Washington Ecology touts progress in fuel carveouts to cap-and-trade law



(The Center Square) – Joel Creswell, climate pollution reduction program manager for the Washington State Department of Ecology, says progress has been made regarding a program to exempt a few groups from paying fuel taxes based on the state’s carbon emission auctions.

This comes amid complaints from operators in multiple industries saying they’re unfairly paying taxes they shouldn’t.

Under the Climate Commitment Act of 2021 – which went into effect at the beginning of this year – the agriculture, maritime and aviation sectors are supposed to be exempt from any fuel surcharges fuel companies pass along to customers due to the cap-and-trade program.

Cap-and-trade requires emitters to obtain “emissions allowances” equal to their covered greenhouse gas emissions at quarterly auctions hosted by the Department of Ecology.

Since the CCA’s January launch, there have been complaints from some farmers, fishermen and fuel distributors that they have had to pay the carbon tax.

“We got a lot of questions early in the program…about fuel exemptions and beyond issuing updated guidance,” Creswell said at Monday morning’s meeting of the Senate Environment, Energy & Technology Committee. “We felt that there was a need to have a more in-depth conversation with fuel users and the regulated community to help create a common understanding of key issues.”

That “more in-depth conversation” took place in the form of a series of stakeholder meetings launched by the Department of Ecology’s Exempt Fuels Work Group in the summer that continued into September.

“One of the key results is that maritime fuels – there were issues early in the program with surcharges being imposed on maritime fuels that should have been exempt – and through the work group process, we have determined that those fuels are now trackable, so fuels that are burned outside of Washington waters are exempt from the program,” Creswell explained.

He continued, “Through conversations with fuel suppliers and fuel users, we’ve been able to get to a place where the imposition of those surcharges on exempt fuels is largely solved. In some cases, statement credits or refunds have been issued. We don’t think everybody’s gotten those but we are seeing things moving in a positive direction there.”

Creswell then pivoted to the agriculture industry.

“Also in the agricultural space, there’s an increasing number of fuel suppliers who are not imposing surcharges on agricultural fuels that are exempt,” he said.

More and more fuel suppliers are not including the surcharge in sales, according to Creswell.

“Last time I checked, that number was up to 23, so that’s a growing group that [is] finding they’re able to do that,” he said.

“So, also we have found that two – I think it’s actually up to three now – fuel suppliers or distributors are starting to provide rebates to people who purchased exempt fuels earlier in the year and paid surcharges on those.”

Creswell mentioned that fuel used for trucking crops and other agricultural products via public roadways is supposed to be exempt through 2027.

“So that’s something under statute that’s exempt for five years, and we have figured out a way to update the definition of agricultural products and guidance – that’s something we have worked with the work group on,” he said. “That’s been reviewed by them, so we’re in the process of updating that guidance.”

In the next few weeks, the Department of Ecology will release a summary of proposals submitted by fuel suppliers for removing surcharges and offering surcharge-free fuel, Creswell said, as well as credits and refunds at retail stations and cardlocks.

Unlike retail gas stations that are open to the general public, cardlock stations are designed for business fleets and trucking companies to access.

“So, we’ve really made significant progress on the exempt fuels issue,” he said.

He did note, however, that “just because our work group has wrapped up doesn’t mean our door is closed. We’re continuing to have these conversations with distributors and fuel suppliers, just to make sure that everybody has the information that they need to report fuel sales to us that are exempt.”

The Center Square reached out to BP for comment on Creswell’s assessment of the state’s efforts on fuel carveouts but did not receive a response.

“Every exception you make to a cap-and-trade scheme makes it less efficient and more costly for everyone else,” observed Josiah Neeley, a policy analyst on energy and environmental issues at the R Street Institute think tank, in an email to The Center Square.



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