This story has been updated to reflect that Gov. Jay Inslee vetoed a measure related to the cap-and-trade bill.
SEATTLE — After years of failed attempts, Washington state lawmakers last month celebrated the narrow passage of a bill that places an economy-wide cap on carbon emissions and charges polluters for their contributions to climate change.
But their long-awaited win came as national momentum for such policies, known as cap-and-trade, has begun to wane. California’s first-in-the-nation program, created in 2013, has drawn charges of environmental racism from critics who say it allows industries to achieve compliance without reducing pollution in marginalized communities. Late last year, California’s top air regulator fell out of the running to lead the U.S. Environmental Protection Agency after dozens of environmental justice groups warned President Joe Biden about what they said was her “bleak track record in addressing environmental racism.”
Washington legislators say they’ve worked carefully to put environmental justice front and center in their law. Alongside the carbon regulations, the law creates a program to monitor and regulate air pollutants that can harm people’s health, such as ozone and sulfur dioxide, in marginalized areas. Some communities of color, including several tribal nations and the Washington Black Lives Matter Alliance, say the law is a powerful first step toward addressing both climate change and inequality.
“We learned from California,” said state Sen. Reuven Carlyle, a Seattle Democrat who sponsored the legislation. “Rather than only measuring greenhouse gas emissions, we are measuring the real-time reality on the front lines of pollution.”
Other groups, including a coalition of racial justice organizations that pushed for an alternate bill, say they have little faith the program will curb carbon emissions or reduce air pollution.
Whether Washington’s program succeeds—and whether environmental leaders think it’s helping frontline communities—could have major implications for national climate policy. Gov. Jay Inslee, a Democrat, has long been among the leading voices on combating climate change, and he is touting the law as “arguably the strongest environmental justice policy in the nation.”
On Monday, Inslee signed the bill into law, but vetoed a measure that tethered cap-and-trade to the future passage of a transportation package. It's possible the move will generate a legal challenge over the governor's authority.
Becky Kelley, Inslee’s senior climate adviser, said the law’s twofold focus on climate change and clean air will provide a template for federal and state leaders to follow. Some opponents of the program agree that it could inspire policy elsewhere—and that worries them.
“This will really give the green light to carbon market backers to start pushing for a national program,” said Jill Mangaliman, executive director of Got Green, a Seattle-based environmental justice group that fought the measure.
“This talk on cap-and-trade will undo a lot of gains we’ve seen nationally in climate policy focused on frontline communities. If they believe cap-and-trade is going to reduce pollution, we’re going to get off course.”
Cap-and-trade programs set a limit on the amount of carbon dioxide that can be emitted statewide, a number that declines each year. Businesses can purchase credits allowing them to produce set amounts of carbon within that limit. Those credits, or allowances, can be traded among companies. Officials use the money from credit auctions to pay for projects that further reduce emissions or mitigate the effects of climate change. Polluters can also buy offsets, such as projects to protect forests, to count for some of the required emissions reductions.
Critics say that California’s program has allowed polluters to cheaply hoard carbon credits, which could allow high emissions levels in future years. And they say the ability to trade credits and purchase offsets allows big polluters to achieve “reductions” elsewhere without lowering emissions in marginalized communities.
A recent ProPublica investigation found that California’s offset program had issued millions of “ghost credits” for forest projects that did not deliver the carbon benefits they advertised, resulting in an increase in greenhouse gas emissions.
“It's unfortunate that folks are not seeing California's example as a warning sign,” said Yolanda Matthews, a climate justice organizer with Puget Sound Sage, a Washington-based group that focuses on climate and racial justice. “It's going to let big industry run wild and trade pollution and not be accountable to anyone but themselves.”
Supporters see it differently.
“This ain’t California,” said Sakara Remmu, founder and lead strategist with the Washington Black Lives Matter Alliance. “What passed there isn’t what passed here. … It's not the magic wand, but it's the first solid foothold into building this out.”
Backers of the law say they’ve structured it to ensure carbon credits are not too cheap or abundant. The program has a rising floor for credit prices and a provision that allows regulators to withdraw some credits if prices are too low. And unlike California’s program, Washington’s does not rely on offsets to reach emission targets, instead using them essentially as a bonus.
Perhaps most importantly, the law creates a separate program to monitor and regulate local air quality, with a focus on communities that have been overburdened by pollution.
“If you look at the criticisms of cap-and-trade, a lot of it really does come down to, ‘Are polluters able to keep polluting and buy their way out of the problem?’” said Kelley, the Inslee adviser. “The fact that the climate provisions are combined with clean air provisions is a powerful way to ensure we're doing both.”
Mainstream green groups such as the Nature Conservancy and the Audubon Society backed the law, splitting with some local environmental justice advocates.
“They said, ‘We're not gonna let what happened in California happen here,’ but it’s all an experiment and we’re the guinea pigs,” said Mangaliman, the Got Green leader. “The mainstream green groups have supposedly fixed the problems, but it’s a big gamble for our communities.”
Mangaliman and others argue any carbon trading scheme is too complicated to regulate effectively, and large corporations know how to find the loopholes. They say oil giant BP’s support for the Washington law is a sign that it won’t stop pollution.
The New Republic recently reported that BP’s support for the program may be a way to back its investment in a carbon offset company that has been implicated in California’s ghost credit problem.
“Carbon markets always end up being corrupted,” said Edgar Franks, political director with Familias Unidas por la Justicia, a Washington-based farmworker union. “I really want the [Washington State] Department of Ecology to be a watchdog, but a lot of Ecology programs are underfunded because of how powerful the industry is.”
Rosalinda Guillen, another farmworker advocate, noted that communities like hers face disproportionate effects from climate change, such as exposure to wildfire smoke. She also said the state has done little to crack down on the use of harmful pesticides, leaving her without much optimism that regulators will take on polluters that foul the air in marginalized communities.
“The willpower for the state agencies and people in power to actually hold them accountable is not there,” said Guillen, an activist with Community to Community Development, a Washington-based organization that works on food sovereignty and immigrant rights issues.
“We don’t have the same political power and resources, and the agriculture industry has intimate relationships with every state agency. We just gave them the game they know how to play and win.”
The cap-and-trade program is expected to bring in billions of dollars from the sale of carbon credits. The state plans to put that money into projects that reduce carbon emissions or help mitigate the effects of climate change. At least 35% of the investments made under the program must target communities overburdened by air pollution, and another 10% must back projects supported by tribal nations.
Washington state Rep. Debra Lekanoff, a Democrat, sponsored a competing proposal backed by many environmental justice groups. Her bill would have created an economy-wide price on carbon and used the resulting funding to issue “green bonds” to invest in clean energy and bolster infrastructure to prepare for the effects of climate change.
When it became clear the cap-and-trade bill was more likely to pass, she worked to incorporate the funding commitments for overburdened communities into that package, calling it a hybrid approach.
“This is not the perfect bill, but it is a bold bill and it is a first step,” she said. “We got the obligation to make sure that overburdened communities don't continue to be the victims.”
Lekanoff, a member of the Tlingit tribe and the only Native American in the state legislature, said investments from the law will allow several Native communities in Washington to relocate villages that have been threatened by sea level rise.
Several backers said tribal support helped push the bill over the finish line. But it also faced opposition from the Na’ah Illahee Fund, a Native-led organization that works to support Indigenous communities. After the bill passed, one of the group’s leaders told Stateline her board had forbidden her from speaking, citing the “precarious political situation” created by tribes’ support for the bill.
While some activists are excited about the millions in investments that cap-and-trade could bring to their communities, others worry that the program creates perverse incentives.
“We’re creating value in carbon emissions, and that’s a step toward continuing those emissions,” said Jim Walsh, a senior energy policy analyst with Washington, D.C.-based advocacy group Food and Water Watch, which opposes cap-and-trade.
Supporters note that cap-and-trade passed in concert with the HEAL Act, which writes the concept of environmental justice into state law. That law requires state agencies to consider the effects their actions will have on overburdened communities, and it also creates a citizen-led environmental justice council to provide oversight of state programs, including cap-and-trade.
“You're getting precedent-level definitions of environmental racism into law,” said Remmu, the strategist with the Black Lives Matter Alliance. “They can’t take that foothold away … and it becomes a mechanism for accountability.”
Backers also note that Washington state has passed other climate policies in recent years, including a carbon-neutral electricity standard, energy efficiency mandates for commercial buildings, a clean fuels standard, a zero-emission vehicle program and investments in vehicle electrification.
Opponents of cap-and-trade say many of those policies, especially the HEAL Act, are important. But they feel carbon-trading will undermine the state’s work to meet its climate goals. They instead want emissions reduction requirements on individual polluters.
“We're looking for a program that asks the major emitters to dial down emissions directly at the source,” said Deric Gruen, co-director of Front and Centered, a coalition of groups that focus on communities of color and climate justice. “Those are transparent things people can see and believe in.”
Supporters say the Washington efforts can provide a national model. But it remains to be seen whether the victory in Washington will renew interest in cap-and-trade. Eleven northeastern states participate in a cap-and-trade plan to regulate power sector emissions, but a similar program for transportation emissions has so far found few willing participants in the region.
Oregon Democrats attempted to pass their own cap-and-trade program in 2019 and 2020 but were stymied by walkouts by Republican lawmakers that blocked a vote. State leaders have turned their attention to other climate bills this year.
New Mexico’s Climate Change Task Force, appointed by Democratic Gov. Michelle Lujan Grisham, is evaluating market-based climate programs, including cap-and-trade.
While Biden has focused on other policies in the first few months of his term, such as reducing fossil fuel extraction on federal lands, Special Presidential Envoy for Climate John Kerry said last month that the White House supports carbon markets as an “important tool” in the fight against climate change.
Lekanoff, the Washington legislator, said results from the state’s new program will determine whether cap-and-trade is viable as a climate solution in other states or even nationally.
“We need to build cap-and-trade that does what it says it's going to do,” she said. “If we find out this bill just issues allowances to continue to pollute, we should rethink this approach.”