The Climate Commitment Act is a law enacted by the Washington state legislature and signed by Governor Jay Inslee in 2021.
Cap and invest program
editThe Washington State cap and invest program was established in 2021 by the Climate Commitment Act (CCA). It combines a cap and trade system with a program to directly invest the generated revenue into addressing climate change. This program is intended to enforce the GHG limits set by the legislature, by requiring all businesses emitting at least 25,000 metric tons of CO2 equivalent to obtain allowances[a] equal in size to their total emissions. Businesses found not to be in compliance can be fined up to $50,000 per violation, per day. A set number of allowances are auctioned off and can be bought and sold on secondary markets, similar to securities.[1][2]
In December 2021, Washington joined the Western Climate Initiative, the auction program used by California and Québec's linked program, plus Nova Scotia's standalone program. The first auction was held February 28, 2023.[3]
Auctions
editThe program uses sealed-bid auctions, whereby the price that each participant bids is unknown to other participants. After bidding is closed, participants are allocated the number of allowances that they bid for, in order of highest price first, until all allowances have been accounted for. However, the price that all the successful participants actually pay (the settlement price) is the lowest successful bid price. Any participant who bid a price lower than the final price, will not receive any allowances at auction, and will instead have to purchase them on the secondary market.[4] The Department of Ecology also establishes price floors and ceilings for allowances, increasing over time and adjusted for inflation.[5][6][7] As of 2024, participants must bid in lots of 1,000 allowances.[8]
Allowance Price Containment Reserve (APCR) auctions are intended to keep prices from escalating too quickly. These auctions are automatically called after an auction where prices rose above a certain threshold and they are only open to polluting entities. In an APCR auction, prices are fixes at Tier 1 (lower) and Tier 2 (higher) prices, and there are a set number of allowances up for auction in each tier.[9][10]
Most allowances have a "vintage year," which is the earliest year that it can be used to cover a business' emissions. A limited number of allowances are sold in advance of their vintage year. Allowances with earlier vintage years can always be used in later years, but allowances cannot be used before their vintage year. For example, a 2027 vintage allowance cannot be used in 2026. Allowances sold in APCR auctions have no vintage and can be used in any year.
Compliance
editBusinesses and other required reporting entities must cover all of their emissions with allowances and/or offset credits. Compliance is measured in four year periods, the first of which covers 2023-2026. On the compliance deadline (November 1) following each year in a compliance period, entities must submit compliance instruments covering at least 30% of their emissions from the previous year. On the final compliance deadline in a compliance period, entities must submit compliance instruments covering all of their remaining emissions from the compliance period.[11]
| Date | Required compliance amount | Vintage allowed |
|---|---|---|
| November 1, 2024 | 30% of 2023 emissions | 2023 |
| November 1, 2025 | 30% of 2024 emissions | 2023-2024 |
| November 1, 2026 | 30% of 2025 emissions | 2023-2025 |
| November 1, 2027 | 30% of 2026 emissions | 2023-2026 |
| Remaining 70% of all 2023-2026 emissions |
Initiative 2117
editIn the 2024 general election, Washington voters will decide on ballot initiative 2117 which seeks to repeal the Climate Commitment Act.[12] A poll in May 2024 of 403 registered voters showed 41% support repealing while 31% oppose with a +/- 5% margin of error. As of June 2024, over $8.5 million and $5 million have been raised in support and opposition of the initiative, respectively.[13]
Initiative 2117 is part of a group of ballot initiatives lead by conservative leaders, including businessman Brian Heywood, who criticized the CCA for targeting gasoline which has inelastic demand, meaning that people still have to buy it even when the price goes up. He was quoted as describing the policy as "like Marie Antoinette — let them drive Teslas." The coalition defending the CCA, No on 2117 includes Microsoft, Amazon, and oil company BP.[14][15]
At the 2024 meeting of the North American Carbon World, Director of the Washington State Department of Ecology, Laura Watson, suggested that the result of the reason for the sudden drop in settlement price for carbon allowances in the first auction of the year was a result of the initiative getting on the ballot.[16][17]
Initial results from the 2024 election suggested that the initiative would fail, keeping the CCA intact.[18]
See also
editExplanatory footnotes
edit- ^ "Allowance" means an authorization to emit up to one metric ton of carbon dioxide equivalent. from RCW 70A.65.010
References
edit- ^ "SB 5126 – 2021". Bill Information. Washington State Legislature. 2021.
- ^ "Cap-and-invest - Washington State Department of Ecology". ecology.wa.gov. Retrieved May 31, 2024.
- ^ "Auctions and market - Washington State Department of Ecology". ecology.wa.gov. Retrieved May 31, 2024.
- ^ "Cap-and-invest - Washington State Department of Ecology". ecology.wa.gov. Retrieved May 31, 2024.
- ^ WAC 173-446-335
- ^ WAC 173-446-210
- ^ WAC 173-446-380
- ^ "WCI, Inc. Auction Platform". www.wci-auction.org. Retrieved June 1, 2024.
- ^ WAC 173-446-370
- ^ "WAC 173-446-APCR - Washington State Department of Ecology". ecology.wa.gov. Retrieved May 31, 2024.
- ^ a b "Auctions and market - Washington State Department of Ecology". ecology.wa.gov. Retrieved June 1, 2024.
- ^ "Initiative 2117 – 2024". Bill Information. Washington State Legislature. 2024. Retrieved June 1, 2024.
- ^ "Washington Initiative 2117, Prohibit Carbon Tax Credit Trading and Repeal Carbon Cap-and-Invest Program Measure (2024)". Ballotpedia. Retrieved May 30, 2024.
- ^ "Amazon, BP Counter Push to Repeal Washington Climate Law". Bloomberg. Retrieved June 1, 2024.
- ^ readyfreddy (April 17, 2024). "No on 2117 Launches with Unprecedented Statewide Coalition". Retrieved June 1, 2024.
- ^ Path 1: The Expansion of WCI and Developing Requirements for It (Video). April 4, 2024. Retrieved June 2, 2024 – via YouTube.
- ^ Denkmann, Libby; Anderson, Hans (October 7, 2024). "Will Washington state do away with cap-and-trade? Voices for and against I-2117". www.kuow.org. Retrieved October 10, 2024.
- ^ "November 5, 2024 General Election Results - Initiative Measure No. 2117 County Breakdown". results.vote.wa.gov. Retrieved November 9, 2024.