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As part of Ecology’s work to pursue linking carbon markets with California and Québec, during the 2024 Legislative Session, we requested legislation to modify the Climate Commitment Act (CCA) in ways that facilitate linkage. The legislation, Senate Bill 6058, takes effect January 1, 2025.
In order to provide clarity on what this means for market participants, we are sending this market notice to explain how and when the provisions included in Senate Bill 6058 will be implemented.
Provisions that go into effect on Jan. 1, 2025
Some provisions in the bill amend statutory sections that require no further action by Ecology to directly affect the program. Ecology will implement the following provisions starting January 1:
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Biofuels: Change in the definition of “biomass-derived fuels” to include fuels that have at least 30% lower greenhouse gas emissions than the fossil fuels they are capable of replacing. The current definition applies to fuels with at least 40% lower emissions. RCW 70A.65.010(12)
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Allowance purchase limit: The purchase limit for a covered entity or an opt-in entity will increase from 10% to 25% of the allowances offered during a single auction. RCW 70A.65.100(6)(a)
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Emissions-intensive, trade-exposed industries (EITEs): The reduction schedule that is applied to the allocation of no-cost allowances to EITEs will be based on four-year periods that are specified in the statute, instead of compliance periods. RCW 70A.65.110(3) and (4)
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Linkage provisions:
- Ecology will be required to post publicly and provide to the Legislature quarterly status updates on any potential linkage agreement. RCW 70A.65.210(4)
- Any linkage agreement Ecology enters into must include the right to withdraw from the agreement. RCW 70A.65.060(3)
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Unspecified electricity imports threshold:
- Starting in emissions year 2025, first jurisdictional deliverers with total annual reported emissions associated with unspecified electricity imports exceeding zero metric tons of carbon dioxide equivalent (MT CO2E) would be covered entities under the Cap-and-Invest Program. The current threshold is 25,000 MT CO2E. RCW 70A.65.080(c)(i)(B)
- Coverage would be triggered by emissions year 2025 reports submitted in 2026 and would impact compliance obligations beginning in Nov. 2026.
- This lower threshold would not apply to emissions associated with unspecified electricity purchased from a federal power marketing association. RCW 70A.65.080(c)(i)(C)
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Participation by a federal power marketing administration (PMA):
- Clarification that a PMA may voluntarily elect to participate in the Cap-and-Invest Program. RCW 70A.65.320
- A PMA may choose to assume the compliance obligation for all electricity it markets in the state, or for only the electricity it markets in the state through a centralized electricity market. RCW 70A.65.320(2)
Provisions that would have effect after rulemaking
Other provisions in the bill depend upon Ecology implementing them through rulemaking. Last spring, we announced a rulemaking to implement Senate Bill 6058 and make other changes to Chapter 173-446 WAC and Chapter 173-441 WAC necessary to facilitate linkage. Visit the linkage rulemaking webpage to learn more about the rule content, process, and timeline.
The following provisions would have effect after new rules are adopted:
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Biofuels: Ecology may adopt a different standard by rule to align with a linked jurisdiction. RCW 70A.65.010(12)
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Compliance periods: Ecology may be required to revise the definition of “compliance period” to align with a linked jurisdiction. The length of the first compliance period will remain the same. RCW 70A.65.010(20) and 65.070(1)(a)(ii)
- Dates and timelines for the following would depend on compliance period lengths:
- EITE allocation schedules are not affected by this potential revision to compliance periods (see above).
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Electricity provisions:
- Ecology may revise the definition of “electricity importer,” including for:
- Ecology will implement the amended definition of “imported electricity,” including changes to netting, as well as determination of electricity wheeled through the state and electricity separately accounted for. RCW 70A.65.010(43)(d)
- Ecology will adopt opt-in registration requirements for federal power marketing administrations. RCW 70A.65.320(5)
- Ecology will adopt new reporting requirements for electric power entities, including:
- Revised reporting threshold to require all entities with unspecified electricity imports to be reporting entities. RCW 70A.15.2200(5)(a)
- Revised reporting requirements to support identification of “electricity wheeled through the state.” RCW 70A.15.2200(5)(a)
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Reporting methodologies: Ecology is no longer required to update its greenhouse gas reporting methodologies when there are changes to federal greenhouse gas emissions reporting requirements. We plan to retain our existing greenhouse gas reporting methodologies to maintain consistency over time. RCW 70A.15.2200(5)(b)(iii)
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Offsets: Ecology will implement changes to offsets, including:
- Increasing the percentage of a covered entity’s compliance obligation that can come from offset projects located on federally recognized Tribal land to a maximum of 8% for compliance obligations due in the first compliance period (including the quadrennial obligation) and a maximum of 6% in the second compliance period. RCW 70A.65.170(3)
- Taking into consideration forest practice rules where a project is located, or applicable best management practices. RCW 70A.65.170(4)(b)
- This provision will be addressed through a separate rulemaking on offset protocols.
Provisions that go into effect after Washington links
Some provisions in the bill would only go into effect when Washington links. We will only implement these provisions if Ecology joins a linkage agreement.
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Vintage year allowance holding limits for general market participants: Until Washington links with another jurisdiction, general market participants (GMPs) cannot own more than 10% of the total allowances to be issued in a calendar year (“vintage-year”). After linkage, there will no longer be a vintage-year holding limit for GMPs. RCW 70A.65.100(6)(c)
- When Washington links, the holding limit calculation listed in WAC 173-446-150(2)(a) and (b) for registered entities will be based on the cumulative annual allowance budget for all linked jurisdictions. This would have the effect of increasing the number of allowances entities can hold.
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Enforcement and penalties: Ecology will only have the ability to reduce monetary penalties or the number of penalty allowances required to be submitted for violations under RCW 70A.65.200(2) and (3) throughout the first compliance period or until Ecology enters into a linkage agreement, whichever is sooner. RCW 70A.65.200(7)
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