210423_cp1_news_dj fuel costs Truck on interstate highway

The Washington Legislature is considering bills to raise the gas tax and indirectly tax fossil fuels with cap-and-trade and a low-carbon fuel mandate.

OLYMPIA — House and Senate Democrats are considering cap-and-trade, low-carbon fuels and a gas tax increase, a trifecta that critics claim could push up gas prices by 65 cents a gallon by 2028.

The state Department of Ecology disputes some assumptions that go into the forecast. The three policies, however, directly or indirectly tax petroleum and natural gas, and all are advancing in the Legislature.

Testifying April 14 against cap-and-trade, Central Washington wheat farmer Andy Juris told lawmakers that farmers and rural residents who must drive long distances would be hurt the most.

“Agriculture is simply an energy-intensive industry,” said Juris, speaking to the House Environment Committee.

“Any higher cost we’re faced with, like higher fuel prices caused by cap-and-trade, is a direct financial hit to my farm that I’m expected to absorb somehow,” he said.

With the legislative session set to end April 25, majority Democrats are finalizing budgets. Climate, transportation and “environmental justice” are priorities that drive the move to tax fossil fuels.

A 16-year plan passed by the Senate Transportation Committee on April 14 relies on raising the fuel tax by 9.8 cents a gallon on July 1. Pump taxes, including the federal tax, would be 77.6 cents a gallon, second-highest in the U.S. behind California.

The transportation budget also relies on a cap-and-trade setup, which requires manufacturers to bid for the right to emit greenhouse gases.

Some climate activists scorn cap-and-trade as a loophole-riddled scheme to let “polluters” off the hook, but the policy has support from larger environmental organizations. It also appeals to budget writers.

The auctions would be a new and huge revenue source for the state as emitters, including fossil fuel companies, bid for a dwindling number of “allowances.”

The Washington Research Council, a business-supported organization, projected cap-and-trade will increase gas prices by 18 cents a gallon and diesel prices by 21 cents a gallon in 2023.

By 2028, cap-and-trade would push gas prices up by 26 cents and diesel by 30 cents a gallon, according to the research council.

The research council projected that fuel prices will rise in lockstep with allowance prices. Ecology accepts that allowance prices will rise, but rejects the idea that fuel prices will have a corresponding increase.

An Ecology spokesman said in an email April 15 that manufacturers could cut emissions, reducing their need to bid for emission permits.

It’s also possible that alternatives to gasoline, such as renewable diesel or electricity, would turn out to be cheaper, he said.

“While the cost of allowances may have an impact on retail gas prices to some extent, a given increase in the price of allowances is unlikely to translate directly into higher prices at the pump,” he said.

Forecasting fuel prices under a low-carbon fuel standard requires even more speculation. The government mandates more biofuels and hopes the free-market will hold down pump prices.

Stillwater Associates, a California consultant to the petroleum industry, projected in January that a House low-carbon fuel bill would raise gasoline prices by 29 cents a gallon by 2028 and 58 cents by 2035.

Oregon already has a low-carbon fuel standard. The goal is to reduce greenhouse gases from transportation fuels by 10% by 2025. At about the halfway point, the standard had added 3.7 cents to the cost of a gallon of gasoline in 2020, the Oregon Department of Environmental Quality reported April 15.

Ecology resists the idea that a low-carbon fuel standard pushes up fuel prices. The forecasts assume refineries won’t cut their costs of complying with the standard and will then pass on the full cost to customers in Washington, according to Ecology.

Farm groups are among the staunchest opponents of a low-carbon fuel standard and cap-and-trade. Juris told lawmakers that any increase in petroleum and natural gas prices will hurt.

“It’s a struggle because we’re already operating on a very thin margin,” he said.

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