Olympia Update

OLYMPIA–In my 30 years as a state legislator, there have been times when I have correctly predicted that something Olympia did would turn out badly for Washingtonians. The "cap-and-tax" program recently created by the Democrat majorities in the Legislature certainly looks like it should be added to this dubious list.

Earlier this month, the state Department of Ecology announced the results from the state's first carbon-allowance auction, which was created by the Climate Commitment Act passed by Democrats in 2021. The recent auction is the first of a series of quarterly auctions under the law, known as the cap-and-trade program (or "cap-and-tax," as I prefer to call it) created by the Legislature.

The program allows DOE to set a cap on carbon emissions each year. Companies that can't stay within the cap, meaning those that emit over 25,000 metric tons of carbon dioxide, can purchase allowances from the state through quarterly auctions, with the next one coming in May.

Here is the painful part – the four annual auctions are expected to raise billions of dollars a year for the state government. Do you think the powers-that-be will spend that extra money on highways or other projects that would directly benefit people in Dayton, Pomeroy, Ritzville or other towns in eastern Washington? Don't count on it. Money raised from these auctions must be deposited into two accounts and be spent on "clean transportation," "natural climate resiliency," "clean energy transition" and other environmental goals that Governor Inslee and Co. want. There is no guarantee that any of the cap-and-tax money will go toward roads or highways. Like I've said, this is like a gas tax, but with no benefits for roads. To me, this is inexcusable.

Supporters of the cap-and-tax program have argued that it would be inexpensive to those affected by it, including fuel consumers. But judging by that first auction, it looks like it will be VERY costly. The initial estimate in 2021 was that carbon "allowances" under cap-and-tax would cost $22.78 per metric ton of carbon. Last October, there was a revised estimated auction price of $33. But the first auction actually showed these allowances cost $48.50, more than double the cost some had predicted two years ago and 50% higher than the October estimate.

The $48.50 allowance translates to 39 cents a gallon for gasoline and 47 cents a gallon for diesel. Despite predictions from cap-and-tax advocates that the oil companies will eat these extra costs, anybody with common sense will know that these additional costs somehow will be passed on to consumers. Be ready for fuel prices to go up even more.

The recent auction generated about $300 million. This program and the "allowances" must be viewed as a $300 million tax hike that will impact anyone else who uses fuel, and possibly others indirectly. And keep in mind that these future auctions will raise billions of dollars for state government.

It's worth noting that crude oil prices have dropped about $10 a barrel in recent weeks, yet the price of fuel at the station I regularly use jumped 10 cents a gallon on March 17. The one common factor is that the "allowances" at the recent carbon auction held by DOE under the cap-and-trade program were 50% more than estimated. Just a coincidence? I don't think so.

The Department of Ecology and the oil industry still have no plan to provide a refund to those who are supposed to be exempted from the effect this new law will have on farm fuel or fuel for maritime activity. Farmers, barge operators and others who should be spared from cap-and-tax are rightfully upset, and they deserve answers now.

Sen. Mark Schoesler, R-Ritzville, has served the 9th Legislative District since 1993.