Dive Brief:

• Washington lawmakers last week passed legislation adopting a "cap-and-invest" system. Once it's signed into law, it would cover three-quarters of greenhouse gas emissions in the state, including those from the power sector.
• The bill, which is headed to the desk of Gov. Jay Inslee, D, also "enacts arguably the strongest environmental justice policy in the nation, obligating us to improve air quality for overburdened communities that have to live daily with air pollution from emissions," Inslee said in public remarks.
• Electric utilities in Washington already are required to completely decarbonize their energy resources by 2045. "What the cap-and-invest program does is help unlock even more ambition, even more reductions from the power sector by creating an incentive for further decarbonization," said Pam Kiely, associate vice president, U.S. climate, at the Environmental Defense Fund. 

Dive Insight:

The Climate Commitment Act, once signed into law, would give Washington the second economy-wide carbon cap system in the U.S., according to Vlad Gutman-Britten, Washington director at Climate Solutions. California’s cap-and-trade program, linked with Quebec, was the first. 

The Washington bill passed as part of a package of environmental bills, including House Bill 1091, which requires a reduction in the carbon intensity of transportation fuels. The legislation essentially develops an overall limit for greenhouse gas emissions from major sources in the state that declines yearly in alignment with Washington's statutory carbon reduction targets, Kiely explained. That limit is represented by "emission allowances": for regulated sources to emit a ton of carbon dioxide equivalent, an entity will have to hold one emission allowance. Some allowances are allocated to specific entities, while others are auctioned off.

In 2019, the state passed a law requiring electric utilities to completely eliminate coal-fired power by 2025 and ensure 100% renewable or zero-carbon power by 2045. The biggest impact this new legislation will have on the power sector is in driving electrification across the built environment and transportation space, according to Kiely, "in a way that will allow the good work that companies like Puget Sound Energy and Seattle City Light have already done to decarbonize the electric sector, to put that to work to help decarbonize other sectors of the economy."

Under the legislation, consumer-owned and investor-owned utilities in the state would be given allowances so as to prevent ratepayer costs from increasing. The state’s Department of Ecology, along with the Washington Utilities and Transportation Commission and Department of Commerce, are tasked with adopting rules for allocating these allowances in accordance with each utility’s supply and demand forecasts, according to an analysis of the legislation. 

The bill is structured so that it will not create any net costs for customers. "But it will provide a direct incentive to still become cleaner and reduce emissions for the utilities — so it’s a win-win that way," Gutman-Britten said.

Washington’s Department of Ecology must develop rules to implement the program by Jan. 1, 2023, according to the bill. Compliance obligations will not come into effect until lawmakers enact separate legislation on transportation funding, however.

The bill earmarks some of the auction proceeds from this program for clean transportation programs, natural climate resilience solutions and programs related to the clean energy transition.