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Washington proposes cap-and-trade plan

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On December 17, Washington Governor Jay Inslee announced a cap-and-trade program covering 130 facilities and fuel distributors, amounting to 85% of the state’s carbon emissions. The sectors covered by the program have not been announced yet, however, the agriculture and waste management sectors, along with emissions generated by biofuels and biomass would not be included. The cap, which would decline by approximately two percent per year, would be set by the Washington Greenhouse Gas Inventory, a database of yearly emissions based on reports submitted by the state’s major pollution sources.

The proposed Carbon Pollution Accountability Act (CPPA) is expected to generate around USD 1 billion annually, which would be used for transportation, education and disadvantaged communities. Covered entities would be required to purchase carbon permits at the outset of the program at state-run quarterly auctions, with permits expected to be priced at USD 12 in 2016. Similar to California and Québec’s cap-and-trade program, entities would be required to annually surrender 30% of their allowances, while the remaining allowances are due every three years. Covered entities may also submit independently verified offsets to meet up to eight percent of their annual emissions. However, such offset projects must first be verified by the state. A monitoring, reporting and verification process is outlined in the CPPA, which includes independent audits and annual emissions reporting. To limit price spikes, a cost containment reserve holding four percent of the carbon permits is also established. Finally, the CPPA also permits Washington to link its carbon market with other jurisdictions.

Inslee plans to introduce the legislation at the beginning of 2015 and pending the approval of the state legislature, the program would start on July 1, 2016, with entities required to surrender their carbon permits by November 1, 2018. 

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