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41 big polluters will get free passes on WA’s carbon trading market

Washington is required by law to eliminate or offset all of its greenhouse gas emissions by 2050. But generous exemptions for more than 40 of the state’s biggest polluters in a future carbon market could push this goal out of reach.

In January, the state Department of Ecology will launch a cap-and-invest program that will require 99 of the state’s largest emitters to gradually reduce emissions or pay to continue burning fossil fuels. While the list will be finalized later this year, as it stands, 41 major emitters will be allowed to pollute at little or no cost for at least the next 12 years.

This is because they have been designated, by the state legislature, as industries particularly sensitive to fluctuations in regional markets and global trade.

Critics say the designation treats some industries differently than others. State officials implementing the program have mostly agreed, but their hands are tied.

Leaving the rules unchanged, they said, could jeopardize statewide decarbonization efforts.

“Whether [designated emitters] don’t reduce their emissions and it’s 2040 and 2050, we probably won’t be able to meet our statewide goals,” said program implementer Luke Martland.

Only new legislation will change the operation of designated issuers beyond the next 12 years. Earlier this year, a bill that would have done this failed to pass the Legislative Assembly.

Exempt industries include oil refineries and pulp and paper mills as well as a handful of chemical, mineral and metal manufacturingrs, which collectively represent 10% of the statewide emissions covered by the program.

A pulp and paper mill, for example, is subject to fluctuations in the price and availability of wood and other raw materials. If the price of materials increases, the plant could struggle to absorb those costs and meet program mandates, which require polluters to emit less or pay the difference.

According to the Department of Ecology, lawmakers feared that competition in the global market, compounded by strict climate targets, would push these companies to cut staff and production, close shop or leave the state for less pasture. greens.

The State Cap and Investment Program, the centerpiece of the Climate Pledge Act signed into law last year, is a market-driven compliance tool used by individuals, businesses, cities, States and nations around the world to incentivize fossil fuel reduction. consumption.

Any entity that emits more than 25,000 metric tons of carbon dioxide each year is required to participate in the program. If they can’t do it or don’t do it fast enough, they can buy “quotas”, each equivalent to the emission of one ton of carbon dioxide, during online auctions organized every quarter. Over time, the amount of these allowances will be reduced, thereby increasing the price and making it increasingly expensive to continue burning fossil fuels.

Done right, carbon trading could help the state achieve its ambitious goal. Or it could give polluters the means to pay to get out of the system and avoid significant reductions in harmful gases that warm the planet for years to come.

Program rules are being drafted and will be finalized in the fall before the programs launch on January 1, 2023.

Critics say the special designations and free stipends will soften the program’s impact.

Giving free allowances to big polluters could prevent 90% of industrial emissions cuts through 2034, according to a report released earlier this month by Front and Centered, an Europe-wide environmental justice group. State ruled by communities of color.

The group went further, saying that any free pass in a carbon trading system will make the program ill-equipped to significantly reduce or eliminate emissions. The solution, they said, is to force companies to directly and immediately eliminate major sources of pollution.

“If we’re not tackling this major source of greenhouse gases and local pollution, then we’re not really tackling the problem,” said Deric Gruen, co-executive director of Front and Centered.

The impacts of industrial pollution are particularly pronounced among marginalized communities.

Yet Sen. Reuven Carlyle, D-Seattle, one of the key architects of the Climate Commitment Act, said the Front and Centered report failed to recognize that the law compels all polluters to reduce their emissions, which they get or not free allowances. They are also subject to air quality regulations designed to address concerns about environmental justice and industrial pollution.

“There is a belt and suspenders approach where we have a market-driven system to find the most economically efficient emission reductions,” he said.

Yet these polluters are only one piece of a thorny puzzle.

Required participants in the program represent approximately 75% of statewide emissions, including transportation, electricity, natural gas, refineries and other industrial sources.

The agriculture, aviation, and maritime industries, which make up the bulk of the remaining 25 percent, were excluded from the program due to state laws and federal regulations.

The state will set the starting price for allowances when the program starts in January.

Finding the right starting price is a balancing act, said Claire Boyte-White, communications specialist for the Climate Commitment Act. “Ultimately, we want entities to comply voluntarily, cooperatively, openly, on time,” she said.

If allowances are too cheap, big polluters might see the whole program as a slap on the wrist. If allowances become too expensive, voluntary participation could be low and large emitters may look elsewhere for a more affordable market.

“We want something that businesses can participate in effectively and successfully, year after year,” Boyte-White said.

Earlier this year, the state commissioned an independent study of the Climate Commitment Act.

The results, released in July, revealed that merging Washington’s carbon market with those of California and Quebec would significantly reduce the price of allowances and expand the market.

According to the analysis, each allocation is expected to cost $41 if the Washington market is tied to theirs, but could be up to 65% higher in different scenarios.

Upfront costs were expected to be “very, very high” in the analysis, the makers said. In direct response, they decided to pre-load a contingency fund intended to help reduce costs if allowances became too expensive. They will also aim to merge the markets sooner than expected, with a tentative target of 2025.

Energy suppliers in Washington are also subject to the Clean Fuel Standard – which was adopted in 2021 and requires fuel suppliers to reduce the carbon intensity of transportation fuels, including gasoline and diesel, to 20 % below 2017 levels by 2038 – as well as the Healthy Environments for All Act, which facilitates inter-agency cooperation and funding to address environmental injustice.

“We’re on track to be the leading state in the nation in reducing our emissions in line with science-based targets,” Carlyle said. “That doesn’t make it any easier.”

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