Climate policy will be on the ballot this year in Washington state, thanks to a hedge fund executive who is spending millions of dollars to circumvent Democrats’ lock on state government.
Washington’s cap-and-invest program has been running for about a year and has raised almost $2 billion — much more than its architects expected. The money is paying for electric vehicle chargers, free bus service for children and other decarbonization programs. That windfall, though, is fueling accusations that the ambitious law is to blame for high gas prices.
Now, an effort is underway to scrap Washington’s cap-and-invest system and bar the state from ever instituting another one. An initiative has qualified for November’s ballot that would ask voters whether to repeal the climate law.
Down-ballot from the presidential race, this referendum could be the year’s most important climate election. A repeal would upend the climate agenda of Washington Democratic Gov. Jay Inslee. The results will ripple to other states considering their own cap-and-trade systems, such as New York, as well as other countries facing the same choice.
Democratic state Sen. Joseph Nguyen, chair of the state Senate’s environment committee, said European diplomats have quizzed him about the repeal initiative: “I literally get calls from people from around the world who want to do the exact same thing [as Washington], and they’re paying attention.”
Washington voters have rejected climate taxes twice in recent years — but the dynamics around this election will be wildly different: In 2016 and 2018, voters nixed the creation of a carbon tax; this year, they’ll vote on a cap-and-trade system that’s already integrated into the state budget and corporate business plans.
And unlike those past elections, when the oil industry and other business groups spent then-record sums to defeat climate policy, now the campaign is being driven in large part by one man: Brian Heywood, a Republican megadonor and self-described “economic refugee” from California who has been the financier — and increasingly, the face — of the repeal initiative.
In an interview with E&E News, Heywood said Democrats misled the public about the impacts of cap and trade on the state’s gas prices, which have always been above average but for a time last summer climbed to the highest in the United States.
“It hit everyone in their pocketbook right away,” he said. “People were [already] hurting, and we suddenly vaulted to the top of the most expensive gas in the nation — higher than Hawaii. How is that possible?”
Heywood also disputed the merit of lowering carbon emissions, arguing that Democrats are relying on vague language to scare people into ceding control of their lives.
“Exactly what does it mean to decarbonize? I’d like a definition of that,” he said. Given a definition of the state releasing less carbon into the atmosphere than the landscape absorbs, he responded: “That’s not what they’re using. … They don’t want net[-zero emissions], they want zero carbon emissions. Wait, what? Like, every time I breathe, I have a carbon emission.”
Washington has a legally binding 2050 target of lowering annual emissions to 5 million metric tons, or 95 percent below 1990 levels. The state’s emissions must be net zero by that year, too, which means the state would have to offset any emissions it still produces.
Democrats reject the idea that cap and trade has spiked Washington gas prices, arguing that swings in the global oil market dwarf the law’s impacts. Inslee’s office this month circulated a memo claiming that Washington and Oregon’s gas prices — which historically moved in tandem, before Washington instituted cap and trade — have separated this month by only 10 to 35 cents, whereas the last two years have seen much bigger swings in prices.
Progressives also point to the billions of dollars in funding unlocked by cap and trade to boost mass transit and electric vehicles. The law calls for a steering money to low-income communities and those over-burdened by pollution.
Nevertheless, Democrats and their allies are taking the repeal effort seriously. Polling by Washington Conservation Action and the Service Employees International Union found that the initiative is competitive.
Heywood has spent about $7 million on a signature-gathering campaign to get a cap-and-trade repeal on the ballot, along with five other initiatives that would repeal capital gains taxes, forbid income taxes, allow opt-outs of the state’s long-term care program, relax rules around vehicular police chases and create a “parental bill of rights” for schools.
Heywood isn’t just the money man; he’s also the pitchman. At ease in front of a crowd, the hedge fund executive has stepped into the vacuum left by the state Republican Party’s diminishing power and a business community that, in Heywood’s opinion, suffers from “Stockholm syndrome” under Democrats in Olympia.
Heywood said he’s done spending his own money on the initiatives, at least for now; he’d only anticipated spending $4 million in the first place. Now that his measures are on the ballot, he’s going to turn to fundraising from both individuals and national groups.
“I’m going to be working with other people to come in, and I think there’s interest in doing it,” he said, declining to name other potential donors.
Privately, some Democrats worry the referendum could tilt against them if business groups also drop money into the fight. So far, that hasn’t happened — at least directly. Instead, many utilities and business associations are urging lawmakers to link Washington’s carbon market with California and Quebec to stabilize the market.
The architect of Washington’s cap-and-trade system said businesses understand the current market system is already a compromise — cushioned by free allowances for certain sectors — and if it goes away, then the alternative would be top-down regulations that chafe polluting businesses even more.
Only the oil industry would benefit from repeal, said Reuven Carlyle, the former Democratic chair of the state Senate’s environment committee and sponsor of the Climate Commitment Act, the law that created Washington’s cap-and-trade system.
The Western States Petroleum Association has run ads attacking the cap-and-trade system for high gas prices. That messaging is what powers the repeal effort, Carlyle said, even if the group isn’t formally backing Heywood’s effort and doesn’t have to report its spending as a campaign expenditure.
“The Western States Petroleum Association is thrilled to discreetly stand in the shadows to a hedge fund individual who put the actual cash up,” he said. “Brian is a convenient distraction.”
The Western States Petroleum Association said it’s had no communication or coordination of any kind with Heywood about the repeal initiative, and a spokesperson accused Democrats of looking for scapegoats to avoid reckoning with the impact of cap and trade on consumers.
Kevin Slagle, vice president of strategic communications for the Western States Petroleum Association, said cap and trade is broken but the group doesn’t want to see it repealed: “That would be an unfortunate outcome, because it doesn’t have to be this way.”
“We strongly prefer fixing the program, not repealing it,” he added, saying the end of cap and trade would introduce uncertainty to the market and set the table for regulations that might be worse for the industry.
“Have we been a perfect industry? No, but if we’re gonna try to really problem-solve, we’ve got to be able to sit down [with Democrats] and talk and sort of push this other stuff away. And I think that’s what’s really frustrating,” Slagle said. “Now you’ve got an initiative on the table that, really — it’s a wild card now.”
Heywood also said he’s had no help from oil companies or any other industry, but he would welcome it.
“The oil companies are terrified of the little Stalinist tyrants in Olympia that are threatening their businesses if they don’t play ball. And there’s been no opposition, [no] pushback by anybody in the state to give the businesses any kind of cover to stand up and say, ‘This doesn’t make sense.'”
Heywood also rejected the notion that businesses should accept cap and trade because it’s better than whatever climate regulations might replace it: “That’s what a thug does.”
“This is Stockholm syndrome with a terrorist organization that says, ‘Either you do it this way, or we’re going to hurt you,'” he said. “So the businesses are understandably afraid.”
Republican state Rep. Jim Walsh, who is also chair of the Washington Republican Party and involved with the initiative, said business groups are sympathetic to repealing cap and trade. But he said they aren’t convinced the initiative will succeed and that they’re hesitant to get involved for fear of angering the majority party.
“Industry is just doing what industry does. I mean, they’ve got to hedge their bets. And that is different than it was a few years ago,” Walsh said, referencing the failed climate initiatives in 2016 and 2018.
“But we have the people even more on our side than we did a few years ago,” he added. “This has got more broad support than just one rich guy.”
Heywood first tried getting 11 initiatives on the ballot in 2022 using volunteers, but it failed. Changing tactics — and opening his wallet — last year, his group successfully gathered enough signatures for six. Financed by Heywood, a group called Let’s Go Washington paid signature-gatherers to canvass the state along with another group, Restore Washington.
Repealing cap and trade was the first initiative they submitted for certification, but organizers say they’ve reached the thresholds for all six, with a grand total of 2.7 million signatures. The secretary of state’s office is still processing three of them.
Walsh said Heywood gets demonized for his contributions, but the left also relies on billionaires to finance campaigns. And though Heywood stands to benefit from eliminating the capital gains tax, that doesn’t explain his contributions to the other five initiatives.
“He gets criticized for being a rich guy throwing his money around. But if he were just a rich guy, self-interested, he would have only supported one of the initiatives,” Walsh said.
Heywood has attracted speculation that his initiatives are a way to raise his political profile for his own run for office, but he says he has no desire to be part of “such a messy, ugly, dirty world.”
He is co-chief executive officer for Taiyo Pacific Partners, a hedge fund that concentrates on Japanese investments. He is fluent in Japanese, according to his online biography, and he worked in Japan as a missionary before graduating from Harvard University.
“I think Harvard has a ‘one-redneck-Mormon-kid-from-Arizona’ quota,” he said, describing his childhood goal as making $40,000 a year, because it was more than his dad made.
That background, he said, is what motivated him to sponsor the initiatives: remembering the economic crunch from his childhood in the 1970s — only now the pain is coming from government policy.
Heywood said the state is trying to meet its climate targets “on the backs of, like, the guy that’s making $65,000 a year, driving thousands and thousands of miles in his pickup truck,” while China continues to heavily pollute.
“Ok, let’s all go back to horses,” he added. “I have a horse ranch — and I have lots of carbon output that comes from there.”
Heywood has a sense of humor about his wealth. When critics accuse him of trying to cut taxes in order to benefit his own finances, he thinks about what a nice beach house in Florida — where there’s already no income or capital gains taxes — he could’ve bought instead of funding these initiatives.
“I run a hedge fund — normally that means boo, hiss, evil guy,” he said he said in 2021, according to a Facebook video describing him as a “conservative influencer.”
But, he continued, he sees the job of a hedge fund as creating the right conditions for a company to channel the best ideas of its employees, shielded from the short-term pressures of shareholders. Heywood said that was what he wants to do in Washington, too: create the infrastructure for people to make themselves heard.
When an event organizer signaled to him that his time was running out, he joked from the stage about getting more time: “I’ll give [you] $1,000, and you give me 10 more minutes.”
The crowd laughed when the organizer said that wouldn’t be enough.
