The cost of Washington's new CO2 tax: the bad news and the less bad news

There is a great deal of uncertainty about what Washington’s new CO2 tax will cost, but there is an early indication the cost will be, while still expensive, less than feared.

Washington’s new tax on CO2 emissions takes effect Jan. 1. Companies that distribute CO2-emitting fuel sources, like gasoline or natural gas, must purchase permits to cover the emissions from those fuels. Since there are a limited number of permits, the price is determined by an auction.

The first auction for permits doesn’t occur until late February. Since the impact on the cost of energy – gasoline, diesel, natural gas – is determined by the cost of the permits, we won’t know how much the tax is until that auction occurs.