RGGI states to consider Wash. State plan to use its CO2 units, but “substantive issues” flagged

Published 00:25 on January 27, 2016  /  Last updated at 00:25 on January 27, 2016  /  Americas, US  /  No Comments

RGGI states will evaluate Washington State’s draft proposal to allow it to use the regional carbon market’s allowances in its own state-wide cap-and-trade scheme, RGGI’s operator said on Tuesday, adding that the plan raises “substantive issues”.

RGGI states will evaluate Washington State’s draft proposal to allow it to use the regional carbon market’s allowances in its own state-wide cap-and-trade scheme, RGGI’s operator said on Tuesday, adding that the plan raises “substantive issues”.

Washington’s Department of Ecology earlier this month released details of its plan to launch a carbon market to help it halve state GHG emissions from 1990 levels by 2050.

The proposal identifies emissions allowances from RGGI, as well as California and Quebec’s carbon markets, as being eligible for compliance in the Washington scheme, in addition to certified offsets from livestock, mine methane and ozone depleting substance projects in California.

“Although the RGGI states commend Washington for moving forward to limit greenhouse gas emissions, the proposal raises substantive issues relating to the potential use of RGGI allowances,” RGGI Inc. said in an emailed statement, without elaborating further.

“The RGGI states will evaluate the proposal with input from RGGI stakeholders and anticipate submitting comments to Washington as it proceeds with the rulemaking.”

The RGGI market is currently heavily over-supplied with allowances, but more than 80% of them are in the hands of speculators, Thomson Reuters Point Carbon said late last year, a situation that has created an artificial scarcity and has lifted prices significantly.

A spokesman for California’s Air Resources Board, which regulates that state’s cap-and-trade scheme, told Carbon Pulse: “At this point we are aware of and monitoring development of Washington’s proposal.”

Allowing Washington to use carbon allowances from other markets would effectively reduce the emission caps of those programmes, which in theory could lead to supply shortages or higher prices.

WASHINGTON’S PLAN

If approved in its current form, Washington’s scheme will target the state’s largest emitters including power plants, metal manufacturers, natural gas distributors, petroleum fuel producers and importers, waste facilities and other large industrial polluters.

The measures are expected to initially affect around two dozen installations, which collectively account for around 60% of the state’s emissions, but could rise to more than 60 plants representing at least 65% of GHGs.

Based on Washington’s proposal, its scheme, set to run in three-year compliance cycles from 2017, differs from other cap-and-trade systems in that installations will receive no allowances upfront but rather earn them for cutting below set baselines, and that trading can only take place bilaterally between entities covered by the programme.

Four public hearings have now been scheduled over the proposal, with a finalised plan expected by this summer.

The state has pledged to bring its GHG emissions back to 1990 levels by 2020, and to cut them by 25% by 2035.

Under the US EPA’s Clean Power Plan rules, and despite having amongst the lowest levels of carbon intensity in its power generation in the entire US, Washington will have to cut its emissions by 70% below 2005 levels by 2030 – more than any other state.

By Mike Szabo – mike@carbon-pulse.com

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