Sign Up Early for SB'24 San Diego and Save! Spring Rate Ends June 23rd.

The Next Economy
WA Ballot Initiative Could Stymy National Efforts to Put a Price on Carbon

I-2117 is already destabilizing the state’s landmark carbon market — confusing businesses and creating uncertainty about the future of climate policy.

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.”

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.

Advertisement