As part of our ongoing work to reduce carbon pollution and meet greenhouse gas limits set by state law, we share independent economic analysis of the Climate Commitment Act and the Clean Fuel Standard .
We commissioned these reports to better understand the costs to businesses, industries and consumers in Washington when these new climate initiatives begin on January 1, 2023.
The Climate Commitment Act will limit greenhouse gas emissions from major state sources through a cap and invest program. The economic report shows that linking the Washington program to the California and Quebec programs would create the most cost-effective option.
The Clean Fuel Standard will reduce greenhouse gas emissions by reducing the carbon intensity of transportation fuels, such as gasoline and diesel. The economic report shows that the standard will have little impact on gasoline prices over the next few years and will eventually lead to lower energy costs and significant health benefits.
These independent reports confirm that new climate regulations play a minor role in the overall price of gasoline and diesel. Studies show – just like current events – that domestic and global events play the dominant role in fuel prices.
Clean Fuel Standard
Economic report shows little impact on gasoline prices
Washington’s new Clean Fuel Standard will mean a difference of less than 1 cent per gallon in the price consumers pay at the gas pump in 2023, a third-party economic analysis estimates. Prices could increase by up to 2 cents in 2024 and 4 cents in 2025, according to the report.
Ecology commissioned the Berkeley Research Group to assess the impact of the clean fuels standard on the retail price of gasoline and diesel, as well as electricity for electric vehicles. Berkeley is an independent, globally recognized consultant with a long track record of delivering high quality reports across a wide range of markets and industries.
Research shows that regulations like the Clean Fuel Standard play a minor role in gas prices compared to changes in the U.S. economy and disruptions in crude oil supply and demand caused by events. global issues, such as the pandemic and Russia’s invasion of Ukraine.
Lawmakers passed the Clean Fuel Standard in 2021. It will come into force in 2023. It requires fuel suppliers to gradually reduce the “carbon intensity” of transportation fuels by 20% by 2038, enough to reduce Washington State’s greenhouse gas emissions of 4.3 million metric tons per year. Transportation is the largest source of greenhouse gas emissions in Washington, accounting for 45% of total emissions.
The analysis shows that the price impacts vary over the next 12 years, then drop to near zero as the number of electric cars increases and there is a transition to cleaner energy.
We expect to propose draft regulations for the clean fuel standard later this summer.
The Clean Fuel Standard is designed to accelerate the transition to clean fuels and make zero-emission vehicles and other low-carbon technologies more affordable and accessible. The report shows the magnitude of these impacts in its projections for electricity used to “power” electric vehicles: Electricity used to charge the batteries of electric cars and trucks is expected to become cheaper by up to $1.83 per equivalent gallon.
Reducing the use of gasoline and diesel would also bring important health benefits. By 2038, the report predicts that reducing air pollution through the clean fuel standard, combined with other transportation initiatives, would mean an estimated $1.8 billion in economic benefit through better health .
Read the report on the Clean Fuel Standard webpage.
Climate commitment law
Economic report highlights most cost-effective option for new cap and investment program
Linking Washington’s new cap-and-invest program to other carbon markets in California and Quebec would create the most cost-effective participation option, according to independent market analysis.
Ecology engaged Vivid Economics to assess the economic effects of different approaches to establishing an emissions market for Washington. Vivid Economics is an internationally renowned firm with extensive experience in analyzing carbon markets around the world.
The report showed that the expectation of a linked cap-and-invest program would yield an initial emissions allowance price of $41 per metric ton of carbon dioxide equivalent when Washington’s program begins in 2023, while other scenarios produced prices up to 65% higher.
The Legislature considered connecting Washington’s carbon market when it passed the Climate Commitment Act and directed Ecology to continue ties if it benefits Washington businesses and communities.
In a linked market, auctions would be held jointly with California and Quebec, and the three jurisdictions would share a common allocation price. Currently, the price of allowances on the California-Quebec market is around $31. The report said it would be very likely that Washington’s price would more closely align with theirs once a linkage deal was in place.
We have used findings from Vivid Economics to inform key aspects of our regulations for the cap and invest program, which is open for public comment until July 15, 2022.
By law, the decision to tie Washington’s program to other jurisdictions requires a separate public process to weigh the potential costs and benefits. Given the impact this link is expected to have on allowance prices, Ecology will begin this exploratory process in the fall of 2022.
The full draft report outlining Vivid Economics’ findings and a video summary can be found on our Climate Commitment Act webpage.
State climate policies are key to protecting communities in Washington
Today’s extreme gas prices clearly demonstrate why we must quickly move away from fossil fuels. Over time, Washington’s new climate initiatives will make the economy less vulnerable to sudden swings in fuel prices and put manufacturers at the forefront of the global clean energy economy.
Washington is a proud leader in driving the kind of climate policies that will reduce greenhouse gas emissions and protect the environment and economy for future generations. The June 30 Supreme Court decision in West Virginia v. the Environmental Protection Agency has dealt a blow to federal efforts to address the global climate crisis. This decision makes our state plans for a rapid transition away from fossil fuels even more essential.