Paul Fundingsland has been sending me his thoughts on the implementation of Washington State’s experiences with their cap-and-invest “putting a price on carbon” scheme. This dispatch from the front lines of the cap-and-invest war on citizens covers three items: the letter he got from Puget Sound Energy about his natural gas bill, an opinion piece describing ways to reduce the cost burden on citizens, and an article explaining how the program is affecting trucking companies. I believe this is what is headed to New York and appreciate the time he has taken sending the information.
Paul describes himself as “An Obsessive Climate Change Generalist”. Although he is a retired professor, he says he has no scientific or other degrees specific to these kinds of issues that can be cited as offering personal official expertise or credibility. What he does have is a two decades old avid, enthusiastic, obsession with all things Climate Change related.
Background
The Climate Leadership & Community Protection Act (Climate Act) established a New York “Net Zero” target (85% reduction and 15% offset of emissions) by 2050. It includes an interim 2030 reduction target of a 40% reduction by 2030 and a requirement that all electricity generated be “zero-emissions” by 2040. The Climate Action Council is responsible for preparing the Scoping Plan that outlines how to “achieve the State’s bold clean energy and climate agenda.” In brief, that plan is to electrify everything possible using zero-emissions electricity. The Integration Analysis prepared by the New York State Energy Research and Development Authority (NYSERDA) and its consultants quantifies the impact of the electrification strategies. That material was used to develop the Draft Scoping Plan. After a year-long review, the Scoping Plan recommendations were finalized at the end of 2022. In 2023 the Scoping Plan recommendations are supposed to be implemented through regulation and legislation. New York’s cap-and-invest program is supposed to address one of those recommendations.
The New York State Department of Environmental Conservation (DEC) has developed an official website for cap and invest. It states:
An economywide Cap-and-Invest Program will establish a declining cap on greenhouse gas emissions, limit potential costs to New Yorkers, invest proceeds in programs that drive emission reductions in an equitable manner, and maintain the competitiveness of New York businesses and industries. Cap-and-Invest will ensure the state meets the greenhouse gas emission reduction requirements set forth in the Climate Leadership and Community Protection Act (Climate Act).
I started writing about the effects of the Washington Cap-and-Invest Program last summer. Washington State Gasoline Prices Are a Precursor to New York’s Future and the article published at Watts Up With That – Do Washington State Residents Know Why Their Gasoline Prices Are So High Now? addressed the observation that gas prices in Washing spiked soon after the first auction of the program. I also published Washington State Gasoline Prices and Public Perceptions that consolidated responses from Washington residents in the comments from the Watts Up With That article.
Paul contacted me soon after those articles came out with his thoughts that I turned into posts here. The first article on Washington State gas prices described his opinion of how the program came to be and concluded that it is a “state tax shell game preying on the less affluent”. He later sent a long email that I turned into a post that described how the program has been evolving.
My initial impression of Washington GHG emissions is that there are no “easy” emission reductions because the target sectors are transportation, residential-industrial-commercial heating, and “other”. Fundingsland agrees pointing out that:
It’s going to be extremely difficult and may not even be possible for Washington State to be able to claim any meaningful or significant emission reductions based on this tax-and-reallocate scheme given the state’s overall energy use configuration combined with all the various emission allowance exemptions.
In fact, there is a very high probability there will be next to zero emission reductions and perhaps even an increase.
Washington Climate Commitment Act
Washington’s Climate Commitment Act appears to be even more aspirational than California or New York. The Washington Department of Ecology (“Ecology”) web page explains:
The Climate Commitment Act (CCA) caps and reduces greenhouse gas (GHG) emissions from Washington’s largest emitting sources and industries, allowing businesses to find the most efficient path to lower carbon emissions. This powerful program works alongside other critical climate policies to help Washington achieve its commitment to reducing GHG emissions by 95% by 2050.
The state plans in Washington, California, and New York all aim for net-zero emissions where greenhouse gas (GHG) emissions are equal to the amount of GHG that are removed. Washington’s emission reduction target is 95% by 2050. California is shooting for 85% by 2045 while New York’s target is 85% by 2050 but covers the whole economy. In addition to the target levels and dates there are differences in what GHG emissions are included, how the mass quantities are calculated, and which sectors of the economy must comply.
According to the Washington State Department of Ecology description of their cap-and-invest program:
In 2021, the Washington Legislature passed the Climate Commitment Act (or CCA) which establishes a comprehensive, market-based program to reduce carbon pollution and achieve the greenhouse gas limits set in state law. The program started on Jan. 1, 2023, and the first emissions allowance auction was held on Feb. 28.
Businesses covered by the program must obtain allowances equal to their emissions and submit them to Ecology according to a staggered four-year compliance schedule. The first compliance deadline is Nov. 1, 2024, at which time businesses need to have allowances to cover just 30% of their 2023 emissions.
Puget Sound Energy Response
Paul sent information that was used for another article based on a local news update noting that natural gas company Puget Sound Energy (PSE) had announced a 3% rate price hike due to their mandated “Cap & Invest” auction allowance costs. He noted that:
The companies required to participate in the auction allowances are simply passing these costs to their bottom line along to their customers. In essence, the State taxes the company and the company taxes its customers.
What makes this particular example more disgusting than usual is the fact that PSE wanted to simply include a line item on the customer’s bill identifying this cost but the Washington Utilities and Transportation Commission (UTC) actually made it illegal to do so claiming that would make for a “lengthy confusing” bill.
Even though PSE was not allowed to include the costs of the program in their utility bill they are not keeping silent on the reason for the associated cost increase. Paul’s latest correspondence noted that: PSE is being very transparent about why this price increase is happening. It is a direct result of the State’s mandated “Cap & Invest” program.
As far as I can tell according to this web site pse.com/cca my November bill will increase somewhere in the neighborhood of 3%. This is the second documented result of the Washington State required “emissions allowances auctions” (forced permit purchases required to emit greenhouse gases) held quarterly affecting businesses like PSE and ultimately it’s customers. The first example being this past summer’s overnight increase of $.43 a gallon for gas attributed to this scheme.
Since the state mandates that PSE and other companies in the state identified as emitting notable amounts of CO2 must participate in quarterly scheduled “emission allowances auctions”, it is easy to anticipate these kinds of price increases will continue to rise, perhaps at an alarming rate in both transparent and un-transparent ways for the foreseeable future.
The following letter from PSE indicates I can also expect a price increase for the same reasons on my electrical bill from them once they work out those cost details. When that happens, that will be the third documented price increase as a direct result of the recently initiated Washington State “emission allowances auctions” under its “Cap (Tax) & Invest” scheme.
Paul explains:
These are just the obvious examples of Washington State forced increased bottom line public business costs being passed on to their customers. Most of the affected companies in the Washington State scheme do not have the high profile of a utility or refinery with their traceable and identifiable costs and results. The price increases for the other companies will also be passed along to their customers but are much more difficult to identify and document. But they are there none the less, un-transparently adversely affecting the finances of every state citizen especially the lower-, middle-, and fixed-income brackets.
Affordability
The New York Cap-and-Invest Program is supposed to address affordability with a political solution. According to the official website for cap and invest: “Governor Hochul’s Consumer Climate Action Account will deliver at least 30 percent in future Cap-and-Invest proceeds to New Yorkers every year to mitigate consumer costs.”
Paul sent along an opinion piece describing political solutions for Washington. It states:
Today, there are four proposals on the table. Most legislators in the majority have remained silent, and presumably want to use these funds to pay for new or existing programs. Sen. Mark Mullet, D-Issaquah, would like to use these funds to reduce car-tab fees for two years, but this would shortchange the transportation budget resulting in a shell-game in which Carbon Commitment Act (CCA) dollars are used to backfill transportation funds. His proposal also calls for lowering compliance obligations in the short-term, which means increasing carbon emissions.
Finally, Senate Republican Leader John Braun wants to use these funds for property-tax exemptions and credits to renters.
Rep. Mary Dye, R-Pomeroy, and I have a simpler plan. We would send all extra funds back to Washington drivers as CAR check. Unlike Sen. Mullet’s proposal, our bill would not change car-tab fee amounts or emission reductions. Drivers get a rebate, and we adhere to our emission reduction goals.
Fundingsland notes that these represent signs of pushback as the “climate taxes” imposed by the State’s scheme are being realistically viewed as exorbitant and start to adversely affect the citizens. He explains:
Various groups appear to be trying to come up with ways to get funds back out of the state government and returned to the citizens. Let’s see: Washington State taxes the companies. The companies pass those costs along to their consumers. Some of those monies are somehow then given from the State back to the citizens. And, of course there will bureaucratic “processing” costs at every level of the monies going in and coming back out.
Can it be any more convoluted? It Probably will if given a chance.
Sector Fuel Exemptions
Finally, Paul sent another article describing another political solution to the cost problem. Certain industry sectors are supposed to be exempt from any fuel surcharges fuel companies pass along to customers due to the cap-and-trade program. The article explains:
Last week, Joel Creswell – the Washington State Department of Ecology’s climate pollution reduction program manager – touted progress regarding exempting certain industries from paying a fuel tax based on the state’s carbon emission auctions.
“So, we’ve really made significant progress on the exempt fuels issue,” he told the Senate Environment, Energy & Technology Committee on Oct. 9.
According to the Department of Agriculture, certain types of fuel or categories of fuel usage in the agriculture, maritime and aviation sectors are exempt from the fuel surcharge.
The Center Square reached out to various organizations to get their take on Creswell’s assessment.
Washington Trucking Association President and CEO Sheri Call was less sanguine about implementation of the fuel tax exemption.
“It’s definitely more rosy than in reality, and it still doesn’t take into consideration the complex nature of the trucking industry and multiple things that our members do, so I’m still disappointed, honestly,” Call said of Creswell’s assessment. “The work group didn’t really produce much of anything.”
…….
Call said small carriers – mentioning a two-truck operation in eastern Washington – are being hit especially hard, noting that not all of them have “a direct line of sight to covered entities.” She went on to say, “So, they’re not going to make a 50-mile round trip out of their way to buy fuel from a supplier who has offered this exemption.”
Small carriers are struggling, she explained. “For those small carriers who have no choice, they’re trying to fuel as efficiently and cheaply as they can,” she said.
Call mentioned some dollar figures to bring home the impact of the fuel surcharge. “This two truck operation – to them, it’s a $20,000 to $25,000 additional cost to fuel a year, and that’s just one story,” Call said. “I have people who are spending $20,000 to $25,000 a month on fuel because of the surcharge. So, it’s still significant. People are still hurting. and it’s, honestly, it’s a really bad time.”
The current state of the economy isn’t helping, she lamented. “So for us to be suffering with the highest or second-highest fuel prices in the nation right now when the economy is doing so poorly, especially for freight, it’s just a bad combination,” Call said. “It’s a terrible thing to be doing business in Washington. But I’m hearing from carriers who, because of the economic situation, they’re basically instructing their drivers to top off in Washington but do not fuel.”
Honestly, I distrust any political “fix” to a problem created by a political policy. Paul agrees:
Let’s see: Washington State taxes the companies. The companies pass those costs along to their consumers. Some of those monies are somehow then given from the State back to the citizens. And of course there will bureaucratic “processing” costs at every level of the monies going in and coming back out. Can it be any more convoluted? It Probably will if given a chance.
Conclusion
These developments are fascinating. I am impressed that Puget Sound Energy went to its customers directly to explain why the costs spiked in October. Frankly, I don’t see that happening with New York utilities. It is telling that politicians are starting to figure out that being associated with higher energy costs is not necessarily a good political position. However, tacking on another political “fix” is unlikely to work. This is made clear by the trucking industry problems. There is a program to help certain sectors but it is not working in practice and the little guys are getting hurt the most.
The reason I appreciate hearing from Paul and publishing his thoughts is that everything that is happening in Washington will likely happen in New York. I believe that proponents of cap-and-dividend programs have unrealistic expectations for these programs. Setting caps that can only be met indirectly by substitution of an alternate “zero-emissions” resource is dangerous because if the alternatives do not become available to meet the arbitrary emission reduction targets, then the only option for affected sources to comply is to shut down. Even if that “works” I completely agree with Paul’s cost observation:
Washington State thinks it is encouraging greenhouse gas emitting companies to change their ways with its “Cap (Tax) & Invest” scheme when in fact it is just punishing its own citizens through these companies with an unreasonable heftier financial burden now, for an unverifiable, seriously dubious, theoretical computer modeled climate benefit 80 years in the future.
I sympathize with him when he told me that he is not looking forward to the effects of the next quarterly emissions allocations auction circus because of the associated financial consequences. It is coming to New York and will also cause energy prices to spike. He concludes:
This money “circus” will be interesting to watch unfold. But not so much fun watching my money help pay for this absurd spectacle.
Pragmatic Environmentalist of New York 