In April 2021 legislation from Washington State establishes a cap-and-trade system that puts a price on carbon emissions. The bill creates a “cap-and-invest” program to gradually set tighter limits on carbon pollution and other greenhouse gases. It requires polluters to decrease emissions steadily, or buy allowances for pollution. The money collected would go toward projects that include, among other things, energy conservation, transportation and assistance for a transition to clean energy. With this legislation, Washington becomes the second state — behind California — to have a comprehensive carbon-pricing law.
More specifically, the Act:
- Annually distributes and auctions a capped and decreasing amount of “allowances” starting in 2023 and aligned to the state’s 2030, 2040, and 2050 GHG limits;
- Includes both a price floor and a price ceiling in order to ensure revenue availability, encourage innovation, and insulate from price shocks;
- Invests substantial revenues raised through auctions to accelerate climate pollution related priorities, including through the Forward Washington transportation package, and consigns revenues to utilities available for specific, targeted use;
- Establishes an Environmental Justice Analysis & Advisory Panel to evaluate and provide guidance on investments and program design;
- Requires an Environmental Justice review every other year to measure trends in emissions from high priority facilities, granting authority for additional actions directed at those high priority facilities not adequately reducing emissions;
- Permits a limited use of offset credits — at least half for in-state projects — for program compliance that incentivize reductions from non-covered emissions sources;
- Allows program-linking with other similarly motivated jurisdictions, generating additional program efficiencies and opportunities to harness Washington’s culture of innovation;
- Leverages an Emissions Containment Reserve to maintain cap integrity and enhance certainty of achieving cumulative and target-year emission reductions.