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Measure would ax Washington's carbon market on 100

emitters

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Market has raised $2 billion for green programs since 2023

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Vote could shape carbon markets in other states and Quebec

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BP, tribes, and labor and green groups work to defeat

initiative

By Timothy Gardner

Nov 1 (Reuters) - A ballot initiative to ax Washington

state's carbon market would, if passed next week, send an

ominous signal to other U.S. states and Canadian regions looking

to build markets aimed at cutting emissions that scientists

blame for climate change.

The carbon market, formed by the state's Climate Commitment

Act (CCA), has raised more than $2 billion for programs

including transit, wildfire protection, and salmon protection

since its 2023 launch.

It is supported by Native American tribes and environmental

groups, as well as BP, a global energy company preparing

for the potential wider adoption of such markets.

Hedge fund manager Brian Heywood is leading the initiative

in the Nov. 5 elections to repeal it. He blames CCA, which puts

emissions limits on about 100 of the state's largest polluters,

for spiking Washington's gasoline prices to the highest in the

U.S. in mid-2023.

Heywood, the millionaire Republican and CEO of

Taiyo Pacific Partners

, holds rallies for the initiative at gas stations, where he

gives drivers money to reduce the cost of fill-ups.

"The guys that have to drive 45 minutes a day in their 2002

Honda sedans, they're the ones that get crushed, and no one's

standing up for them, so I am," Heywood told Reuters.

Backers of cap-and-trade carbon markets say they can

efficiently tackle carbon emissions by harnessing the power of

capitalism.

In such markets, the government sets gradually falling

limits on carbon pollution. Industry can meet the limits by

reducing their emissions through investments in clean energy. If

they reduce emissions they can sell allowances to other emitters

who choose not to make the efficiency investments.

Washington's market may eventually link to similar

mechanisms in California and Quebec, which backers say would

give industries a broader choice of credits.

Luke Sherman, a carbon markets analyst at the consultancy

Energy Aspects, said which way Washington votes could influence

decisions in states like New York, which has proposed a carbon

market to meet its 2050 carbon emissions goals, and in New

Jersey and Maryland where some lawmakers support carbon markets.

It could also help persuade California and northeastern

states in the Regional Greenhouse Gas Initiative to either

broaden existing carbon markets to more industries or narrow

them.

"How ambitious they want to be could certainly be influenced

by their perception of voter support or rejection of carbon

pricing in Washington," Sherman said.

'NEEDS SOME FIXES'

Washington state auctions of the allowances also earn

revenues that it invests in projects from clean transit to

salmon fisheries.

Kelsey Nyland, a spokesperson for No On 2117, named after

the ballot number, said if the measure passes it would cut

billions of dollars in funding hurting "every corner of our

state, putting major road and bridge projects addressing

congestion, safety and freight mobility at risk of being delayed

or even canceled."

Community Transit, which serves Puget Sound, said it would

lose about $200 million through 2038. Programs that could be hit

include bus rapid transit, an efficient service featuring

dedicated lanes.

"The last thing we'd like to cut is service to our

customers, but that certainly could happen," said spokesperson

Martin Munguia.

A poll conducted in October sponsored by The Seattle Times

and others showed 48% of respondents oppose the initiative, 30%

said "yes" and 22% were undecided.

Big fossil fuel companies could help overcome the measure.

BP is working to defeat the initiative "because it moves the

state backwards on climate action and endangers funding for key

transportation infrastructure and other low-carbon projects," a

spokesperson said.

BP owns Cherry Point, the largest oil refinery in the

Pacific Northwest. When asked whether it might oppose the

measure because it would make any pollution allowances it owns

worthless, BP referred to Washington state rules forbidding the

disclosure of details on market positions.

Energy Aspects' Sherman said if the measure succeeds, energy

companies may have to face new state emissions regulations

blunter in nature than carbon pricing.

"These regulations could be costlier for some emitters than

their obligations under the cap-and-invest program," Sherman

said.

The Western States Petroleum Association has not opposed

CCA, but wants changes to avoid fuel price spikes.

"Regardless of the election results, the program needs some

fixes for it to be affordable for consumers and sustainable for

the long run," said Jessica Spiegel, vice president, northwest

region of WPSA.