Key Takeaways
Washington State voters will be able to vote against laws designed to make energy more expensive and limit consumer choices this fall if they choose.
Led by Governor Jay Inslee, the state has implemented a series of bills that indirectly levy a carbon tax on energy, but gas prices have skyrocketed as the cost of their “cap and trade” fees have grown.
While Washington is one of the most left-of-center states, its consumers do not like paying more at the gas pump or for inefficient government.
Three years ago, Washington state lawmakers enacted a significant climate law championed by Governor Jay Inslee, positioning the state as a leader in climate initiatives. The 2021 Climate Commitment Act introduced a statewide cap-and-trade program, requiring businesses to acquire allowances for greenhouse gas emissions. However, this measure, I-2117, has led to substantial costs for both businesses and consumers. Since January 2023, the cap-and-trade program has generated over $2 billion from consumers, which the state is channeling into funding “clean energy,” public transit, energy efficiency, and climate adaptation projects in communities across Washington. On November 5, voters will have the opportunity to repeal the law and its cap-and-trade program. While the law aims to help Washington meet its voluntary climate targets of nearly halving greenhouse gas emissions by 2030 and eliminating them by 2050, it comes with rising costs for consumers.
The cap-and-trade law was established after years of attempts by state lawmakers to implement carbon pricing. It sets an annually decreasing cap on statewide carbon emissions and establishes a fixed pool of “allowances” based on this cap. Large businesses, including utilities, refineries, and heavy industries, must bid for allowances corresponding to their carbon dioxide emissions. Over time, the number of available carbon allowances is reduced, intentionally driving up carbon prices to encourage emission reductions from businesses and consumers. Essentially, it functions as a hidden carbon tax, covering nearly 75 percent of the state’s emissions. This cap-and-trade program operates alongside other sector-specific policies aimed at reducing emissions, meaning Washington consumers face multiple programs that increase the costs of fossil fuel-based products in pursuit of the state’s carbon goals.
The ballot measure to repeal the climate law was led by local hedge fund millionaire Brian Heywood, a resident of Redmond, Washington. He initiated the campaign last year, with his political action committee, Let’s Go Washington, spending approximately $7 million—over $6 million of which came from Heywood himself—to gather signatures for this initiative and several others on the ballot. One of these, Measure I-2066, aims to prevent restrictions on natural gas usage in buildings, while two other measures target the state’s capital gains tax and its long-term care insurance program.
Heywood and other backers of the repeal, including industry interests, see the cap-and-trade program as causing Washington’s high gasoline prices as refineries and other regulated businesses have passed on the program’s costs to consumers. Heywood’s initiative started when gas prices rose to the highest in the nation last summer. According to the Washington Department of Ecology, however, multiple factors go into the state’s gas prices, including the global oil market price. It estimates that the climate law has led to an additional cost of about 10 cents per gallon for gasoline.
Washington lawmakers have so far earmarked billions from the cap-and-trade auctions to fund climate programs and much of that money is starting to flow to communities across the state. So far, revenue from the Climate Commitment Act has provided $115 million to help low-income households and small businesses purchase heat pumps and other electric appliances, $150 million to offset household energy costs, and tens of millions to electrify the state’s ferry system and help schools switch to electric buses, which are much more expensive than diesel buses. The law has also funded free public transit for anyone 18 or younger since last year. Auction revenues have also been spent on the state’s transportation projects to improve road infrastructure and biking and trail routes and to fund tribal transit projects. Other investments have supported climate adaptation efforts, including $50 million for tribes. The emissions-reduction targets Washington wants to achieve with its cap-and-trade program surpass even California’s goals. Washington’s law includes provisions to identify and reduce air pollution in communities believed to be most impacted by it.
In recent auctions, carbon prices have dropped to among their lowest levels since the program’s introduction, impacted by the uncertainty from the repeal initiative. A repeal would eliminate billions of additional funding for similar projects in the years to come as the allowance market tightens and carbon prices increase. Some climate advocates worry that a repeal would slow momentum in other states that are considering similar cap-and-trade schemes, including New Jersey and Colorado.
Despite the high-profile opposition, Washington’s cap-and-trade program has support within the state, including from BP and the Western States Petroleum Association, an oil and gas industry lobbying group. No on 2117, a political action committee formed to oppose the repeal, has raised nearly $12 million from donors including Microsoft co-founder Bill Gates and Amazon and other major companies, outpacing the $5.5 million raised by Let’s Go Washington since the start of this year. Voters could reject the measure as a statewide survey conducted in early September found that 46 percent of voters said they would reject I-2117, 30 percent said they would approve it and 24 percent were undecided.
Conclusion
The status of Washington’s signature climate law is at risk due to upcoming ballot initiatives this November. The ballot initiatives would: stop the ban on affordable and abundant natural gas, repeal the state’s recently enacted and unconstitutional capital gains tax, eliminate green energy mandates that force residents to pay the highest in the nation gas prices at the pump, and give workers more choices when it comes to joining a union. The four voter initiatives on the ballot could pass in what amounts to a blue state tax revolt. While Washington is one of the most left-of-center states, its consumers do not like paying more at the gas pump or for inefficient government. The theme “Vote Yes, Pay Less” for the ballot measure sums up the resistance to the law. Local conservatives are hoping to not only end the policy but also prevent the state from ever enacting a cap-and-trade program again.
