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Senate passes bill supporting linking WA’s carbon market to CA-Quebec

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(The Center Square) – The Senate has passed legislation that would facilitate linking Washington state’s carbon market to the joint California-Quebec market, a move supporters hope ensures durability for the controversial financial mechanism.

On Monday, by a vote of 29-20, the Senate passed a second substitute version with amendments to Senate Bill 6058 that makes several technical changes to the Evergreen State’s carbon market to help align it with those of California and Quebec.

Among the technical changes: authorizing the state Department of Ecology to change the length of compliance periods under carbon tax credit trading – cap-and-trade – as part of the Climate Commitment Act of 2021, modifying definitions and policies related to electricity importing and reports, increasing the percent of allowances a covered or opt-in entity may buy from 10% to 25% in a single auction, and continuing the prohibition on a general market participant from owning more than 10% of total allowances issued in a calendar year until Washington’s market is linked with another jurisdiction.

“Joining forces with other states and governments in the fight against climate change is an important step forward in our work to reduce carbon pollution and support a green, sustainable economy,” bill sponsor Joe Nguyen, D-White Center, said in a news release. “The Climate Commitment Act is playing a critical role for Washington’s clean energy future – investing in energy efficiency, protecting our environment, reducing pollution, and more – and linkage makes it work even better.”

The CCA, which went into effect at the beginning of 2023, requires emitters to obtain “emissions allowances” equal to their covered greenhouse gas emissions at auctions hosted by Ecology. The program is meant to reduce greenhouse gas emissions in Washington by 95% by 2050.

An October 2023 analysis by Ecology found that a larger, linked market would result in more predictability when it comes to allowance prices and provide businesses with an incentive to increase investments to curb their greenhouse gas emissions.

The report warned that failing to pursue linkage could doom the entire program.

Washington’s cap-and-trade program also faces a challenge in the form of Initiative 2117, which would repeal the CCA.

Owing to case law and a 1971 opinion from the Washington attorney general that seems to say that if the Legislature passes a bill on the same subject as an initiative, it is then supposed to go on the ballot as an alternative, SB 6058 contains a provision that “If Initiative Measure No. 2117 is approved by a vote of the people in the 2024 general election, this act is null and void.”

The Legislature can approve the initiative or send it to voters. If I-2117 is rejected by the Legislature or the Legislature takes no action by the end of session on March 7, it will go on the November ballot. The Legislature may also pass an alternative proposal to accompany I-2117 on the ballot.

On Feb. 5, companion legislation in the form of a second substitute version of House Bill 2201 was passed out of executive session by the House Appropriations Committee and is awaiting debate before the full chamber.

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