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Washington State ‘Cap-and-Invest’ Law Aims for Fast Carbon Cuts without Higher Energy Costs

Washington State is adopting a new “cap-and-invest” law aimed at driving rapid decarbonization without increasing energy costs for ratepayers.

The new Climate Commitment Act “essentially develops an overall limit for greenhouse gas emissions from major sources in the state that declines yearly in alignment with Washington’s statutory carbon reduction targets,” Utility Dive reports, citing Pam Kiely, associate vice president, U.S. climate, at the U.S. Environmental Defense Fund. “That limit is represented by ‘emission allowances’: for regulated sources to emit a ton of carbon dioxide equivalent, an entity will have to hold one emission allowance. Some allowances are allocated to specific entities, while others are auctioned off.”

The measure is the United States’ second economy-wide carbon cap system, after the cap-and-trade market set up several years ago by California and Quebec (and, at the time, Ontario).

The measure “enacts arguably the strongest environmental justice policy in the nation, obligating us to improve air quality for overburdened communities that have to live daily with air pollution from emissions,” said Governor Jay Inslee, whose next move now will be to sign the bill into law.

“What the cap-and-invest program does is help unlock even more ambition, even more reductions from the power sector by creating an incentive for further decarbonization,” Kiely said. She added the biggest impact of the bill will be to drive electrification across buildings and personal transport “in a way that will allow the good work that companies like Puget Sound Energy and Seattle City Light have already done to decarbonize the electric sector, to put that to work to help decarbonize other sectors of the economy.”

State law already requires utilities to phase out coal-fired generation by 2025 and deliver 100% renewable or zero-carbon power by 2045. Under the new legislation, “consumer-owned and investor-owned utilities in the state would be given allowances so as to prevent ratepayer costs from increasing,” Utility Dive writes. “The bill is structured so that it will not create any net costs for customers.”

But “it will provide a direct incentive to still become cleaner and reduce emissions for the utilities—so it’s a win-win that way,” explained Vlad Gutman-Britten, Washington director at Climate Solutions.