Ecology quietly scrubs the gas price impacts of CO2 tax from their web page

May 30, 2023

Even as Washington’s gas prices have increased compared to neighboring states, staff at the Washington State Department of Ecology have repeatedly downplayed the impact of the state’s new tax on CO2 emissions. Last year, when asked about the impact on gas and diesel, Governor Inslee claimed, “This is going to have a minimal impact, if any. Pennies. We are talking about pennies.”

Now, as gas prices have increased rapidly, Ecology staff have quietly scrubbed the agency’s web page of those claims. They also significantly increased the estimated impact of the tax on CO2 emissions on Washington’s economy.

It is the latest example of the failure of the governor and Ecology staff to deal honestly with the impact of the state’s climate policies. Their denial means Washington will continue to pay high costs for relatively small environmental benefit, missing opportunities to reduce CO2 more effectively at lower cost.

Staff at the Washington State Department of Ecology have consistently claimed the new tax on CO2 emissions, known as the Climate Commitment Act (CCA), would have a minimal impact on gas prices. Citing a macroeconomic study of the CCA, Ecology staff addressed the question of the CCA’s impact on gas prices on their web page. In a response to the question, “What are Ecology’s estimates for the impacts on gas prices,” they wrote, “We found the potential impact on gas prices is expected to remain low – about 1% to 3% in 2023.”

In response to a letter from State Senator Shelly Short, Ecology staff were more specific. Air Quality Program Manager Kathy Taylor wrote on July 1, 2022, that modeling from Vivid Economics showed the tax on CO2 emissions “would translate into an additional 5 cents per gallon in 2023.”

That projection was significantly lower than we calculated using the more standard approach of assigning the cost of the tax on CO2 to emissions to the price of gas. Using the cost estimate for one metric ton (MT) of CO2 cited in Ecology’s study, we estimated the cost increase would be about 46 cents per gallon.

Ecology Staff specifically rejected that estimate. On a page addressing the economic impacts of the CCA, they addressed the question, “Will the new climate policies result in a 46-cent-per-gallon increase in the gas tax starting in 2023.” Their dismissive response was, “No.” They went on to say that “Ecology’s analysis predicts minimal price impacts to the price of gas in 2023 and very modest impacts in future years. These are not ‘best case’ outcomes. The impacts remain small when we evaluated them under a range of potential market scenarios.” In other words, they promised that they were not engaging in wishful thinking but that their unequivocal prediction was robust and certain.

Since then, however, gas prices have increased about 40 cents per gallon more than neighboring Oregon and Idaho since the beginning of the year when the CCA took effect. What do Ecology staff have to say now about the price impact of the taxes on CO2 emissions?

Nothing. In fact, the previous claims about the price impact have all been scrubbed from the department’s web page. Additionally, Ecology staff radically changed one of the claims about the price impact of the CCA.

The section that confidently claimed that gas prices wouldn’t increase by 46 cents a gallon and promising “minimal” price impacts in 2023 has been completely removed. Where they previously expressed certainty that minimal cost impacts weren’t “best case” outcomes, they now say nothing.

Under the question, “What are Ecology’s estimates for the impacts on gas prices,” the new text includes only a projection for a different law – the low-carbon fuel standard – but says nothing about the price impact of the CCA.

Additionally, Ecology staff also made a significant change to the wording of another answer on the price impact of the CCA. Where they previously claimed the impact on “gas prices” would be “1% to 3% in 2023” they now say the “overall economic impact of the cap-and-invest program to be 1 to 3%” (italics mine).

The cost went from a 1 to 3 percent increase in gas prices to a 1 to 3 percent overall economic impact. Washington’s GDP in 2022 was an estimated $725 billion, so the impact of the tax on CO2 could be up to $21.75 billion annually.

That is an incredible change and is significantly different than Ecology’s previous claim. Ecology staff misconstrued the study from Vivid Economics they had been citing all along.

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How, then, do Ecology staff explain the significant increase in gas prices compared to other states? They have turned to vague distraction. They write, “In 2022, a combination of international and national factors drove fuel prices to record highs — including the invasion of Ukraine, refinery problems, and a slow recovery from the pandemic, which limited oil and gas development. Starting in summer 2022, gas prices began falling. They are now almost $1 per gallon below the 2022 peak. Historically, gas is a volatile commodity — retail prices are affected by changes to production capacity, and supply and demand for crude oil. State regulations play a minor role.”

This is obviously an attempt to distract from the impact of the tax on CO2 emissions. All the forces they identify, including the war in Ukraine and the pandemic, apply to Oregon and Idaho as well. Only in Washington have we seen the significant rate of price increases since the beginning of the year, when the CCA took effect.

There are, of course, many things that contribute to gas prices. Taxes, including the 49.4 cent per gallon gas tax, the 18.4 cents per gallon federal tax, and the estimated 40 cents per gallon from the tax on CO2 emissions currently, add up to more than one dollar per gallon. Calling that a “minor role” is dismissive and indicates Department of Ecology staff are unlikely to seek ways to reduce the financial impact of the CCA.

Additionally, claiming that prices are lower today than last year due to “supply and demand” undermines the argument made by the governor and Ecology staff that oil companies are responsible for recent price increases. Apparently, when prices go up it is due to oil company greed, but when prices go down it is due to “supply and demand.” The governor and Ecology staff have chosen to play politics, blaming everyone else for the impact of their policies on Washington’s residents and economy.

Ultimately, the governor, some in the legislature, and in the Department of Ecology like the high cost of the CCA. Higher taxes mean more tax revenue that state legislators and the governor can spend.

It doesn’t have to be this way. We have repeatedly highlighted ways that Washington can effectively reduce CO2 emissions at much lower cost. The prices of CO2 emissions in California, which has a similar tax, is about 75 percent lower than Washington. Washington’s needlessly restrictive law increases the economic impact of our climate policies. As long as the Inslee Administration’s policy is to deny the real-world impact of the state’s policies, Washington residents will continue to pay needlessly high prices.