Washington preps to merge carbon market with California amid repeal threat

The state Senate has approved Monday to make it easier to merge Washington’s carbon market with ones in California and Quebec despite a looming ballot measure that could moot efforts to link the climate programs.

Majority Democrats overrode Republican opposition to pass Senate Bill 6058 on Monday on a party-line 29-20 vote. It now goes to the House for consideration.

“This doesn’t commit us to do anything,” Sen. Joe Nguyen, D-White Center, the bill’s prime sponsor, said before the vote. It gives the Washington Department of Ecology the “guardrails” to hold conversations with the other jurisdictions and bring any agreement back to the Legislature, he said.

Sen. Drew MacEwen, R-Shelton, said creating a larger market could be good if it drives down the cost of compliance, thus benefiting businesses and consumers.

But, he said, acting on the bill Monday was “premature” and the Legislature should wait until it knows where things stand with the initiative.

He was talking about Initiative 2117, which is on track for the November ballot. If passed by voters it would repeal the state law that established the carbon pricing program.

A wonky discussion

Monday’s brief floor debate avoided details of the 40-page bill and belied the deep political divide caused by the controversial climate policy.

The bill would amend several sections of the Climate Commitment Act, the 2021 law that is a climate policy centerpiece for Gov. Jay Inslee and his fellow Democrats in the Legislature.

That law seeks to reduce greenhouse gas emissions by putting a price on pollution-causing carbon emissions. The cap-and-invest program sets a limit on carbon emissions for major emitters, like refiners and utilities, and that limit shrinks over time.

Those polluters must buy allowances at auctions for each metric ton of greenhouse gasses they emit. Revenue collections from auctions reached $1.8 billion in 2023, the program’s first year. Some of those dollars have been steered into purchase of electric school buses, free public transit for youth, air quality monitoring, and electric vehicle chargers.

As Nguyen noted in a statement, the Climate Commitment Act envisioned Washington joining other carbon markets because it could lead to lower prices for allowances.

“Joining forces with other states and governments in the fight against climate change is an important step forward in our work to reduce carbon pollution and support a green, sustainable economy,” Nguyen said.

The highly technical bill would make various changes in the rules for compliance periods, offsets, electricity imports, and allowance purchase limits.

For example, it would increase the purchase limit for businesses during each auction from 10% to 25% of allowances sold. It would also keep in place a ban on auction market participants owning more than 10% of the total allowances issued in any calendar year until Washington’s program is linked with another jurisdiction.

Harmonizing the three programs will require revising of rules in all three jurisdictions. Inslee administration officials have said a merger could be completed in 2025. Industry executives predict it could be closer to 2027.

Though it didn’t come up Monday, there is still a question of whether legislation could be construed as an alternative to the ballot measure. If so, it would have to be put in front of voters alongside the initiative.

To avoid that, a provision in Senate Bill 6058 says it “is not a conflicting measure dealing with the same subject” as Initiative 2117. If a court directs it to be put in front of voters as an alternative, the legislation immediately becomes “null and void and may not be placed on the 2024 ballot,” reads the legislation.

Provisions in the bill would take effect Jan. 1, 2025 if the initiative is not approved. They will be “null and void” if voters pass the ballot measure.

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