Climate commitment act

AN ACT Relating to amending the climate commitment act by 1
adjusting auction price containment mechanisms and ceiling prices, 2
addressing the department of ecology's authority to amend rules to 3
facilitate linkage with other jurisdictions, and providing for market 4
dynamic analysis; amending RCW 70A.65.150, 70A.65.070, and 5
70A.65.160; and adding a new section to chapter 70A.65 RCW.6
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:7
NEW SECTION. Sec. 1. A new section is added to chapter 70A.65 8
RCW to read as follows: 9
(1) The department shall provide analysis and forecasts of the 10
compliance instrument markets created by this chapter, including:11
(a) The prices in primary and secondary compliance instrument 12
markets; 13
(b) Trends in compliance instrument supply and demand and prices;14
(c) Activities in the markets, categorized by type of market 15
participant; and 16
(d) The share of the allowance budget consumed by various 17
categories of registered entities. 18
(2) The department must consider the analysis in subsection (1) 19
of this section in adopting rules and otherwise implementing the 20
requirements of this chapter. 21
H-1243.3
HOUSE BILL 1975
State of Washington 69th Legislature 2025 Regular Session
By Representatives Fitzgibbon, Dye, and Parshley
Read first time 02/14/25. Referred to Committee on Environment &
Energy.
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Sec. 2. RCW 70A.65.150 and 2022 c 181 s 6 are each amended to 1
read as follows: 2
(1) To help minimize allowance price volatility in the auction, 3
the department shall adopt by rule an auction floor price and a 4
schedule for the floor price to increase by a predetermined amount 5
every year. The department may not sell allowances at bids lower than 6
the auction floor price. The department's rules must specify holding 7
limits that determine the maximum number of allowances that may be 8
held for use or trade by a registered entity at any one time. The 9
department shall also establish a reserve auction floor price to 10
limit extraordinary prices and to determine when to offer allowances 11
through the allowance price containment reserve auctions authorized 12
under this section. 13
(2) For calendar years 2023 through 2026, the department must 14
place no less than two percent of the total number of allowances 15
available from the allowance budgets for those years in an allowance 16
price containment reserve. The reserve must be designed as a 17
mechanism to assist in containing compliance costs for covered and 18
opt-in entities in the event of unanticipated high costs for 19
compliance instruments. 20
(3)(a) The department shall adopt rules for holding auctions of 21
allowances from the price containment reserve when the settlement 22
prices in the preceding auction exceed the adopted reserve auction 23
floor price. The auction must be separate from auctions of other 24
allowances. 25
(b) Allowances must also be distributed from the allowance price 26
containment reserve by auction when new covered and opt-in entities 27
enter the program and allowances in the emissions containment reserve 28
under RCW 70A.65.140(5) are exhausted. 29
(4) Only covered and opt-in entities may participate in the 30
auction of allowances from the allowance price containment reserve.31
(5) The process for reserve auctions is the same as the process 32
provided in RCW 70A.65.100 and the proceeds from reserve auctions 33
must be treated the same. 34
(6) The department shall by rule: 35
(a) Set the reserve auction floor price in advance of the reserve 36
auction. The department may choose to establish multiple price tiers 37
for the allowances from the reserve; 38
(b) Establish the requirements and schedule for the allowance 39
price containment reserve auctions; and 40
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(c) ((Establish the amount of allowances to be placed in the 1
allowance price containment reserve after the first compliance period 2
ending in 2026)) Place no less than two percent and no more than five 3
percent of the total number of allowances from the allowance budgets 4
from 2027 to 2040 in the allowance price containment reserve.5
(7) In order to contain allowance prices in advance of the 6
timeline for linkage with other jurisdictions, the department must 7
amend the schedule of allowance allocations adopted by rule under 8
subsection (6) of this section to place in the allowance price 9
containment reserve and to make available, in the second compliance 10
period of the program, all allowances scheduled to be placed in the 11
allowance price containment reserve through 2040. 12
Sec. 3. RCW 70A.65.070 and 2024 c 352 s 3 are each amended to 13
read as follows: 14
(1)(a)(i) The department shall commence the program by January 1, 15
2023, by determining an emissions baseline establishing the 16
proportionate share that the total greenhouse gas emissions of 17
covered entities for the first compliance period bears to the total 18
anthropogenic greenhouse gas emissions in the state during 2015 19
through 2019, based on data reported to the department under RCW 20
70A.15.2200 or provided as required by this chapter, as well as other 21
relevant data. By October 1, 2022, the department shall adopt annual 22
allowance budgets for the first compliance period of the program, 23
calendar years 2023 through 2026, to be distributed from January 1, 24
2023, through December 31, 2026. 25
(ii) If the department enters into a linkage agreement, and the 26
linked jurisdictions do not amend their rules to synchronize with 27
Washington's compliance periods, the department must amend its rules 28
to synchronize Washington's compliance periods with those of the 29
linked jurisdiction or jurisdictions. The department may not by rule 30
amend the length of the first compliance period to end on a date 31
other than December 31, 2026. 32
(b) By October 1, 2026, the department shall add to its emissions 33
baseline by incorporating the proportionate share that the total 34
greenhouse gas emissions of new covered entities in the second 35
compliance period bear to the total anthropogenic greenhouse gas 36
emissions in the state during 2015 through 2019. In determining the 37
addition to the baseline, the department may exclude a year from the 38
determination if the department identifies that year to have been an 39
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outlier due to a state of emergency. The department shall adopt 1
annual allowance budgets for the second compliance period of the 2
program that will be distributed during the second compliance period.3
(c) By October 1, 2028, the department shall adopt by rule the 4
annual allowance budgets for the end of the second compliance period 5
through 2040. 6
(2) The annual allowance budgets must be set to achieve the share 7
of reductions by covered entities necessary to achieve the 2030, 8
2040, and 2050 statewide emissions limits established in RCW 9
70A.45.020 by December 31st of each of those years , based on data 10
reported to the department under chapter 70A.15 RCW or provided as 11
required by this chapter. Annual allowance budgets must be set such 12
that the use of offsets as compliance instruments, consistent with 13
RCW 70A.65.170, does not prevent the achievement of the emissions 14
limits established in RCW 70A.45.020. In so setting annual allowance 15
budgets, the department must reduce the annual allowance budget 16
relative to the limits in an amount equivalent to offset use, or in 17
accordance with a similar methodology adopted by the department. The 18
department must adopt annual allowance budgets for the program on a 19
calendar year basis that provide for progressively equivalent 20
reductions by December 31st of each year, year over year. An 21
allowance distributed under the program, either directly by the 22
department under RCW 70A.65.110 through 70A.65.130 or through 23
auctions under RCW 70A.65.100, does not expire and may be held or 24
banked consistent with RCW 70A.65.100(6) and 70A.65.150(1).25
(3) The department must complete evaluations by December 31, 26
2027, and December 31st of the year following the conclusion of the 27
third compliance period, of the performance of the program, including 28
its performance in reducing greenhouse gases. If the evaluation shows 29
that adjustments to the annual allowance budgets are necessary for 30
covered entities to achieve their proportionate share of the 2030 and 31
2040 emission reduction limits identified in RCW 70A.45.020 by 32
December 31, 2030, and December 31, 2040 , as applicable, the 33
department shall adjust the annual allowance budgets accordingly. The 34
department must complete additional evaluations of the performance of 35
the program by December 31st of the year following the conclusion of 36
the fifth and sixth compliance periods, and make any necessary 37
adjustments in the annual allowance budgets to ensure that covered 38
entities achieve their proportionate share of the 2050 emission 39
reduction limit identified in RCW 70A.45.020. Nothing in this 40
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subsection precludes the department from making additional 1
adjustments to annual allowance budgets as necessary to ensure 2
successful achievement of the proportionate emission reduction limits 3
by covered entities. The department shall determine and make public 4
the circumstances, metrics, and processes that would initiate the 5
public consideration of additional allowance budget adjustments to 6
ensure successful achievement of the proportionate emission reduction 7
limits. 8
(4) Data reported to the department under RCW 70A.15.2200 or 9
provided as required by this chapter for 2015 through 2019 is deemed 10
sufficient for the purpose of adopting annual allowance budgets and 11
serving as the baseline by which covered entities demonstrate 12
compliance under the first compliance period of the program. Data 13
reported to the department under RCW 70A.15.2200 or provided as 14
required by this chapter for 2023 through 2025 is deemed sufficient 15
for adopting annual allowance budgets and serving as the baseline by 16
which covered entities demonstrate compliance under the second 17
compliance period of the program. 18
(5) The legislature intends to promote a growing and sustainable 19
economy and to avoid leakage of emissions from manufacturing to other 20
jurisdictions. Therefore, the legislature finds that implementation 21
of this section is contingent upon the enactment of RCW 70A.65.110.22
Sec. 4. RCW 70A.65.160 and 2022 c 181 s 7 are each amended to 23
read as follows: 24
(1)(a) The ((department shall establish a )) price ceiling for 25
calendar year 2026 shall be $80 to provide cost protection for 26
covered entities obligated to comply with this chapter. ((The ceiling 27
must be set at a level sufficient to facilitate investments to 28
achieve further emission reductions beyond those enabled by the price 29
ceiling, with the intent that investments accelerate the state's 30
achievement of greenhouse gas limits established under RCW 31
70A.45.020.)) The price ceiling must increase annually in proportion 32
to the reserve auction floor price established in RCW 70A.65.150(1).33
(b) If the department enters into a linkage agreement, and the 34
linked jurisdictions do not amend their rules to synchronize with 35
Washington's price ceiling established in (a) of this subsection, the 36
department may amend its rules to synchronize Washington's price 37
ceiling with those of the linked jurisdictions. The price ceiling may 38
not be set at a level below the ceiling specified in (a) of this 39
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subsection unless the director of the department determines that an 1
amendment to the price ceiling is necessary in order to enter into a 2
linkage agreement. 3
(2) In the event that no allowances remain in the allowance price 4
containment reserve, the department must issue the number of price 5
ceiling units for sale sufficient to provide cost protection for 6
covered entities as established under subsection (1) of this section. 7
Purchases must be limited to entities that do not have sufficient 8
eligible compliance instruments in their holding and compliance 9
accounts for the current compliance period and these entities may 10
only purchase what they need to meet their compliance obligation for 11
the current compliance period. Price ceiling units may not be sold or 12
transferred and must be retired for compliance in the current 13
compliance period. A price ceiling unit is not a property right.14
(3) The price ceiling unit emission reduction investment account 15
is created in the state treasury. All receipts from the sale of price 16
ceiling units must be deposited in the account. Moneys in the account 17
may only be spent after appropriation. Moneys in the account must be 18
expended to achieve emissions reductions on at least a metric ton for 19
metric ton basis that are real, permanent, quantifiable, verifiable, 20
enforceable by the state, and in addition to any greenhouse gas 21
emission reduction otherwise required by law or regulation and any 22
other greenhouse gas emission reduction that otherwise would occur.23
NEW SECTION. Sec. 5. If any provision of this act or its 24
application to any person or circumstance is held invalid, the 25
remainder of the act or the application of the provision to other 26
persons or circumstances is not affected.27
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