Skip to content

The Impact – CCA Air Pollution Strategy, Market Linkage, Questions for Electric Utilities

Mike McClanahan profile by Mike McClanahan

Part two of our series on Washington’s new carbon reduction law covers plans to target air pollution in specific communities and outlines some of the unresolved questions facing regulators, utilities, and taxpayers.  Interviews: Prof. Harrison Fell, NC State University, Center for Environmental and Resource Economic Policy; Michael Mann, Executive Director of Clean & Prosperous Washington; and Todd Myers, Environmental Director for the Washington Policy Center. 

In 2020 state lawmakers set the following greenhouse gas emissions reduction targets: 45% below 1990 emissions by 2030, 70% below 1990 levels by 2040, and 95% below 1990 levels by 2050.

The 2021 Climate Commitment Act  set an upper limit on annual greenhouse gas emissions from on-road transportation fuel, large industrial polluters, and utilities. The emissions cap is lowered each year. The steepest cuts are required in the first several years of the program.   

The carbon pricing program generates revenue from the sale of pollution permits called allowances which are sold at auction. 

The program is administered by the Washington State Department of Ecology and has raised close to one and a half billion dollars from the first four auctions of 2023. Of that, about 184 million will go towards rebate programs for natural gas customers who meet certain income criteria, according to the agency.

State lawmakers plan to direct hundreds of millions of CCA dollars into clean energy siting, active transportation projects, and grant programs for things like heat pump rebates. There’s also a statutory minimum percentage of all CCA revenue that must be directed to Tribes and a percentage that must be directed to communities which have been disproportionately impacted by pollution.

The Department of Ecology hasn’t finalized the rules for reporting how Climate Commitment Act       funds are spent, but  some related programs are getting underway.

The 2021 law requires Ecology to make sure the new carbon cap and trade program improves air quality in overburdened communities, meaning areas with more than their fair share of air pollution. 

The agency has identified 16 communities that fit the description and represent more than 1.2 million residents. Ecology has started deploying new air quality sensors to improve monitoring in those areas and is planning a series of open house meetings this fall to discuss expanding the air monitoring network. 

Professor Harrison Fell with the Department of Agriculture and Resource Economics at NC State University said Washington’s law stands out for the short timeline for steep cuts in emissions. 

“That certainly is one of, if not the most aggressive policy out there. Now, of course, we have federal policies going on at the same time. But I would say what differentiates Washington from, say, California or the Northeast region is, is that steepness of the path over time in which they’re trying to decarbonize and that that is pretty unique and pretty aggressive,” said Fell.

“If you look at a lot of the net zero studies that are out there, a clear theme that comes out of these studies is that the lowest cost path is to electrify transportation, electrify home heating and then clean up the electricity sector,” said Fell. “The problem sometimes with a cap and trade program with respect to those electrification goals, is that part of the process of pricing carbon should lead to a higher electricity price, at least in the short run. As we start to price the carbon embedded in our electricity system, those higher electricity prices sometimes discourage electrification of different sectors, transportation, and home heating. And so some of these subsidies should help work together with the carbon pricing schemes.”

The emissions cutting framework created by the Climate Commitment Act was described in the bill as a cap-and-invest system because the law puts a price on carbon dioxide equivalent emissions, requires covered entities to purchase allowances to cover each metric ton of CO2e they emit, and directs the money raised towards programs to decarbonize the transportation and building sectors. 

Emissions from electric utilities were targeted separately in a 2019 law, the Washington Clean Energy Transformation Act. 

“The reason we supported the Climate Commitment Act is because we believe in a market mechanism, a market mechanism to address environmental concerns. We’ve seen it work in the past, and we believe that it will work in the future,” said Michael Mann, Executive Director of Clean & Prosperous Washington.

“We have a new generation of all-electric vehicles coming to the market. And we have an incentive program and it doesn’t provide any incentives for those vehicles. So I think that’s something we really need to fix for our rural residents,” said Mann.  “We know that the transportation sector accounts for 40% of our carbon emissions. So let’s attack that first.”

Cap-and-trade systems have been credited with cutting pollution before, such as the drop in sulfur dioxide emissions linked to acid rain.

“But you have to be careful. And what we have seen in a lot of cases is that we see these wild price swings because when politics sets the targets and not markets, that’s when you could get real problems,” said Todd Myers, Environmental Director for the Washington Policy Center. 

“The most effective way to reduce CO2 emissions is through innovation. Washington’s law is sort of perverse in the fact that it caps innovation, making it harder to find those very effective and very cost effective ways to reduce CO2 emissions. But it sends more money to the state, increasing the costs of gasoline and other things like that,” said Myers. “There are ways that we can meet our targets, and there are ways that we can reduce CO2 emissions effectively and inexpensively, but those are not the ones that we’re choosing.”

This week the Department of Ecology released a preliminary cost-benefit analysis of linking   Washington’s carbon market with the joint California-Quebec carbon market.

“Regarding linkage, the single biggest issue is trying to harmonize the goals,” said Fell. “If you have vastly different emission reduction targets, well then you are going to be, to some degree, diluting the environmental integrity of the program. This all has to be balanced against potential cost reductions. As you know, that should reduce costs simply because more participants means more ability to find low cost abatement opportunities out there.”