The governor, who had made tackling climate change a key issue, also directed state agencies to work with utilities to transition away from coal-powered electricity and to consider requiring the use of cleaner transportation fuels.
Inslee's executive action comes months after a bipartisan panel of legislators deadlocked on strategies to reduce the state's greenhouse gas emissions. That panel split along party lines.
Inslee said his executive order builds on previous studies and work groups to create an action plan. "This is the right time to act," he said, adding that it is required by law.
At one point, the governor read from a statute that requires the state to return to 1990 greenhouse gas emissions levels by 2020, and for greater reductions beyond that. Some Republicans had questioned whether those limits are binding and whether they needed to be revised.
A key part of Inslee's action plan sets up a carbon emissions reduction task force that includes labor and community groups as well as businesses such as Alaska Air Group and Puget Sound Energy. They began meeting Tuesday, following the news conference at Shoreline Community College.
The group, headed by Rod Brown of the Cascadia Law Group and Ada Healey of Vulcan, is expected to come up with recommendations for a market-based program to limit global warming pollution.
Inslee's order says the program must set a cap on carbon emissions, and consider measures to offset costs to consumers and help businesses. Recommendations are due in November, and would shape legislation Inslee requests in the 2015 legislative session.
Many of the major elements will require legislative approval or legislative funding.
Inslee said a program that caps the amount of carbon pollution would require legislative approval, but a low-carbon fuel standard could be done by executive action.
The Union of Concerned Scientists, the Sierra Club and others applauded the governor for his bold leadership.
Becky Kelley, president of the Washington Environmental Council, said she was encouraged by the sense of urgency and the breadth of the team he pulled together. "There's an intention by the governor and by a lot of others to move something forward," she said.
But Rep. Shelly Short, R-Addy, questioned why the governor was "reinventing the wheel." She served on the state climate panel, and noted that many of the same issues were discussed there.
"What he's chosen is something that he completely controls versus something that was a bipartisan process," she said. "We'll see how engaged he is of us as legislators before he drops proposals next session."
The governor is likely to face a challenge in getting bipartisan support for a program to cap carbon pollution. "What would that look like in Washington and what would that cost?" Short asked.
Former Gov. Chris Gregoire aggressively pushed for and failed to get lawmakers in 2009 to approve a carbon trading system.
Gregoire also signed an executive order in 2009 directing state agencies to take action on climate change. State officials back then also studied whether to implement a low carbon fuel standard, but it's unclear what happened with that work.
Earlier this year, Republicans raised fears that a low-carbon fuel standard, which requires fuel producers to offer a cleaner mix of fuels such as biofuels or natural gas, would raise gasoline prices.