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New modeling shows cap-and-trade bill could spike gas prices

New modeling shows cap-and-trade bill could spike gas prices

Opposition to a cap-and-trade proposal currently moving through the state House is growing even as new modeling indicates the cap-and-trade program as currently written could add a whopping $.57 per gallon to the price of gasoline by 2024.

The state Senate earlier this month voted in favor of a cap-and-trade program via PSSB 5126, a heavily revised version of an original proposal by Governor Jay Inslee. Now moving through the state House, the bill has undergone numerous changes that have undermined aspects of the Senate compromise that have industry members previously supportive or neutral regarding the measure now piling on against it.

Modeling indicating the bump to gas prices was conducted by the consulting firm National Economic Research Associates (NERA). In comparison, the Puget Sound Clean Air Agency’s regional low carbon fuel standard (LCFS) analysis put the high-ball estimate for gas price increases also at $.57 per gallon – but the timeline in that scenario was through 2030.

Overall, the cap-and-trade program could add annual costs to Washington households of $1,280 by 2024, according to the NERA modeling.

Testifying at the bill’s April 19 public hearing in the House Appropriations Committee, Jessica Spiegel with Western States Petroleum Association told legislators the bill’s fiscal note analysis “used the lowest potential cost. The fiscal note could be seriously underestimating the economic impact to the state.”

Washington Farm Bureau President Tom Davis offered mixed testimony at the April 19 hearing. On one hand, he noted the newly-added exemptions for on-farm fuel use and a five-year exemption for fuel for transporting farm products. At the same time, he said an increase of $.18-.57 per gallon is “certainly a huge problem for the people who grow and harvest our food.”

Yet the added costs for Washington residents at the gas pump – and elsewhere – was only one of several reasons that have stakeholders growing uneasy about the bill due to changes made. Also among those concerns is a new provision that effectively delinks the cap-and-trade program from Sen. Steve Hobbs’ (D-44) Forward Washington transportation package. Under the Senate version of the bill, $5 billion would have gone into a specific account to pay for transportation projects including fish barrier removal subject to a U.S. court injunction.

Yet the House Environment and Energy Committee voted on April 16 in favor of a striker amendment that eliminates that account and replaces it with two new subaccounts within the Climate Investment Account and the Natural Climate Solutions Account. The amended version also no longer requires that the Climate Investment Account be included in the four-year balanced budget requirement.

Jerry Vanderwood with the Association of General Contractors told the committee that the new bill undoes a “grand bargain” linking carbon pricing with transportation investments.

Another change that has drawn fresh criticism from both employers and private sector unions is the removal of free or low-cost allowances for energy intensive and trade exposed industries (EITE) starting with the third compliance period in 2035. Northwest Pulp and Paper Association Executive Director Chris McCabe told the committee that “this bill will cause production shift” of paper mills away from Washington to other parts of the country where those facilities wouldn’t be under the same environmental restrictions.

Speaking in opposition to the bill, Edgar Scott with Spokane-based Kaiser Aluminum told legislators “we’re very concerned that the treatment of EITE post-2035 will result in significantly negative competitive impacts. We understand that these are very complicated and challenging issues.”

United Steelworkers Local 338 has 700 members who work at Kaiser Aluminum’s Spokane plant. Union President Dan Wilson told the committee that the aluminum plant generates lower carbon emissions than similar plants in other states and around the world, adding that “in order to prevent the leakage of good jobs and carbon emissions…we (should) produce as much of these products here as possible.”

Utility representatives testifying at the April 19 hearing are also now opposed to the bill because of added bill language that potentially could add regulations for purchasing electricity from the Bonneville Power Administration, which operates numerous hydro-dams in Eastern Washington.

Washington Rural Electric Cooperative General Manager Kent Lopez told the committee that utilities already have to comply with the Clean Energy Transformation Act (CETA) passed in 2019, which requires them to be carbon-neutral by 2030. Due to the potential additional regulation of utilities in the bill, he recommended they delay moving the bill forward until those provisions are further examined.

Incidentally, some environmental activists have also come out against the bill for what they perceive as insufficient regulations or restrictions on industry. Washington Policy Center Environment Director Todd Myer told the committee that “by trying to be all things to all people, it (the bill) is now a hodgepodge.”

TJ Martinell is a native Washingtonian and award-winning journalist. Born and raised in Bellevue, he’s been involved in the news industry since working at his high school newspaper.

His investigative reporting for various community newspapers in the Puget Sound region has been recognized by the Washington Newspaper Publishers Association and the Society for Professional Journalists.

A graduate of Eastern Washington University, he has a B.A. in journalism and was the news editor of EWU’s student university newspaper.

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