Would low-carbon fuel standard raise or lower drivers’ costs? Impact is crux of debate

Gov. Jay Inslee wants the Legislature to lower carbon in transportation fuel, but oil companies and other businesses predict that would cause more pain at the pump for motorists.

Inslee has scoffed at projections that gasoline prices will increase if Washington joins Oregon, California and British Columbia in adopting a low-carbon fuel standard. He said the proposal is crucial to cutting greenhouse gas emissions in the fight against climate change.

“Given a choice between allowing Australia to burn down and those fires to burn down the state of Washington …. if there are a few pennies, I think the choice is pretty clear on that. We want to preserve our state,” Inslee said.

But opponents said the cost of complying with the regulation would drive up the cost of gasoline by 2030 and those costs would be passed on to motorists through higher prices.

“You’re seeing a high cost, anywhere from 20, 30, 40, 50 cents a gallon over time with very minimal impact on the reduction of carbon overall,” said state Rep. Andrew Barkis, R-Olympia.

Greenhouse gas emissions in Washington were estimated to total 97.5 million metric tons in 2017 – with 44 percent attributable to transportation sources.

The bill before the Legislature this session, HB 1110, calls for reducing the carbon intensity of fuels by 10 percent below 2017 levels by 2028 — and by 20 percent by 2035. Carbon intensity refers to the amount of greenhouse gas emissions emitted by producing, distributing and using a fuel.

The regulation works this way: Fuel producers that can’t meet the targets to lower the carbon intensity of their fuel would have to buy credits from companies that can do so, such as those that sell biofuel.

The cost of buying those credits is designed to create an incentive for fuel producers to shift to lower-carbon fuels and for motorists to move from gasoline-powered vehicles to electric ones.

The debate over adopting a low-carbon fuel standard has intensified over the past several months. The reason: if lawmakers don’t adopt it statewide, a regional air quality agency is weighing a similar regulation that could affect motorists in the central Puget Sound.

The state has not done a detailed analysis of the potential cost of a low-carbon fuel standard since 2014. As a result, supporters and opponents of the bill cite different sections of a 2019 report that a consulting firm did for the Puget Sound Clean Air Agency, which oversees air quality in Pierce, King, Snohomish and Kitsap counties.

The report said the economic impacts of complying with a low-carbon fuel standard in the Puget Sound area would be small. It also said under one scenario, the regulation could add from 22 cents to 57 cents per gallon to the cost of gasoline and from 24 cents to 63 cents per gallon to diesel fuel by 2030.

Craig Kenworthy, executive director of the Puget Sound Clean Air Agency, told lawmakers recently that those estimates were based on a worst-case scenario that the oil industry would not diversify its fuel production.

“We are seeing the industry diversify and the worst-case scenario is not actually what is happening or what is going to happen on the ground,” he said.

Based on projected increases in fuel efficiency, the average per-mile cost of driving could be the same or lower in 2030 than today, Kenworthy added.

But others are concerned that consumers — especially those who must drive long distances to their jobs — would bear the brunt of higher gasoline prices. They include Mark Martinez, executive secretary of the Pierce County Building and Construction Trades Council.

“Our jobs could be in Seattle one week, down in Olympia the next week and back in Tacoma for the week after. The cost of that future should not be placed on the backs of the working class,” he said.

Backers and opponents of the bill also have clashed over how low-carbon fuel standards have affected gasoline prices in California and Oregon.

Inslee, for example, has said gasoline prices have declined by 40 cents per gallon in California since the regulation took effect in 2011. Affordable Fuel Washington, an advocacy group bankrolled by the Western States Petroleum Association, has cited a 2018 California legislative report that said the regulation could add 46 cents per gallon to the cost of gasoline by 2030.

In a recent interview, Inslee said a low-carbon fuel standard on a per-mile basis could lower fuel costs for Washington residents.

“The reason is we have new technologies — because we are very innovative people — that are cheaper than our [gasoline]-powered cars that we are running right now. It’s cheaper to run an electric car today than it is with gasoline because the cost per mile for fuel is 80 percent less than what gasoline costs,” he said.

The prices of electric vehicles generally are higher because of battery costs, but they are expected to continue to decline as technology advances.

Sen. Doug Ericksen, a Ferndale Republican who opposes the low-carbon fuel standard, said automakers support the bill because they want a subsidy to replace gasoline-powered vehicles with electric ones or others that use low-carbon fuels.

“So you are charging people who drive F-150s a fee to allow these companies to purchase electric vehicle fleets or convert them over to natural gas,” Ericksen said.

People who want to buy electric vehicles could get a rebate from utilities that generate revenue by selling credits to high-carbon fuel producers.

“[Rebates] are especially important for lower-income buyers that can afford the monthly payment but do not have the upfront costs,” Ryan Spiller, a lobbyist with the automaker trade group, the Alliance for Automotive Innovation, told a Senate committee recently.

This story was originally published January 24, 2020 at 5:45 AM.