Washington state drivers could see a reduction of 4 cents per gallon as the cost of greenhouse gas permits in the state’s climate law declined by 8 percent to $65.26 per metric ton of CO2.
The price equates to 52 cents per gallon of gasoline and 63 cents per gallon of diesel. The cost is also passed along to homeowners who use natural gas for home heating.
Washington has the highest tax on CO2 emissions in North America. By way of comparison, California’s CO2 price is $27.94.
Over the past year, Washington’s CO2 tax has increased 31%, from $50 in March 2025 to $65.26 today.
Interestingly, the price is exactly the amount needed to trigger another special auction of CO2 permits. Special auctions are triggered when the price reaches a certain cap. The system is designed to prevent prices from rising too quickly by putting more permits up for auction. The tradeoff is that putting more credits on the market, CO2 emissions in the near term will be higher than projected.
What appears to be happening is that companies that are required to purchase CO2 allowances are bidding just up to the trigger price, assuming they can purchase additional credits at a lower price in the special auction. The special auction prices are lower than the trigger price. Basically, Washington’s system is now functioning as a flat carbon tax rather than a cap-and-trade system.
While it is useful in a practical sense to compare Washington’s gas prices to Oregon to determine the impact of the CO2 tax, it is more difficult to draw a direct comparison because there are other laws that play a role. For example, since the middle of 2025, the cost of Oregon’s low-carbon fuel standard has jumped from about $40 per metric ton to over $150 per metric ton. That added 13 cents per gallon in just the second half of last year in Oregon. So, even as the cost of Washington’s CO2 tax drive our prices up, Oregon’s aggressive low-carbon fuel standard was driving their prices up as well.
This auction raised about $183 million in revenue for the state.