Economic impacts of
Washington’s climate policies

Yes. Ecology conducted economic analyses of the Climate Commitment Act and the Clean Fuel Standard when rules for these new programs were proposed in Summer 2022. As part of these analyses, we commissioned reports from respected, independent analysts to add to our understanding of cost impacts to businesses, industries, and consumers in Washington when these new climate initiatives begin Jan. 1, 2023. 

• Berkeley Research Group - Clean Fuel Standard Cost Benefit Analysis
• Washington State Climate Commitment Act: Summary of market modeling and analysis of the proposed Cap-and-Invest Program

The third party report we commissioned from Berkeley Research Group evaluated the Clean Fuel Standard’s impact on the retail cost of gas and diesel fuels, as well as electricity for electric vehicles. It found the Clean Fuel Standard would mean less than a 1-cent-per-gallon difference in the price consumers pay at the gas pump in 2023.

Prices could rise 2 cents in 2024 and up to 4 cents in 2025, the report shows. These price impacts are not expected to continue forever.  Once the Clean Fuel Standard is fully phased in about a decade from now, any remaining price impact is predicted to drop to nearly zero. In addition, the electricity used to power electric vehicles would actually be significantly cheaper than it is today, due to new incentives to add charging equipment and expand options for electric vehicles.

Ecology also analyzed potential effects of Washington’s other major greenhouse gas policy, the Climate Commitment Act, accounting for the impacts of the Clean Fuel Standard. We found the potential impact on gas prices is expected to remain low – about 1% to 3% in 2023.

No. The 46-cent figure appears to have begun with a June 2022 memo from the Washington Research Council, a free-market policy nonprofit. The memo contained a chart showing that the Climate Commitment Act cap-and-invest program could result in an increase in compliance costs of 46.6 cents per gallon in 2023. The chart itself, however, states that the data should not be used to forecast fuel prices.

Despite this disclaimer, the 46-cent figure has been repeated by other groups. It has sometimes been incorrectly cited as an official Ecology estimate. This figure does not reflect Ecology’s analysis. It appears to be based on narrow, oversimplified assumptions.

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.

The Climate Commitment Act and the Clean Fuel Standard are market-based policies. The laws require major greenhouse gas emitters to stay under a statewide limit, then lets those businesses determine the best method to accomplish that. The Washington Research Council’s analysis is based on the assumption that businesses won’t take steps to reduce their compliance costs and that consumers won’t reduce their personal transportation costs.

These assumptions do not match standard economic modeling. They do not match what we see in other regions that have implemented similar carbon-reduction initiatives. Ecology’s projections are consistent with the real-world outcomes seen in California, Oregon, and British Columbia, where markets for low-carbon fuels and alternative transportation options continue to grow and cost impacts remain low.

Here in Washington, when fuel prices topped $5 in mid-2022, consumer data shows that people responded by buying more fuel efficient vehicles, switching to electric vehicles, or driving less. Even though not everyone is able to take steps to cut their personal costs, the response was strong enough to reduce overall demand and bring down fuel prices for everyone. Due to these changes in supply and demand, the record-high prices we saw in Summer 2022 have since declined by more than $1.10 per gallon.

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 sharply. They are now more than $1.10 per gallon below the 2022 peak.

Washington’s new climate policies have yet to take effect and played no role in recent fuel prices. California and Oregon – which already have clean fuel standards in place – actually saw bigger decreases in gas prices than Washington did.

Historically, gas is a volatile commodity that is greatly affected by changes to production capacity, and supply and demand for crude oil. State regulations play a very minor role. These policies promise long-term benefits for consumers.

Climate change threatens Washington’s environment, economy, and the health of people who live here. Those threats carry very real costs. The Clean Fuel Standard and Climate Commitment Act will help us:

• Reduce carbon emissions.
• Accelerate the switch to clean energy sources with more stable prices.
• Make zero-emission vehicles and other low carbon technologies more affordable and accessible.

When we complete this switch, costs from these policies will fall quickly. Transportation costs will be significantly lower than they are today.

Along with these broader benefits, both the Clean Fuel Standard and the Climate Commitment Act include provisions to make sure communities with lower incomes have better access to clean transportation options and improved air quality.

Cleaner air creates economic benefits

We also asked Berkeley Research Group to investigate other costs and savings due to cleaner fuels and reduced greenhouse gas emissions. The report shows that once fully phased in, the Clean Fuel Standard – combined with other transportation initiatives – will mean an estimated $1.8 to $3.8 billion in economic benefit due to better health and reduced health care costs.

At the same time, the Clean Fuel Standard alone is estimated to save up to $40 million per year by reducing our contribution to climate change – and the wildfires, floods, storms, and other natural disasters that come with it.

Transportation is the largest source of greenhouse gas emissions in Washington, accounting for about 39% of total emissions. To meet Washington’s requirement of reducing total greenhouse gas emissions 95% by 2050, we must take steps to reduce emissions from this sector now. That’s why the Legislature passed the Clean Fuel Standard, to add incentives to the transition to low-carbon and zero-emission fuels, along with companion policies like the zero-emission vehicles standard.

The Climate Commitment Act, which covers a wider range of emissions sources, will act as a backstop – helping to cut overall emissions to meet limits set in state law, while also driving down the demand and cost of petroleum.

Because fuel suppliers will be reducing the carbon intensity of their products under the Clean Fuel Standard, they will need fewer emissions allowances under the Climate Commitment Act. The two policies work together, pushing to reduce priority transportation emissions at a low cost.

For more than 50 years, the federal Clean Air Act has given states the choice to follow national vehicle emission standards or the more protective standards set by California. Under federal law, only California has the authority to set its own vehicle emission standards.

In 2020, the Washington Legislature chose the more protective standards, adopting California’s zero-emission vehicle rules in the Motor Vehicle Emission Standards law (RCW 70A.30.010). In doing so, Washington joined 16 other states that together represent more than 35% of all new vehicle sales in the U.S.

Because the standards are specified in state law, Ecology did not conduct an economic analysis on their effects, as we would for traditional rulemaking where we had discretion in setting standards. Ecology did an economic analysis on parts of the Clean Vehicles Program that are not considered emission standards under federal law, such as early action credits for manufacturers and reporting requirements.

Before the California Air Resources Board adopted the updated standards earlier this year, they conducted a full economic analysis of the impacts of the new policy. That analysis found that, although zero emission vehicles have higher upfront purchase costs, the operating costs are significantly lower. Those operating costs add up over time. California found they would save consumers and businesses nearly $50 billion by 2040 (in current dollars).

California’s analysis also found benefits:

• $14.6 billion from improved health outcomes tied to reduced air pollution.
• $46 billion from limiting the damage caused by climate change. 

Read our blog: Independent studies show new climate change initiatives deliver significant benefits at minimal cost