Sean V. O’Brien: Prepare for even higher gas prices this summer

By Sean V. O’Brien

After our state’s first carbon auction this past February, industries operating in our state paid a staggering $300 million to the Washington Department of Ecology to put toward programs the state claims will reduce carbon emissions and fight climate change.

The Climate Commitment Act, signed into law by Gov. Inslee in 2021, created a cap-and-trade program in which the state caps how much carbon industries can emit. The program requires these industries to obtain “emissions allowances” equal to their greenhouse gas emissions. Similar to purchasing stocks and bonds, these allowances are obtained through auctions hosted by Ecology.

In the aftermath of the second auction held this year at the end of May, as much as $557 million will be brought in – something Washington Policy Center analysis projects will result in a 45 cent per gallon gas price increase for Washingtonians.

The auction’s price of carbon was so high it triggered an extra auction of allowances that must now be held in August.

Since the start of 2023, my colleague Todd Myers, Washington Policy Center’s Environmental Director, has tracked gas prices here and in other states in the region to analyze the impacts of the CCA. No other state is seeing the rate of increases we have been facing since the program’s inception.

After the second auction, the carbon prices increased 15 percent to $56.01 per metric ton of CO2, translating to about 45 cents per gallon of gasoline and 54 cents per gallon for diesel – meaning Washingtonians will pay about 84% more than California’s price on carbon.

As Myers states, “Although Washington is paying more for CO2 emissions than California, that additional cost doesn’t help the environment – it just harms our economy. As long as the governor and agency staff continue to deny that reality, Washington residents will pay a high price for energy, but won’t receive the environmental benefits they are paying for.”

The Spokesman-Review’s own reporting earlier this year highlighted the impact of increasing gas prices on local communities and the fact that residents are crossing the border into Idaho to avoid our high prices at the pump.

In response to questions posed to Gov. Inslee last year regarding the possibility of increased prices under the new law, he claimed, “This is going to have a minimal impact, if any. Pennies. We are talking about pennies.”

But in the aftermath of Myers’ tracking of the state’s statements surrounding the expected outcomes of the program, the Inslee administration quietly scrubbed its website to remove its original claims regarding the potential increases in prices. The Ecology website no longer includes its projections of an increase of “1% to 3% in 2023” gas prices. Instead, they now claim a 1 to 3% increase in the “overall economic impact.”

As Myers explains, Washington’s GDP in 2022 was an estimated $725 billion, meaning the impact of the tax on CO2 could be up to $21.75 billion annually.

“That is an incredible change and is significantly different than Ecology’s previous claim,” he notes.

Kris Johnson, president of the Association of Washington Business, echoes the concern. “It was clear from the beginning this program would raise the cost of gasoline, but rather than focus on doing the hard work needed to make it work for the state and our environment, officials have tried telling us consumers would only pay ‘pennies on the dollar.’”

It’s not just the business community raising alarm. Amid the soaring prices, tribal leaders from across the state have also been raising concerns about the impacts of the state’s program on gas prices. After meeting with a dozen of the state’s 29 tribes recently, Gov. Inslee rebuffed their pleas for relief.

In reaction, Tom Wooten, chair of the Samish Nation said of the governor, “I’ve lost a lot of respect for that man. I don’t think the average citizen should be taking it on the chin.”

If the state’s cap-and-trade system’s status quo remains in place, Washingtonians should expect to continue taking it on the chin at the pump this summer.

Sean V. O’Brien is Eastern Washington director for Washington Policy Center. He is the former executive director of the Congressional Western Caucus and is based in the Tri-Cities. Members of the Cowles family, owners of The Spokesman-Review, have previously hosted fundraisers for the Washington Policy Center and sit on the organization’s board.