Washington State’s landmark carbon-compliance market is under fire.
Initiative 2117 would repeal a 2021 law
known as the Climate Commitment
Act
(CCA) — a measure that established the state’s cap-and-invest
program
to help reach 95 percent emissions reductions by 2050. A 2023 ballot measure
puts the CCA on the chopping block, seeking to abolish the cap-and-invest
program and prohibit the state from ever establishing any kind of carbon tax in
the future.
Supporters of the CCA maintain that it effectively puts a
price on carbon — an important step toward decarbonization that has yet to take
hold
nationwide.
What’s more, the income from allowance sales under the CCA must be spent on
cutting pollution, creating jobs and assisting communities in responding to
climate change (The CCA raised $1.82
billion from
the sale of allowances in 2023).
Opponents claim the CCA won’t contribute to meaningful emissions reductions and
makes fuel, food and energy more expensive for consumers.
“These higher gas prices disproportionately affect low-income and working-class
Washingtonians, whose demand for automobile fuel is particularly inelastic since
they often can’t afford to live any nearer to their jobs,” I-2117 supporter
Rep. Drew Stokesbary told
Sustainable Brands® (SB) via email. “I support reducing global carbon
emissions, but not on the backs of the working class.”
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Rep. Jim Walsh, the author and
sponsor of I-2117, said in a
tweet
earlier this year that the CCA can’t be reworked to help Washingtonians and
reduce emissions.
“It's my belief that the best way to handle this mistake is to repeal it and
start over again,” he said. “If we want to have a conversation about protecting
the environment, protecting the climate, doing something about climate change,
let's talk about policy that actually reduces carbon outputs.”
Stokesbary equates support for the CCA as virtue signaling — asserting that
Washington State shouldn’t be responsible for setting the standard for national
or regional carbon markets, and that it shouldn’t be “… the responsibility of
working Washingtonians to pay for the sins of China and other global
polluters.” Repealing the CCA, he continued, would result in hundreds of dollars
of annual savings for most Washingtonians and open the conversation for a
revenue-neutral carbon standard that better balances the costs to working people
against the costs of reducing carbon.
And Walsh claims the CCA hasn't demonstrated actual reductions in the state’s
carbon emissions: “It just makes carbon more expensive, pollution more
expensive.”
But proponents argue that’s exactly the point.
“Carbon markets are designed to put a price on the external costs of carbon
emissions,” contends Jason Grant,
President & COO of Climate Vault Solutions — a startup whose
unique
model
has created an ecosystem linking carbon
offsets,
carbon
markets
and carbon-dioxide
removal
to address past, present and future emissions. “This in turn creates an economic
signal that encourages businesses and major emitters to invest in cleaner, more
efficient technologies and operations … It takes time for the benefits of the
market to be realized, so critics who question the market’s efficacy may be very
premature in their assessments.”
Governor Jay Inslee’s office told SB that “The
Climate Commitment Act is our state’s most powerful policy to cap and reduce
harmful air pollution.”
CCA funding delivers direct benefits to Washingtonians, and its impact has been
supercharged by federal IRA
funding:
CCA helps fund projects including thousands of new EV-charging
stations, grants designed to help
low-income families afford energy-efficiency upgrades, free transit for all
youth, new electric ferries, and
more.
“Washington’s success will provide a roadmap to help other states launch similar
programs — putting our country on a stronger footing to meet our national
climate goals,” Jaime Smith,
Executive Director of Communications for the Office of Governor Jay Inslee, said
via email. “Our policy puts a unique and important focus on equity — ensuring
communities and Tribes who have been most impacted by the harms of climate
change will benefit from our efforts to fight it.”
The CCA has also found
supporters
in industry — including Amazon and Microsoft; and even energy companies including BP, Neste and Shell.
“BP continues to support the Climate Commitment Act because it is an
economy-wide, market-based program that can help lower carbon emissions, attract
innovation, and create clean energy investment and jobs in Washington,” a BP
spokesperson told SB.
The debate surrounding the CCA holds valuable insights and repercussions for the
US’s ability to put a universal price on carbon and could be a harbinger of
what’s to come in the effort to scale regional and national carbon markets.
“Washington’s Climate Commitment Act is a significant addition to the growing
number of regions implementing emissions caps, further strengthening the North
American carbon market,” Grant said. “If Washington's market eventually links
with California and Québec’s
markets,
we could see a more unified carbon price signal, enhanced liquidity and
potentially greater price stability.
“At Climate Vault, we are big believers in the notion that markets can be a
powerful force for
good
when it comes to combating climate change. One of the major strengths of
Washington's CCA is its market-based approach — where participants' demand sets
the carbon price, rather than having it fixed by regulation. This flexibility
directly encourages more efficient and cost-effective emissions reductions. The
new market has already generated around $2 billion since its launch, which is
earmarked for reinvestment in local climate-mitigation projects.”
I-2117 is already destabilizing the state’s carbon market and future climate
policies. Companies are scrambling to understand what a repeal could mean, Grant
asserted — leading to exactly what is not needed for the climate crisis:
Uncertainty.
“This uncertainty makes it difficult for businesses to plan long-term
climate-mitigation investments and gives regulated emitters the wiggle room to
delay major decarbonization commitments,” Grant asserted. “This speaks to a
broader issue happening across the US, not just Washington — with the SEC’s
climate-disclosure
rule
and California's climate-disclosure
laws
facing similar legal challenges.”
A repeal, he said, would leave several unanswered questions:
-
What happens to the market participants holding millions of dollars in
carbon allowances?
-
Will there be compensation for buyers if the market is dismantled and
allowances become worthless?
-
If repealed, will regulated entities still need to meet compliance
obligations for 2024?
“If the repeal succeeds, it could also set a precedent for future attempts to
roll back environmental regulations — potentially influencing other
jurisdictions,” Grant continued. “The loss of the market revenue stream will
also impact the state’s budget and climate initiatives. Without this revenue,
the state will face tough decisions on budget allocations. Additionally,
ensuring that there are sufficient supporting policies in place — such as
incentives for energy efficiency and renewable energy — is crucial for the
overall success of any carbon market.”
Washingtonians will vote on I-2117 on Nov. 5 of this year.
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Christian is a writer, photographer, filmmaker, and outdoor junkie obsessed with the intersectionality between people and planet. He partners with brands and organizations with social and environmental impact at their core, assisting them in telling stories that change the world.
Published Jun 11, 2024 8am EDT / 5am PDT / 1pm BST / 2pm CEST