Washington regulators are moving forward with a slew of potential changes to the state's "cap-and-invest" program through a pair of draft rules, despite ongoing uncertainty around new program mechanics under discussion in the California-Quebec carbon market.
The Department of Ecology opened public comment for the two draft rules on 16 April for the revised carbon market linkage rulemaking it kicked off in March.
The draft language builds on changes required by SB 6058, which lawmakers passed last year at the request of Ecology, to smooth out any incompatibility between the state's program and the larger California-Quebec market, known as the Western Climate Initiative (WCI).
In line with legislation, the agency is proposing to shift the program's greenhouse gas (GHG) emissions exemption for biomass-derived fuels to 35pc lower lifecycle emissions — down from 40pc — than the comparable petroleum fuels, allow the use of another jurisdiction's carbon offsets issued after July 2019 for compliance, and lower the allowance holding limits for general participants in a linked market. Ecology is proposing other changes required by the law, such as accounting for emissions from imported electricity.
Changes Ecology is proposing that are not required by SB 6058 include accounting for the combined total allowances between all three jurisdictions in the program's holding limit formulas and adding quarterly future vintage allowance auctions in line with the WCI.
Ecology began pursuit of linking with the WCI in 2023, the first year of the Washington's program.
While the agency continues to move forward on linkage-related due diligence required by state law, some program changes needed to join the WCI market, such as aligning program compliance periods and corporate affiliation group disclosures, must wait for guidance from California and Quebec. Ongoing work by the current WCI members to update their respective regulations has run into a series of delays.
One potential change California Air Resources Board staff floated in April 2024 is aligning the end of each compliance cycle with the program's emissions reduction targets in 2030, 2035, 2040 and 2045, rather than the current three-year compliance cycle. But the agency has largely been silent on the issue since, including in its most recent market notice on planned changes in October 2024.
Washington's "cap-and-invest" program aims to cut GHG emissions by 45pc by 2030, compared with 1990 levels, and to achieve net-zero emissions by 2050. The program covers industrial facilities, natural gas suppliers, power plants and other fuel suppliers with GHG emissions of at least 25,000 t/yr.
Ecology is requesting public comment on the draft language through 16 May.
