Dive Brief:
- The state of Washington is teaming up with California and Québec to establish a multi-jurisdictional carbon emissions trading market, building on an existing arrangement between the Golden State and the Canadian province.
- The three jurisdictions released a draft agreement Tuesday that seeks to add Washington to the shared carbon market jointly run by California and Québec, which connected their programs in 2014. This decade-old carbon market is already the largest carbon market in North America and the third-largest in the world.
- Washington’s Department of Ecology published the draft agreement and said in an accompanying release that “a shared market would reduce greenhouse gases more efficiently by driving long-term, cost-effective investment in decarbonization.”
Dive Insight:
All three jurisdictions developed and drafted the agreement, which lays the groundwork for information sharing, accounting and cooperation. However, the agreement is non-binding and does not seek to establish new regulations or modify existing ones, according to the draft document.
Before formally entering the linkage agreement, Washington must solicit public input on the deal, complete an Environmental Justice Assessment and make specific findings regarding the linkage criteria — all requirements outlined in the state’s Climate Commitment Act. The law, established in 2021, is a cap-and-invest program designed to reduce Washington’s greenhouse gas emissions 95% by 2050, compared to 1990 levels.
The Department of Ecology, which administers the CCA, is accepting public comments until May 1 and said it will hold two public hearings next month to answer questions and share more information about the linkage agreement and assessments it has conducted. The public hearings will take place April 22 and April 27.
“No state or province can handle the climate crisis alone,” Washington Gov. Bob Ferguson said in the March 3 release. “Working together will lead to greater progress in reducing emissions, as well as more predictability for businesses as they invest in clean energy and develop their own strategies for a cleaner future.”
Washington, California and Québec could start operating a linked carbon emissions trading market as soon as 2027, depending on how fast linkage process steps and regulatory changes are completed in each jurisdiction, according to the release.
Once linked, Washington businesses will be allowed to use California or Québec issued allowances or tradable permits — which represent authorization to emit one metric ton of carbon dioxide equivalent — to cover their emissions compliance obligations, and vice versa, according to the Department of Ecology. The three jurisdictions could also host joint allowance auctions and share a common allowance price.
Referring to California and Québec’s decade-long partnership on carbon markets, Washington’s ecology department noted a single market with a higher number of emissions allowances is more beneficial. “Larger markets are generally more stable and have more consistent pricing because a larger pool of buyers and sellers reduces price swings,” the department said.
The department added that, in addition to helping the state decarbonize and meet its emissions reduction goals, Washington expects the linkage agreement to provide “substantial benefits” to the state’s cap-and-invest program, economy and communities.
