How Washington plans to spend money from the new carbon-cap law

Other dollars could be put toward restoring salmon habitat, accelerating clean-energy projects and helping ease the burdens of pollution on vulnerable communities that are disproportionately affected by carbon emissions.

This year’s deal-making comes after lawmakers and Inslee in 2021 approved Senate Bill 5126, which made Washington the second state, behind California, to adopt a carbon-cap-and-invest program.

Known as the Climate Commitment Act, the new law puts a price on carbon, and businesses that generate fewer emissions than the credits allowed for them are then able to sell those credits to other businesses that are more slowly reducing greenhouse gases. The law is expected to generate between $500 million and $1 billion annually in the coming years, according to the state Office of Financial Management, which can be put toward clean energy projects.

In March, the state Department of Ecology sold the first round of credits at an auction – which will take place four times a year – raising a total of $300 million. Over time, the total pool of carbon credits available is expected to be gradually ratcheted down. The hope is to get to net-zero emissions by 2050.

Now state lawmakers are disbursing the total projected carbon dollars across three new state budgets. That adds a new level of complexity for negotiations, according to House Speaker Laurie Jinkins, D-Tacoma.

“That’s a big piece of work that we’ve never had to do before,” Jinkins said in a question-and-answer session with reporters. But “I don’t think there’s a lot of, like, disagreement about what we’re doing.”

Reuven Carlyle, a former Democratic state senator from Seattle, sponsored the legislation, and said he was purposely vague on how the money should be spent.

“My goal politically was to get the budget writers salivating with opportunity and anticipation about how to leverage those dollars for federal dollars and for private investment,” said Carlyle.

The new law has gotten a boost since it was signed because the federal Inflation Reduction Act included big investments in climate change that include matching federal funds, said Carlyle, who has since founded a start-up to help businesses hit climate goals.

He described it as “a third less expensive than anticipated the day the governor signed the bill.”

Negotiations

House and Senate Democrats – who hold majorities in the Legislature – and Inslee’s office are now negotiating a package to be distributed in the budgets being finalized before the April 23 scheduled end of the legislative session.

Figuring out the transportation budget may be easiest, since lawmakers last year announced they were dedicating a big chunk of Climate Commitment Act dollars to secure funding and passage for the 16-year transportation spending package, known as Move Ahead Washington, that passed last year. Legislators are putting other dollars into the new two-year capital-construction budget.

And then there’s the state operating budget, the main budget that funds the broad array of government services, from K-12 schools and the mental-health system to parks, prisons, wildfire response and more.

The various proposals for that new budget – expected to come in around $70 billion – include climate dollars to help local governments and tribes reduce the impact of climate change and pollution. Those plans would also fund clean-energy projects and job training.

In a news conference last week, Inslee called for lawmakers to make sure money was going into projects that could directly reduce carbon emissions.

“We want to make sure, first, that this money is used to tackle climate change,” Inslee said, adding: “Because there’s many things that are good projects in the state of Washington, but … we have made a commitment to Washingtonians to reduce our carbon pollution.”

Final budget agreements are likely to be released in the final days of the legislative session.

Republicans in Washington have broadly opposed the Climate Commitment Act and other clean-energy legislation, warning that among other things it could raise the prices for gas and housing for people already struggling to get by in Washington.

Though she voted against the bill in 2021, Rep. Mary Dye, R-Pomeroy, successfully sponsored an amendment to the law that requires the state Department of Ecology to produce an annual report on climate spending. Those updates must detail the recipients of climate funds, along with the amount, the purpose and the ultimate use of those dollars, and if possible what verified impact they have had.

In an interview, Dye questioned how the Democratic majority is distributing the funds and whether a final deal will meet the law’s requirement that at least 35% of the investments go toward vulnerable communities that bear a disproportionate burden of the impacts of pollution.

"I tried to make sure that we put something in so that we know our policies are working or not," said Dye, the ranking Republican on the House Environment & Energy Committee. But “there’s no performance metrics for the overburdened and vulnerable communities.”

Lawmakers should honor their commitments to those communities, said Dye. She also questioned other proposed uses of the climate dollars, criticizing proposals to spend big on Washington’s universities, as well as a project that would reshape Capitol Lake, the human-made body of water at the bottom edge of Puget Sound that the Capitol campus overlooks.

Legislators are meanwhile looking at other adjustments to the Climate Commitment Act. Just last week, Democratic Sens. Mark Mullet of Issaquah and Joe Nguyễn of White Center introduced a bill to ease the cost burdens of fuel on freight haulers and farmers moving agricultural products. Senate Bill 5766 has already been scheduled for both a hearing and a vote this week in the Senate Ways & Means Committee.

“As Washington works toward a green future, we must be mindful of the impacts that these transitions have on our communities,” said Nguyễn. “Our farmers are critical contributors to our economy, and they are being unfairly targeted by big oil companies. It was always our intention to exempt their fuel from the CCA guidelines, and this legislation affirms our commitment to them as we transition into a cleaner, greener economy.”

And Carlyle, the former senator who wrote the law, said elected officials may have to do more in the coming years to reckon with the fact that Washington’s hoped-for transition toward electrified vehicles and buildings will create new stresses on the energy grid.

He described it as “the dark underbelly of the issue that has not yet surfaced.”