On gas prices, Governor Inslee says he was misled by Ecology staff

Dec 12, 2023

After claiming that his climate tax wouldn’t increase gas prices, Governor Inslee now says he was misled by Ecology staff who “did the best jobs they could,” but missed the mark badly.

The governor made these comments as he announced the broad strokes of his 2024 climate agenda in a press conference where he promised to spend hundreds of millions of dollars in tax revenue on a wide range of new government programs and subsidies.

We will provide an analysis of those proposals later, but the governor’s answers on the price impact of his climate tax were remarkably dishonest.

When asked by a reporter about the governor’s repeated claim that the impact of the state’s tax on CO2 known as the Climate Commitment Act would be “only pennies,” the governor had a series of excuses.

First, the governor said he was not responsible for the claim about the small impact of the climate tax. Noting that the governor has claimed the impact would be pennies, the reporter asked, “How did you come to pennies on the gallon?” The governor quickly replied, “I did not,” going on to say that Ecology staff has provided the estimate. This is misleading. In fact, the governor claimed the impact would be virtually zero long before Ecology staff made their estimate.

When he signed the climate tax and the low-carbon fuel standard into law on May 17, 2021 Governor Inslee said, “Don’t let anyone give you that swill that somehow it’s going to increase prices.” It was clear that was false at the time. One purpose of taxing CO2 emissions is to increase the price to provide an incentive to switch to other forms of energy.

The governor claimed the error in the price projection was the fault of the staff at the Department of Ecology. He said, “There was an assessment done by agencies that looked at what had been done in the California cap-and-trade system. … They did the best job they could to try to predict what would happen.”

It is telling that the governor thinks this badly inaccurate projection is the best Ecology staff can do. If that is the case, why would anyone believe Ecology staff in the future when they make predictions about the impact of this or any other state policy?

The reality is that Ecology rejected California’s calculation for estimating the impact on gas prices. Instead, they applied the results of an econometric model from McKinsey and Vivid Economics that has turned out to be completely inaccurate. Ecology subsequently removed those previous inaccurate projections from the web page.

Ecology staff and the governor should have used the approach used by California agencies, as we did.

In 2016 the California Legislative Analyst’s Office noted that “We assume that retail gasoline prices increase by 8 cents to 9 cents per gallon and diesel prices increase by about 10 cents per gallon for every $10 per metric ton of carbon dioxide equivalent that an allowance costs.” Ecology’s study showed an estimated cost for allowances of $58 per metric ton. By California’s estimates, that amounts to 46 cents per gallon of gasoline.

Instead, Ecology ignored California's experience and predicted the impact would be about five cents per gallon.

The governor went on to claim, “Our experience has been somewhat different than California’s.” Again, this is false.

As I wrote last December when we predicted that the climate tax would significantly increase prices, “we assume the tax will be passed on to consumers. This is the experience in California and in Washington state with gas tax increases.” That is exactly what has happened, as even the governor now admits.

Finally, the main theme of the press conference, and likely the upcoming legislative session, is to blame oil companies for the price increases. This message, however, conflicts with the governor’s desire to claim that the impact of gas prices is small.

In back-to-back sentences, the governor claimed the oil companies were needlessly raising gasoline prices and then pointed out that gas prices have declined by 70 cents per gallon since the summer. If oil companies control prices, why would they allow prices to go down? The governor can’t have it both ways.

Having spent the last three years claiming his climate tax wouldn’t raise prices, the governor knows he can’t admit he was wrong or being dishonest. So, he now claims that he was misled by agency staff who weren’t capable of anything better. Whether the governor and Ecology staff were dishonest or just incompetent, Washingtonians should have learned they can’t trust what they are being told about the state’s climate policy.

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