase-in period, industries will have to begin preparing to comply with the law,” he said. “And the big jump in the projected cost of taxes on CO2 emissions means all businesses and families in Washington will see big increases in costs for transportation next year.”
Brett Davis covers the Washington state government for The Center Square.