In May 2021, Governor Jay Inslee signed into law the “Climate Commitment Act” (CCA), which puts in place an economy-wide cap-and-invest program that begins January 2023. Washington is the second state in the United States to pass a law requiring such a program, after California. Washington will not be linked to any other jurisdictions at its start, but the CCA allows for linkage in the future if certain conditions are met.
Entities that emit more than 25,000 tCO2e/year must acquire allowances for their emissions to meet a cap that decreases proportionally to Washington’s GHG limits. These include industrial facilities, in-state electricity producers, electricity importers, natural gas distributors and fuel suppliers. In 2027, the program will add waste-to-energy facilities, and landfills and railroad companies in 2031. Uncovered entities that wish to participate in the program can do so by registering as an opt-in entity or as a general market participant. Covered entities that fail to comply with their obligations will be subject to fines up to USD 10,000 per day.
The Washington Department of Ecology is the administrative authority for the program and will adopt annual allowance budgets to be distributed through a combination of auctions and free allocation. Washington joined the Western Climate Initiative, Inc., in December 2021, and that organization will provide the trading platform and technical services and support for Washington’s cap-and-invest program. The Department will conduct auctions as often as quarterly, as well as additional reserve auctions in the event of prices reaching an auction price ceiling. The CCA also contains market stability measures such an allowance price containment reserve, an emissions containment reserve, and an auction floor price.
Through at least 2035, emissions-intensive trade-exposed industries (EITE) will receive free allowances based either on their carbon intensity baselines, multiplied by their yearly production or, in some cases, on their baseline historical CO2e emissions, regardless of changes in production volumes. From the second compliance period, starting in 2027, free allocation will be adjusted according to benchmark reduction schedules.
Covered entities will be able to cover up to 5% of their compliance obligations with offset credits through 2026, and up to 4% from 2027 to 2030. Covered entities will be able to cover their obligations for up to an additional 3% with units from offset projects on Tribal Lands through 2026, and with up to 2% additional from 2027 to 2030. Available allowances must be reduced in an amount equivalent to offset use.
Allowance auction proceeds can be invested in initiatives to decarbonize transportation and other sectors of the economy, promote clean energy, and advance equity and environmental justice. The CCA attempts to ensure that all communities will benefit from decarbonization. For example, at least 35% of investments will be dedicated towards overburdened communities and an additional 10% directed towards Tribes.
Through 2022, the Department of Ecology is developing the rules to implement the CCA, including: the main cap-and-invest program rules; the criteria for determining emissions-intensive, trade-exposed industries; and updated rules for GHG emissions reporting.
Emissions & Targets
BY 2030: 45% reduction from 1990 GHG levels (Greenhouse Gas Emission Limits – Amendment (2020)
BY 2040: 70% reduction from 1990 GHG levels (Greenhouse Gas Emission Limits – Amendment (2020)
BY 2050: reduction of total GHG emissions to 95% below 1990 levels and achievement of net-zero emissions (Greenhouse Gas Emission Limits – Amendment (2020)
Washington Department of Ecology Office of Governor Jay Inslee