Initiative 2117: Cap-and-Trade ballot measure could kill WA’s first try at getting carbon neutral

One of the citizen-led initiatives on the ballot this November is Initiative 2117, which would repeal Washington’s Climate Commitment Act (CCA) if passed by a simple majority vote. That act, passed in 2021, caps how much carbon can be emitted per year and requires businesses to bid for a fixed number of “allowances” — in basic terms, the state is providing permission to pollute a certain percentage of total allowed emissions. The cap, and the number of allowances sold, are set to decrease every year until Washington is carbon neutral — around 2050. This system is more commonly referred to as “cap-and-trade” or “cap-and-invest.”

Initiative 2117 would repeal the act and do away with our current cap-and-trade system, paving the way for unregulated emissions and pollution. It would also prohibit state agencies, cities or counties from implementing any carbon tax credit trading system in the future, effectively killing the current program and any future iterations.

The initiative is one of four that multimillionaire-bankrolled group Let’s Go Washington successfully got on the ballot this year as part of their effort “to make sure that people know that they still have a place in the democratic process they signed up for,” according to spokesperson Hallie Balch.

This is how the proposition is worded on your ballot:

Initiative Measure No. 2117 concerns carbon tax credit trading.

This measure would prohibit state agencies from imposing any type of carbon tax credit trading, and repeal legislation establishing a cap and invest program to reduce greenhouse gas emissions. This measure would decrease funding for investments in transportation, clean air, renewable energy, conservation, and emissions-reduction.

Should this measure be enacted into law?

Yes
No

Carbon credit trading in Washington is a complicated system, but here’s the simplest explanation we can muster:

Each year, the state sets a limit on how many carbon emissions can be produced in the state of Washington. Businesses that generate more than 25,000 metric tons of carbon dioxide equivalent a year can participate in quarterly auctions for a fixed number of annual allowances, which allow them to emit what amounts to one metric ton of CO2 or CO2 equivalent into the atmosphere. They can then use those allowances, sell them to other companies, or hoard them to use or sell later.

According to the Washington State Department of Ecology, more than 75% of the state’s emissions fall under this program, with covered business types including fuel suppliers, natural gas and electric utilities, waste-to-energy facilities (beginning in 2027) and railroads (beginning in 2031). Businesses emitting fewer than 25,000 metric tons of CO2 equivalent are exempt from having to buy allowances. There are other exemptions as well, like for fuels exported from out of the state of Washington and for Kaiser Aluminum in Spokane Valley, which gets most or all of its credits for free until 2035 because of their sensitivity to competitors out of state who don’t have to buy carbon credits.

What would happen if Initiative 2117 passes?

If Initiative 2117 passes, the CCA would effectively be repealed, the current cap-and-trade system would be dismantled and any future iterations of a cap-and-trade system in the state — even locally or regionally — would be prohibited.

Washington’s cap-and-trade system is not perfect: It’s hard to track consumer costs, and similar cap-and-trade programs, like in California’s, which began in 2013 , have struggled to meet emission reduction goals . Meanwhile, impacts of the cap-and-trade program in California have been disproportionately passed on to lower-income and BIPOC residents ; businesses buying credits pass some of those costs onto customers and Black and brown neighborhoods were less likely to see reductions in pollution.

However, Washington’s program is also new — having gone into effect in 2023 after passage in 2021 — and is slightly different from California’s, with more stringent requirements for carbon offset projects and a focus on lightening the pollution load on already overburdened communities .

How does cap-and-trade help the environment?

The intent of the Climate Commitment Act (CCA) was to reduce carbon emissions by slowly reducing the amount of carbon that can be released each year, selling fewer and fewer allowances at each auction. The demand for credits would also likely increase the cost, penalizing companies that didn’t shift to more carbon-neutral production by making it more and more expensive to produce carbon in Washington. As the state Department of Ecology put it, “Businesses that do not sufficiently reduce their emissions will be faced with increasing compliance costs, so investing in cleaner operations is good for the planet and the bottom line.”

Projected emissions data with the cap-and-trade program in place, from the WA State Department of Ecology.

The CCA also offers businesses the opportunity to participate in projects that offset their carbon emissions. Doing offset projects allows businesses to earn credits that can cover up to 5% of their emissions and an additional 3% with credits from projects on federally recognized Tribal lands.

In order for a project to count for offset credits, it needs to result in “greenhouse gas reductions that are real, permanent, quantifiable, verifiable and enforceable,” according to Ecology. Examples would include a business switching from natural gas to a zero-emissions energy source, or improving energy efficiency of manufacturing plants. Reforestation, urban forestry, livestock methane capturing and the extraction of Ozone-Depleting Substances — like hydrofluorocarbons which are primarily used for cooling — are other projects that might count.

Finally, the CCA uses the money earned from selling carbon emission credits at the quarterly auctions to invest back into the state . In 2023, most of the program’s first tranche of revenue — $76.2 million — was distributed in grants from the Washington State Department of Transportation to “increase bus ridership, improve pedestrian and bicyclist safety, expand rural transportation services and help transit agencies with major purchases,” according to reporting from the Washington State Standard .

The Spokane Transit Authority leveraged state dollars from the program to pay for bus wraps advertising free fare for youth. In Walla Walla, monies from the fund were used to provide free bus fares for all, according to The Spokesman-Review .

Those investments are why Washington calls it a “cap-and-invest,” rather than a “cap-and-trade” program (though businesses who buy credits are still allowed to trade them, so really it’s a question of semantics.)

OK, well, how much does cap-and-trade cost me?

If you think understanding how a cap-and-trade system works is hard, try quantifying costs to the everyday consumer.

While the program as a whole doesn’t technically cost the working people in Washington anything, purchasing those carbon credits for emissions is expensive for businesses, and those costs can get passed down to customers. Let’s Go Washington, the group behind all four of the citizen-led initiatives on Washington ballots this election, call these costs the “hidden gas tax.”

Utility bills are a bit higher — between $1.33 to $14.96 higher per month for Avista customers due to the cap-and-trade system, according to The Spokesman. However, lower-income customers are supposed to be exempt from these charges and were also eligible to apply for a program offering applicants a one-time $200 utility credit funded by the CCA, which closed in early September (although local utility company Modern Electric declined to offer this credit and posted articles criticizing the CCA). So, lower-income customers may have had cheaper bills this year due to credit and exemption, but customers ineligible for the $200 credit and charge exemptions had slightly higher monthly bills because of the CCA.

It gets even more complex when it comes to gas prices. Let’s Go Washington, the multimillionaire-bankrolled group behind the ballot initiative to repeal CCA, claims that the law has caused gasoline producers to pass down costs to drivers, resulting in an extra 30-50 cents per gallon of gas, or about $500 a year. Studies from the Department of Ecology, however, attribute a much more modest portion of rising gas costs to the CCA, stating a third-party report found that the state’s clean energy measures would result in an increase of fewer than 4 cents per gallon by 2025.

Meanwhile, Let’s Go Washington is facing administrative charges from the state Public Disclosure Commission that the organization did not perform “timely and accurate” reporting in its signature gathering for this and other initiatives.

Washington does have on average a 10 to 20 cent higher price per gallon than neighboring Oregon, but the fluctuation of gas prices doesn’t seem to have a clear correlation to the changing costs of emission credits at the auctions: despite a sharp drop in credit prices at the most recent auction, gas prices went up. And, Washington’s gas prices had been higher than the national average since before the credit auction system went into place. The volatility of the market masks exactly what portion of the cost consumers pay at the pump is attributed to the pass-through cost of carbon allowances.

The same goes for groceries — large farms and agricultural producers that emit more than 25,000 metric tons of CO2 equivalent a year are required to participate in the auctions, which means there could be “hidden taxes” falling on consumers. Brian Heywood, the hedge fund manager funding Let’s Go Washington , estimated that the CCA was costing consumers an additional $200 to $500 on their yearly grocery bill, though it’s unclear how those numbers were calculated.

However, the agricultural industry is supposed to be exempt from some of the more complex regulations of the CCA, like surcharges on fuel used for transporting produce. The agriculture industry also received some of the benefits from money collected from the credit auction, such as incentives for composting, which could offset some of the costs passed on to consumers — which makes it especially difficult to analyze how much this is actually costing consumers, though a recent study found Washington residents pay about $40 more a month for groceries than Oregonians and $30 more a month than Idahoans.

Defend WA, the coalition of groups and individuals across the state that spun up to fight Let’s Go Washington’s ballot initiatives, think that the future costs of pollution are much higher than whatever costs are getting passed on to customers.

“Initiative 2117 is a purposely misleading initiative written by a mega-millionaire, and it won’t do a thing to guarantee lower costs for you and your family,” their website reads. “This initiative will only lead to costly consequences: more toxic air pollution that threatens our health, and more traffic.”

Additional reporting contributed by Aaron Hedge.

Further reading

To find more information and opinions from Let’s Go Washington, the group pushing for “yes” votes on the initiative to repeal the CCA and do away with cap-and-trade, click here .

To find more information and opinions from Defend WA, the group pushing for “no” votes on the initiative to protect the CCA and cap-and-trade, click here .

To read more about the program itself from the state Department of Ecology, click here .

For even further reading on cap-and-trade, check out the news articles below.

Is Washington saving the climate or taking your lunch money? A look at Initiative 2117 – Emry Dinman, The Spokesman-Review

Washington’s controversial cap-and-trade program, explained. Really. – Natalia Mesa, High Country News

Voters to decide on repeal of Washington cap-and-trade program – Jerry Cornfield, Washington State Standard

The group that accused Gov. Inslee of bribing voters hands out discounted gas to encourage voters to kill WA carbon tax – Nate Sanford, The Inlander

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