Republicans, Democrats, carbon, and you: Debating Washington's cap and trade

Even before Washington implemented a cap-and-trade program, which put the ability to pollute carbon into the air up for auction, its effects on the state were hotly debated. Would it cause fuel and other prices to spike? Would it generate enough money to fund climate change initiatives? Even now, after a year of the carbon auction, the debate remains.

“There was a lot more demand for those emissions than some folks anticipated, meaning it is harder to reduce carbon emissions than people thought," said Yoram Bauman, aka The Standup Economist, while chatting with KUOW's Soundside.

“You don’t get to taste the honey without the sting of the bee,” he said, noting that to make progress on environmental and climate goals, it's gonna be a struggle.

In short, Republicans currently want to nix the entire cap-and-trade program through the Legislature or through the initiative process; Democrats want to tweak the law, and even link up with the carbon markets in California and Quebec in an effort to make the system cheaper.

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Washington's voters are likely going to answer this debate themselves as Initiative 2117 is slated for the November ballot. The initiative aims to cancel the state's carbon auction. As this debate is likely to continue through the 2024 election season, KUOW's Soundside spoke with a state Democrat, Republican, and an economist to get to the root arguments around Washington's carbon auction — arguments voters should consider when filling out their ballots.

Did Washington's carbon auction cause fuel prices to surge?

Gas prices in Washington state dramatically rose as the carbon auction went into effect. The state had the highest gas prices in the nation last summer. Democrats say that Washington gas prices have been among the most expensive in the USA for decades, and that while the carbon auction may have contributed to prices, it's just one factor out of many. Democrats point a finger of blame at oil companies and refineries, that seek higher profits, as the main reason prices went up.

“I’m not going to duck the fact that climate policies would have an impact on fuel prices; how much is up to debate," State Sen. Joe Nguyen (D) told Soundside, adding that gas prices have recently been lower than they were before the carbon auction began.

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Nguyen chairs the Senate's Environment, Energy, and Technology Committee. He represents the 34th legislative District, covering West Seattle, White Center, and Vashon Island.

“Candidly, right now, we’re being held hostage by a handful of refineries in our state, and that is partially why fuel costs are actually high," he said.

Nguyen said the carbon auction revenue will come back to Washingtonians through an easier transition to a cleaner economy, road maintenance, air quality monitoring and filtering, and road calming measures.

“Fuel costs is a major concern that I have, but so is my kids having asthma; so would be getting cut off from your communities because of climate change (in reference to roads being flooded annually) ... There is never going to be a perfect world where everybody is going to be happy, but that is what leadership looks like in Washington state.”

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Republican State Rep. Mary Dye represents the state's 9th District covering southeast Washington and sits on the House Environment and Energy Committee. Dye argues that the carbon auction is a primary factor in increased costs, such as fuel, food, utility bills, and heating homes. She said higher price tags are “a feature, not a bug of the bill.” Republicans have long argued that Democrats always knew higher costs would come.

“On our side of the aisle, we are seeing the impacts it is having on our constituents in Eastern Washington, and across the state," Dye told Soundside. "It’s impacting our family budgets in a severe way, and it was anticipated it would do so when the bill was proposed."

“It was intended to spread the cost of carbon dioxide emissions to every single citizen in the state of Washington through increased costs of energy in order to dissuade them from using fossil energy."

Dye argues that the carbon auction is unfair to Washingtonians because the state's energy grid is largely hydro-electric and clean. She said Washington doesn't have an air quality crisis, rather lawmakers should be focusing on cleaning up the region's water and improving the health of forests.

So did Washington's carbon auction play a significant role in prices going up around the state?

“Hold on to your hat here … the Republicans are right about this," Standup Economist Bauman said.

Aside from comedy and the economy, Bauman is a supporter of carbon taxes and previously worked on the CarbonWA campaign. That 2016 effort aimed to create a revenue-neutral carbon tax in Washington. Bauman told Soundside that people should be aware that putting any price on carbon is going to raise prices elsewhere.

"Anyone who tells you otherwise is either a liar or an idiot," Bauman said. "You can’t put a price on carbon without consumers, along with everybody else, feeling that incentive effect that says, ‘Hey, you need to think about ways you can potentially reduce your consumption of fossil fuels.’ So … prices are going up because that is the way that carbon pricing works.”

“The oil companies are profit-maximizing businesses, so if they could have raised prices for consumers two years ago, or five years ago, they would have done it," he said. "...What you see with the Climate Commitment Act — and I think this is clear if you compare prices in Washington which has the Climate Commitment Act with prices in Oregon which doesn’t — you see a clear jump in prices when the Climate Commitment Act went into effect in January 2023, and that is exactly in line with what economists said would happen because you are adding an extra tax on this activity.”

What should be done now?

Republican Rep. Dye said that the carbon auction only serves to increase revenue to the state, for projects the Democrats want. She echoed a longstanding Conservative mantra: Industry is the best way to achieve goals, including addressing the environment.

“It’s a question of whether big government is the most efficient way to decarbonize," Dye said. "If you leave the resources to the innovators and the producers, you may find that you get much more rapid innovation and transition to environment-friendly technology."

Nguyen argues that the state needs funding to make investments in a "thoughtful and strategic way" to decarbonize and mitigate the impacts of climate change sooner than later.

"From a more pragmatic level, the funding from the CCA actually goes towards our transportation package, goes towards our operating budget, goes toward our capital projects as well," Nguyen said.

"We’re already paying for the cost of pollution, now it’s a matter of us to ensure that the polluters aren’t doing it for free, and the state isn’t picking up the tab for it.”

Bauman said the opportunities for industry to address the issue are limited.

"Industry is profit maximizing, that is what capitalism is all about. So to the extent that profit maximization overlaps with carbon reduction is things like reducing waste, making processes more efficient," he said. But he also noted that industry can't do much when the profit motive drives it in a direction you don't want.

“The fundamental need is for honesty,” Bauman said. “Be honest to voters and be honest with ourselves that cutting carbon emissions is going to be hard, and it’s going to be a struggle, and we’re just going to have to temper some of what I would call 'well-meaning desires' to hit incredibly stringent climate targets.”

Check out Soundside's full coverage of the Climate Commitment Act here.