Washington State Moves Closer to Launching GHG Cap-and-Trade Program

Washington State’s Department of Ecology is in the process of finalizing regulations for a greenhouse gas (GHG) cap-and-trade program, the second of its kind in the nation.

Under the state’s Climate Commitment Act, passed in 2021, the Department of Ecology is required to implement the program by Jan. 1, 2023.

Under the cap-and-invest program, businesses and organizations responsible for 75 percent of Washington’s greenhouse gas emissions will have to obtain allowances to cover their emissions. Over time, the number of allowances will be reduced, incentivizing businesses to cut emissions.

Some allowances will be awarded with no charge while others will be sold at quarterly auctions, with the first auction planned for the second half of February 2023. The proceeds of the auctions will be invested in emissions reduction programs and preparing Washington communities for the effects of climate change, especially those that deal with more air pollution than others.

The cap-and-invest program is the cornerstone of a suite of climate policies in Washington State that aim to increase the number of zero-emission vehicles on the road, accelerate the switch to cleaner transportation fuels, and move away from coal. State law requires those policies to meet Washington’s goal of reducing greenhouse gas emissions 95 percent by 2050, with remaining emissions to be offset.

California in 2013 began the first emissions cap-and-trade program in the United States. The program applies to emissions that cover about 80 percent of the state’s GHG emissions. In January 2014, California linked its cap-and-trade program with Quebec’s program.

On the East Coast, seven states signed a memorandum of understanding in 2005 to form the Regional Greenhouse Gas Initiative (RGGI), a cooperative effort to reduce their carbon dioxide (CO2) emissions using a regional cap-and-invest market mechanism.

Each state sets CO2 emission limits from its electric power plants, issues CO2 allowances and establishes participation in regional CO2 allowance auctions. The program went into effect in January 2009.