Washington State Enacts Two Market-Based Clean Energy Programs

Source: RL Martin

On January 1, 2023, two climate programs in Washington state, the Climate Commitment Act and the Clean Fuel Standard, went into effect after being signed into law by Governor Jay Inslee in May 2021. These two programs were developed over several months through close collaboration between the Washington State Department of Commerce and the Department of Ecology. “In order to achieve the greenhouse gas pollution reduction goals set by the state legislature, every sector of the economy is going to need to do everything it can,” said Assistant Director of the Washington Department of State Commerce, Michael Furze, in a joint media release.

The Climate Commitment Act establishes an economy-wide “cap-and-invest” program that limits greenhouse gas emissions from many sectors and financially incentivizes businesses to reduce emissions. Under the program, businesses will need to obtain allowances equal to their covered emissions, primarily by purchasing allowances at quarterly auctions hosted by the Department of Ecology. The revenue from the auctions will be reinvested across the state to support climate resiliency, clean transportation, and public health initiatives that prioritize environmental justice. The allowable emissions limit will decrease over time to align with the emissions reduction pathways set by the state legislature, which include reducing overall greenhouse gas emissions by 95 percent below 1990 levels by 2050. 

The Clean Fuel Standard requires transportation fuel suppliers to reduce the carbon intensity of both their production processes and end product by 20 percent below 2017 levels by 2034. The policy also relies on market-based mechanisms, where revenue-generating credits are assigned to suppliers like electric vehicle charging companies, that produce fuels that are low-carbon compared to conventional fuels. Suppliers that cannot meet the standard by adjusting their fuel production processes or by producing low-carbon fuels can purchase credits from low-carbon fuel providers.
To learn more about these programs, please visit the Department of Ecology webpages on the Climate Commitment Act and the Clean Fuel Standard.