Jan 4, 2023 - News

Cap-and-trade takes effect in Washington state

Illustration of a smoke stack with a cork in it.

Illustration: Aïda Amer/Axios

Two major climate-related laws took effect this week in Washington state: a new cap-and-trade program and a clean fuel standard.

Why it matters: Both policies aim to dramatically cut the state's greenhouse gas emissions and reduce the negative impacts of climate change.

  • That's especially needed in light of a new report issued late last month, which found that Washington state's emissions rose by 7% between 2018 and 2019, the most recent available year of data.

Details: Under the new cap-and-trade law, most of the state's biggest polluters — including oil refineries, cement refineries, food processors and paper mills — have to obtain allowances for the greenhouse gas emissions they emit each year.

  • The state Department of Ecology will sell allowances at quarterly auctions, helping raise money for renewable energy and clean transportation projects.
  • Over time, the state will reduce the number of annual allowances available, capping the state's emissions lower and lower while also driving up the cost per metric ton of pollution.

Meanwhile, under the clean fuel standard, fuel producers and importers must reduce the "carbon intensity" of transportation fuel by 20% over the next 15 years.

  • Carbon intensity is a measure of greenhouse gas emissions associated with fuels over their entire life cycle, from extraction to combustion.

The big picture: Even with the new laws in place, Washington may or may not be on track to meet its long term greenhouse gas reduction targets.

  • State lawmakers have committed to reducing emissions to 95% below 1990 levels by 2050, while offsetting the remaining 5% with carbon reduction projects over the same timeframe.

What they're saying: State Sen. Joe Nguyen (D-West Seattle), the incoming chair of the Senate's environment committee, said the new programs will help the state meet its statutory goals, but must be implemented wisely.

  • That will include spending money from the cap-and-trade auctions on projects such as electric vehicle charging infrastructure and renewable energy facilities — things to help transition the state away from fossil fuels, Nguyen told Axios.

What we're watching: Republican critics have argued the new laws will cause gas prices to rise dramatically. But the effects on energy prices are more complicated to predict.

  • A state-commissioned study indicated the clean fuel standard is likely to have more modest price effects — an increase of up to 4 cents per gallon in 2025.
  • Another state-commissioned report found Washington could reduce the cost of the cap-and-trade program by linking its allowance market with similar programs in Quebec and Canada.

What's next: The first auction under the cap-and-trade program is scheduled for late next month.

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