(The Center Square) – The Washington State Department of Ecology says it is “developing a report to the Legislature about policy options for how certain industrial facilities (emissions-intensive, trade-exposed industries or EITEs) could be regulated under Washington’s Cap-and-Invest Program from 2035 onward, because that is not laid out in statute.”
Under the Climate Commitment Act, the cap-and-trade program — as it’s also known — is designed to reduce greenhouse gas emissions by placing a price on pollution. It works by setting a cap on total emissions from major sources and allowing those sources to trade in allowances that permit them to emit a certain amount of pollution.
The program aims to drive down emissions while generating revenue to fund climate solutions and benefit communities disproportionately affected by pollution. It has generated $3.2 billion since its implementation in January 2023.
A recent E&E News article described Washington as considering a carbon fee on out-of-state products that do not charge for carbon emissions.
“That story had some inaccuracies, such as stating that we are considering ‘overhauling’ the carbon market and ‘revising’ current policy,” Caroline Halter, communications manager of DOE’s Climate Pollution Reduction Program, told The Center Square in an email. “It also didn’t do a good job of describing the process that’s happening and the stage it’s at, which is that we are gathering input for a Legislative report. EITE policy through 2034 has already been decided. Ultimately, the Legislature will decide the path forward.”
She provided some more background information on EITEs.
“EITEs are important local industries that are mostly manufacturing facilities. About 40 facilities in Washington qualify as EITEs as set out in the CCA (RCW 70A.65.110),” she said. “These facilities produce a variety of products, including paper, food, beverages, steel, aluminum, glass, cement, building materials, airplanes, semiconductors, fertilizer, and transportation fuels. They use high levels of energy and release large amounts of greenhouse gas emissions while also facing significant national or global competition for their products.”
Certain EITE industries are granted no-cost allowances to help them comply with the program’s regulations because the Legislature recognized that these industries faced unique challenges in reducing their greenhouse gas emissions in the program’s early years.
“Because of this, they receive most of the allowances they need to comply with the Cap-and-Invest Program through 2034,” Halter said. “This is meant to protect against ‘leakage,’ where a company might move out of state, and then it would appear that Washington’s emissions went down, but in reality, the emissions just relocated. So the goal is to keep these companies in Washington and help them reduce emissions.”
DOE is preparing its report on EITEs and their allowance allocation for the period of 2035 through 2050. The report is due to the Legislature in December.
“Our report must include a review of global best practices in ensuring against emissions leakage and economic harm to businesses in carbon pricing programs, and the carbon border adjustment mechanism is a potential alternative to the no-cost allocation policy. Both policies can be used to help mitigate leakage and maintain competitiveness,” Halter said.
“So again, this will ultimately be a Legislative decision, and we are going through a public process to develop a report that will inform their decision.”
The Center Square asked Todd Myers, vice president for research at the Washington Policy Center think tank, for his take on DOE’s explanation.
“I wouldn’t be surprised if Ecology proposed changes to the EITE rules for the Legislature to adopt,” he emailed The Center Square. “The ‘ultimately this will be a legislative decision’ is true as far as it goes, but Ecology is very aggressive about pushing policy changes it wants.
“There is a fair amount of whining on the progressive left about the fact that EITEs get a large number of free credits to prevent them from leaving. I would not be shocked if there are many in the Ecology building who agree with that position.”
