By Rory Carroll
SAN FRANCISCO (Reuters) - Washington Governor Jay Inslee on Wednesday laid out a plan for a carbon cap-and-trade program aimed at fighting global warming and raising $1 billion a year for state schools and public transportation initiatives, but he will first need the support of a divided state legislature.
The program would place an overall limit, or cap, on the amount of carbon that large businesses and fuel distributors can emit. Those companies would then have the option to either reduce their carbon output, buy carbon permits at state-run auctions, or purchase permits from other businesses on the open market.
However, the program faces an uphill battle politically since it will need the state legislature to sign off on the proposal before becoming law, including approval from the Republican-held state Senate.
The proposal in many ways mirrors California's two-year-old cap-and-trade program, which, like Washington, also aims to help the state roll carbon emissions back to 1990 levels by 2020.
Inslee plans to introduce legislation early next year with an eye toward launching the program in July 2016 and linking with the California market at a later date.
Unlike California's program, Washington would not give any carbon permits for free to oil refineries, pulp and paper producers or gasoline distributors, which account for 85 percent of the state's output.
Businesses will instead be required to purchase permits at the outset of the program. Permits are expected to be priced at around $12 a metric tonne in 2016, Inslee officials said.
The cap-and-trade proposal is just one part of a suite of policies Inslee said he would spearhead next year to slash emissions and raise money to plug the state's budget gap.
He also plans to push forward with a low-carbon fuel standard (LCFS), a program that requires fuel producers to gradually reduce the carbon content of transportation fuels they produce.
LCFS programs are also controversial. California's LCFS has been the target of lawsuits by out-of-state fuel producers, who claim it unfairly targets their products.
In a speech on Wednesday, Inslee warned that there would be "alarmist attacks" directed at his plan.
"Corporate polluters have launched aggressive campaigns against similar efforts in other states and have already begun to do the same here in Washington," he said.
On Wednesday the Washington Consumers for Sound Fuel Policy, which represents oil producers and other business groups, called Inslee's plan a $1 billion "hidden tax" on Washington fuel consumers.
(Reporting by Rory Carroll; Editing by Diane Craft)