The Carbon Auction Rebate (CAR) program

The Climate Commitment Act (CCA), passed by legislative Democrats in 2021, enacted a carbon tax that significantly increased the cost of doing business in Washington for the petroleum industry. This new tax – which went into effect in January 2023 – collected far more than the state needed or anticipated. Businesses have passed on these new costs to consumers in the form of higher gas prices. As a result, in the summer of 2023, Washington state earned the distinction of having the highest gas prices in the nation. Learn more here: FAQs: How regressive Democratic policies increased Washington’s gas prices

Washingtonians, already grappling with high inflation and economic uncertainty, need financial relief. House Republicans have a plan: it’s called the Carbon Auction Rebate (CAR) – House Bill 2040. This proposal would take the excess earnings of the carbon tax and send the money directly to registered vehicle owners in the form of a check. CAR checks would help families struggling to make ends meet without affecting the effort to reduce greenhouse gas emissions.

Relief for high gas prices

  • Would send a $214 Carbon Auction Rebate (CAR) on July 1, 2024, to registered vehicle owners in Washington state. For a typical two-vehicle household, that would be $428.
  • This would be funded exclusively from the revenue of the state’s new cap-and-trade program that is above the amounts appropriated during the 2022 and 2023 legislative session from CCA accounts for fiscal year 2023 and fiscal year 2024.
  • If the people vote to retain the CCA, House Bill 2040 makes clear that the Legislature would intend to pass a new CAR bill that would make the payments permanent on an annual basis.

The CCA is costing motorists nearly three times more than what the government estimated at the time lawmakers voted to pass this policy. The act requires regulated parties — industry and utilities that emit greenhouse gases — to buy carbon allowances for emissions that are over an annual “cap” or emissions limit that is set by the state. The cost of those allowances at the quarterly state auction has been much higher than originally projected. Regulated industries, including in-state petroleum refiners, have been passing on the cost to customers as seen in Washington’s gas price spike that started in January of 2023 when the CCA went into effect. See chart below.

The CAR bill would use the $1.3 billion in excess revenue collected under the state’s new carbon allowance auctions to distribute an equal, one-time payment to all 6.8 million registered vehicle owners in Washington.

Out of respect for the initiative process, the bill expires on Oct. 31, prior to the next general election.

Because car tab renewal charges vary based on the value of a vehicle and the car owner’s place of residence, in part depending upon whether an owner lives in a Sound Transit jurisdiction, providing an on-bill credit might zero-out charges for tab renewal before providing the same amount of money that would be available if the CAR payment came as a check. Sending out a check prevents a situation in which those with lower value vehicles receive less than those with higher value vehicles, allowing a uniform payment.

Because this bill would leave the structure of the CCA intact, the same regulated entities will face the same emissions cap, and carbon credit auctions will continue working the same way. This bill would change what happens with the money that is collected. Anything collected above initial revenue forecasts would go back to drivers.

As proposed, the bill would provide CAR checks to the small number of vehicle owners who do not purchase gas. The purpose for doing so is two-fold. First, it would provide an incentive to switch to an electric vehicle and thus further incentivize carbon emission reductions from the transportation sector, a central goal of the CCA.

Second, electric vehicle owners are seeing increased cost of living as a result of the CCA — higher gas prices result in higher costs for goods and services that those drivers buy, even if they are not paying more for gas. They experience cost impacts in fueling up their vehicles with electricity that is more costly to generate and deliver under the CCA. For these reasons, including EV owners, even though the cost impacts of the CCA are experienced in a different way by those drivers, is an important part of this policy.

Constitutionally, the state legislature has absolute power over tax policy and can choose to rebate taxes paid by its residents. This rebate would be a partial prospective rebate of motor vehicle fuel excise taxes, funded by cap-and-trade revenue. In short, this is about keeping the state’s carbon emission reduction policy affordable for working families and in-line with the original cost impacts Democrats projected. There is no intent to give a gift when you are rebating a portion of gas taxes to be paid; this is an adjustment of the gas tax burden that is funded by cap-and-trade revenue.