Washington State does not have a carbon tax in the traditional sense. What people usually mean by the Washington State carbon tax is the Climate Commitment Act, a cap-and-invest program that puts a firm limit on greenhouse gas emissions and requires the state’s largest polluters to buy allowances for every metric ton they release. Those costs pass down to consumers, mostly at the gas pump and on natural gas bills, and the revenue funds transportation, clean energy, and environmental justice work.
It’s a Cap, Not a Tax
A carbon tax charges a flat price per ton of emissions. Washington’s program works differently. Under the Climate Commitment Act, signed by Governor Jay Inslee in 2021, the Department of Ecology sets a total statewide cap on greenhouse gas pollution and lowers it every year.1Washington State Department of Ecology. Climate Commitment Act Companies covered by the program have to hold one allowance for each metric ton they emit, and they buy those allowances at quarterly auctions run by the state. If a business emits more than it planned, it has to buy more allowances or acquire them on the secondary market.
The price isn’t fixed by the government. It comes out of competitive bidding, though the state sets a floor and a ceiling. The September 2025 auction cleared at $64.30 per allowance, and every allowance offered was sold.2Washington State Department of Ecology. September Cap-and-Invest Auction Results Announced
Who Actually Pays
The program covers facilities and fuel suppliers whose annual emissions equal or exceed 25,000 metric tons of carbon dioxide equivalent.3Washington State Legislature. Washington Code 70A.65.080 – Designation of Covered Entities That’s a short list of large emitters: oil refineries, natural gas utilities, big manufacturers, and the companies that supply gasoline and diesel for transportation. Electricity importers are also covered, and under Senate Bill 6058 any importer of unspecified electricity with reported emissions above zero became a covered entity starting with emissions year 2025.4Washington Department of Ecology. CCA Market Notice – Senate Bill 6058 Implementation
A few fuel categories sit outside the compliance requirements. Agricultural fuels used for farming, fuels used to transport agricultural products on public highways (through 2029), aviation fuels, and marine fuels burned outside Washington waters are all exempt.5Washington State Department of Ecology. Fuel Exemptions Under the Cap-and-Invest Program Industries classified as emissions-intensive and trade-exposed don’t get a full exemption but do receive free allowances, which protects manufacturers competing with facilities in states or countries without comparable carbon pricing.3Washington State Legislature. Washington Code 70A.65.080 – Designation of Covered Entities
Individual residents are not covered entities. You don’t file anything, register anything, or owe allowances. The cost reaches you indirectly, through what covered entities charge for the products they sell.
What It Costs You at the Pump and on Your Utility Bill
Fuel suppliers pass the price of allowances through at the pump. As of early 2026, the program adds an estimated 52 cents per gallon to the retail price of gasoline. The math is straightforward: at roughly $65 per metric ton of CO2, and each gallon of gasoline producing about 8.9 kilograms of CO2 when burned, the added cost lands right around half a dollar.
Natural gas customers see the cost too. Puget Sound Energy, the state’s largest natural gas utility, is rolling out a distinct “CCA Customer Charge” line item on bills by mid-2026. Low-income customers identified by the utility receive a bill credit that fully offsets that charge. Other customers may see partial credits depending on available mitigation funds and household income.
Relief for Lower-Income Households
Washington’s Working Families Tax Credit provides some cushion. Residents who qualify for the federal Earned Income Tax Credit can receive a state credit between $50 and $1,330, depending on income and number of children.6Washington State Working Families Tax Credit. Eligibility The credit is not specifically a CCA rebate, but the state expanded it alongside the program to help lower-income households absorb the added cost of carbon pricing.
Where the Money Goes
Since auctions began in early 2023, the program has generated roughly $4 billion. Auction proceeds flow into dedicated accounts with legally restricted uses, not the general fund.
The Carbon Emissions Reduction Account funds transportation projects aimed at cutting emissions: public transit, active transportation like bike infrastructure, alternative fuel and vehicle electrification programs, ferries, and rail.7Washington State Legislature. Washington Code 70A.65.240 The statute specifically bars spending on general highway construction and requires that investments prioritize communities historically harmed by transportation policies.
The Climate Investment Account collects most of the remaining revenue. After reserving up to 5 percent for program administration, 75 percent of the balance goes to the Climate Commitment Account for broader climate programs, and 25 percent goes to the Natural Climate Solutions Account for forest conservation and habitat restoration.8Washington State Legislature. Washington Code 70A.65.250 The Air Quality and Health Disparities Improvement Account targets criteria pollutants and health disparities in overburdened communities.9Washington State Legislature. Washington Code 70A.65.280
Across all accounts, the CCA requires that at least 35 percent of total investments benefit overburdened communities and at least 10 percent support projects with Tribal involvement.1Washington State Department of Ecology. Climate Commitment Act
The Emission Targets Driving the Program
The declining cap isn’t arbitrary. It tracks statutory reduction targets set under RCW 70A.45.020 and measured against 1990 emission levels:10Washington State Legislature. Washington Code 70A.45.020 – Greenhouse Gas Emissions Reductions – Reporting Requirements
- By 2030, emissions must fall to 45 percent below 1990 levels.
- By 2040, emissions must fall to 70 percent below 1990 levels.
- By 2050, the state must reach net-zero emissions, reducing output to 95 percent below 1990 levels.
These targets apply to the state’s entire greenhouse gas inventory, not just the sectors under the cap. The cap-and-invest program is the main enforcement mechanism.
Voters Kept the Program in 2024
Initiative 2117 on the November 2024 ballot would have repealed the CCA entirely and blocked the state from implementing any similar program in the future. Supporters of the repeal argued the program was driving up fuel and energy costs. Opponents said repeal would eliminate billions in funding for transportation, clean energy, and environmental justice projects already underway. Voters rejected the initiative by roughly 62 to 38 percent, leaving the program in place.