Washington State explores linking carbon market with California and Quebec

OLYMPIA - Laura Watson, director of the Washington State Department of Ecology, made an announcement on Nov. 2 regarding the state's cap-and-invest carbon reduction program. The department is taking a preliminary step towards linking Washington's program with similar initiatives in California and the Canadian province of Quebec. This move is based on a report issued by the Ecology Department in October.

Watson’s office feels the preliminary decision is a signal to the other jurisdictions, indicating that Washington is prepared to initiate discussions between the three governments concerning the potential linkage of their carbon markets. It's worth noting that both California and Quebec also have their own processes to consider whether to link their programs.

Director Watson explained her decision, the research, public input that contributed to it, and the future steps for Washington in a blog post on the Washington State Department of Ecology website. 

Strength in numbers and the Climate Commitment Act

In 2021, Governor Jay Inslee and the Washington Legislature passed the Climate Commitment Act (CCA), establishing a carbon marketplace where greenhouse gas emissions allowances could be bought or sold. Over time, the number of available allowances would decrease, putting pressure on businesses to invest in emissions-reducing technologies or programs.

The thought is that connecting Washington's carbon market with those in California and Quebec would create a larger, more liquid market, offering price stability and incentives for long-term emissions reduction strategies. It would also align Washington's decarbonization efforts with those of its peers, amplifying their collective influence on climate policy and clean energy initiatives.

The CCA directs the Ecology Department to seek linkage agreements with other jurisdictions and charges the director with negotiating and signing such agreements.

Realizing local benefits

While international emissions have global consequences, there are tangible local benefits associated with reduced emissions, including cleaner transportation, electricity generation, and buildings.

The CCA outlines the considerations and evaluations needed before signing a linkage agreement with California and Quebec. Criteria are in place to ensure that such an agreement would benefit Washington's communities, economy, and climate goals. Additionally, it's crucial to reduce compliance costs, ensure seamless allowance sale and tracking, and maintain market security.

An Environmental Justice Assessment is also required to evaluate the potential impacts of the linkage agreement on communities disproportionately affected by pollution.

Public Engagement and the path ahead

Public input was sought through various channels, including online listening sessions, surveys, and meetings with community groups.

Director Watson says her preliminary decision is based on this public input, her staff's analysis, and an independent economic analysis commissioned last year.

Collaboration with California and Quebec is needed to determine their interest in linking, what the combined market would look like, issues to be resolved, and a feasible timeline. Regulatory and statutory adjustments to Washington's program are also on the horizon. If all goes well, participation in a linked market might be possible in 2025 or later.

The public will continue to have a voice in this process, with opportunities for input on regulatory and statutory changes, as well as the draft linkage agreement. An Environmental Justice Assessment will also examine how linkage might affect vulnerable communities.

As Washington embarks on this path toward linking its carbon market, it represents an important development in the state's ambitious carbon reduction policy. Public engagement and careful consideration of the potential impacts will be crucial in shaping the program's future.

Rep. Keith Goehner's perspective

In response to the department's announcement, Rep. Keith Goehner, a member of the House Environment and Energy Committee, expressed his concerns. He believes that linking Washington's cap-and-trade program with California and Quebec will not effectively reduce carbon emissions or consumer costs in the state. According to Goehner, it essentially allows businesses to continue their current practices and pass the associated costs on to consumers, further increasing fuel and energy prices.

Goehner pointed out that California's high fuel prices and expensive retail electricity rates are not examples to follow. He raised questions about the accuracy of predictions that linkage to California and Quebec would lower prices, emphasizing the potential loss of sovereignty for Washington.

The debate over the potential benefits and drawbacks of this linkage will likely continue as Washington moves forward with its plans.