California will examine whether Washington’s carbon proposal is compatible with its existing cap-and-trade program, and if a proposed one-way linkage could be supported, officials have told ICIS.
Washington officials unveiled a new carbon proposal on Wednesday that would require industrial, fuel and power sector sources that emit more than 100m tonnes of CO2 equivalent (tCO2e) to cover carbon emissions. The program would start in 2017.
The proposal would allow credits from multi-sector programs to be used for compliance. California carbon allowances can be used, but Regional Greenhouse Gas Initiative (RGGI) allowances cannot be.
California officials said they would analyze the plan to make sure they fully understand the proposal.
“We support linkages to compatible programs,” an Air Resources Board official said.
“We need to examine the Washington proposal to assess whether this is a type of linkage we can support.”
The official added that California would have a public process, and will discuss the proposal with Quebec and Ontario. The latter is looking to join the California-Quebec carbon market in 2018.
It is unclear whether Washington’s proposal would require a full linkage between programs. California has very specific rules on how other programs or states can link to their existing programs, but past linkages have been limited to fully aligned programs.
Washington’s proposal would allow credits to be used from California, but California is not likely to allow emission reduction credits from Washington to be used in its own system. That would mean the two programs would not be completely compatible.
Washington’s regulations require covered entities to retire allowances. This retirement must be documented under the original compliance program.
Washington compliance entities would face some limitations on the number and vintage of the allowances they could use for compliance under the proposals. Affected entities could use California’s carbon allowances for 100% of their obligations from 2017-2022, but this amount would fall to 50% from 2023-2025. It would see further reductions in subsequent years.
Washington entities would also be limited by the vintage years. In a three-year compliance period, entities could use current vintage allowances for up to 35% of the overall limit, and 40% for the two final years of the period.
Those limitations could reduce the impact of the Washington program on California’s cap-and-trade program.
Washington will accept comments on the proposal until 22 July.