Washington state regulators will provide additional information about a potential linkage with the California-Quebec carbon market this week, as they near a preliminary decision on whether to pursue the plan.
The Washington Department of Ecology (DOE) on Thursday will release its preliminary criteria analysis report for linking the state's cap-and-trade program to the larger California-Quebec joint market. The criteria will continue to evolve as Quebec and California are in the process of reviewing their programs, with the final analysis report expected to be released in 2024, DOE climate pollution reduction program manager Joel Creswell said on Monday at a state Senate Environment, Energy and Technology Committee meeting.
While linking would not change any of the state's GHG emission reduction targets, it would sync the state's auctions with the joint market schedule and provide "significantly more market liquidity" while reducing compliance costs as a larger supply of allowances would be available from the market, according to Creswell.
"California is a much bigger market, and Quebec is more similar in size to Washington in terms of population, but that joint market is much bigger than ours," he said. "The advantage there is that the joint market has a lower allowance price than Washington does, so we think that linking will put significant downward pressure on those allowance prices here in Washington."
A preliminary decision on whether to pursue a market linkage is expected to be released between the second half of this month and the start of November.
But California and Quebec will also need to go through their own process to determine if they wish to add Washington to their market, which would put 2025 as the earliest that an agreement could be expected to be negotiated and signed, according to Creswell.
Argus assessed WCA December 2023 allowances at $52.88/metric tonne yesterday.
DOE is also planning to update its GHG inventory program, which currently relies on data from the Environmental Protection Agency (EPA), which often comes at a delay because of the need to wait for all states to submit their data. Over the next two years, DOE plans to roll out improved data tools to rebuild the program, add staff and make the inventory more reflective of the state's overall GHG emissions.
DOE also provided an update on its concluded exempt fuels work group, formed to address surcharges from fuel suppliers for exempted agriculture and maritime fuel uses based on "exaggerated" estimates of compliance costs early in the program. The process of rebating and refunding fuel users is ongoing, according to the agency.
DOE formed the work group after it received invoices from downstream customers that it said showed price gouging, with some suppliers adding surcharges, sometimes for exempt fuels, for the state's cap-and-trade and low-carbon fuel standard programs.
A bill has also been proposed in the legislature, SB 5766, that would require the state to set up a remittance program for farm fuel users and freight haulers of agricultural product affected by rising fuel costs related to cap and trade. It is currently pending before the Senate Ways & Means Committee.
