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Bill would tax trading and banking of zero‑emission vehicle credits; automakers and advocates urge caution
Summary
Senate Bill 5811 would impose excise taxes on sales, pooling and banking of ZEV (zero‑emission vehicle) credits under Washington’s adoption of California standards; staff projected tens of millions in near‑term revenue but automakers and EV advocates warned the tax risks disrupting the credit market and disincentivizing compliance.
Senate Bill 5811 would impose a new excise tax on the sale, pooling and banking of zero‑emission vehicle (ZEV) credits that manufacturers earn and trade under the state’s adoption of California vehicle‑emissions rules, Ways & Means staff said at a briefing and hearing on April 16.
Committee staff summarized how the ZEV compliance market works: manufacturers earn credits when they deliver qualifying vehicles for sale in states that follow California’s program; credits can be banked for future compliance, sold to other manufacturers, or pooled/transferred for use in other participating states. The bill would tax the actual sale price of credits at 2%; banking and pooling would be taxed based on an average credit price set by the Department of Revenue, with higher taxes (up to 50%) for credits used by manufacturers who deliver proportionally fewer ZEVs in Washington than in comparable states.
Staff said the office used Ecology’s credit projections and assumed a credit value of $6,000 per credit for fiscal‑note modeling and estimated roughly $78 million in revenue in FY 2027 under the bill’s assumptions, with multi‑year revenue estimated thereafter. The bill would deposit 70% of revenue to the general fund until June 30, 2027, then to the carbon‑emission reduction account and 30% to the electric vehicle incentive account.
Industry witnesses — including representatives from Rivian, the Alliance for Automotive Innovation and Tesla — urged caution. They argued the ZEV‑credit market is a market‑based compliance mechanism and that taxing banking and trading could reduce credit availability, increase compliance costs, and hamper a predictable market that incentivizes early investment. Witnesses also noted that California’s program and other Section‑177 states already provide the compliance framework and cautioned that the tax could have unintended consequences.
Supporters of the bill argued the state should capture revenue from market activity and direct funds to EV incentives and emissions‑reduction programs. Public testimony included voices for and against the tax; opponents asked the committee to reconsider or exempt certain activities.
Why it matters: The tax targets a specialized environmental compliance market that supports automakers’ ZEV planning. Staff projected material near‑term revenue, but automakers warned the tax could disrupt market functioning and investment incentives for ZEV production and delivery in Washington.
The committee took testimony and asked for agency files and stakeholder follow‑up on modeling assumptions and credit valuations.
