Ecology looks to make Washington reserve carbon auction reforms permanent

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(The Center Square) – A Tuesday morning Department of Ecology public meeting drew no public comment on proposed new permanent rule changes regarding the Allowance Price Containment Reserve, or APCR, for companies participating in Washington state’s cap-and-trade program.

Under the Climate Commitment Act of 2021 – which went into effect at the beginning of this year – emitters are required to obtain “emissions allowances” equal to their covered greenhouse gas emissions at quarterly auctions hosted by the Department of Ecology.

A separate pool of allowances is made available when the prices at the quarterly auctions exceed a certain level to stabilize costs and ensure that carbon allowances are obtainable and reasonably priced for covered entities.

Three quarterly carbon auctions and one APCR auction have been held so far this year, bringing in more than $1.4 billion. Prices in the third quarterly auction were high enough to trigger a second Allowance Price Containment Reserve auction, slated for Nov. 8. The next quarterly auction is set for Dec. 6.

Nikki Harris, Ecology’s rulemaking lead, explained that the proposed rule changes meant to clarify two aspects of the APCR are already in effect under the concurrent emergency rulemaking process.

“The first emergency rulemaking was adopted on June 8, 2023, and renewed on Sept. 7, 2023, with the second emergency adoption,” she said. “An additional emergency adoption is planned on or before Jan. 5, 2024, to keep the rule in effect until the final permanent rule is adopted. For clarification, there is no difference between the emergency ruling and the proposed rule language.”

The first proposed rule change means that one entity can hold only a certain number of allowances in its account at a time.

“This change is to clarify that the existing holding limits that apply to allowances with a vintage also apply to the vintage-less allowances that are acquired through APCR auctions,” Harris said.

In this case, “vintage” refers to the year an emissions reduction occurred.

The other proposed rule change involves limits on how APCR allowances can be used.

“These changes state that any allowances purchased from the Allowance Price Containment Reserve are to be used for compliance purposes only,” Harris said. “This change would prevent those allowances from being sold or traded on the secondary market.”

Usage limits are meant to ensure that allowances will be used to meet compliance obligations and not for speculative purposes.

There were no takers during the public hearing portion of the meeting when formal public comments were to be heard.

The department is accepting comments online or via mail until Nov. 1.

The new rules are scheduled for adoption on Feb. 21, 2024, and would go into effect 31 days later.

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