In this Emerging Issues Analysis, Meline MacCurdy of Marten Law Group discusses legislation proposed in Washington State that would enable the state to participate, beginning in 2012, in a regional cap & trade system for reducing GHG emissions. There are no details, however, for how the system would work, and by the time there are, a federal program may (or may not) be in place, and may (or may not) preempt some or all of the state provisions.

“Washington State Governor Christine Gregoire has proposed legislation that would enable the state to participate, beginning in 2012, in a regional cap-and-trade system for reducing greenhouse gas (GHG) emissions,” Ms. MacCurdy writes. “But the details of how the system would work -- including contentious issues of whether emission credits are auctioned or freely allocated and the use of offsets -- are left to an as-yet unnamed panel to decide. By the time these hard decisions are made, a federal program may -- or may not -- be in place, and may -- or may not -- preempt some or all of the state provisions. The regulated community will have to follow both processes, because it remains anything but clear which program (or combination of programs) Washington entities will be required to comply with.

“The Governors cap-and-trade bill directs the Washington Department of Ecology (Ecology) to establish annual GHG caps beginning in 2012. Overall emissions allowed from regulated entities would be reduced every three years, toward the goal of returning to 1990 levels by 2020.

“Starting in 2012, the bill would cap emissions from electric utilities and major industrial facilities -- such as cement, pulp and paper, and aluminum plants -- that annually emit more than 25,000 metric tons of GHGs. The bill also would allow Ecology to expand the program to include smaller industrial emitters in 2015. Motor vehicles and residential and commercial buildings would be covered under the system indirectly, beginning in 2015, through regulation of the potential emissions from fuels. The bill would direct Ecology to decide who among fuel refiners, importers, distributors, or sellers would be responsible for obtaining emission allowances based on the potential emissions from the fuels they sell. This would avoid requiring the general public to obtain allowances for their cars or home heating oil, but the cost of the allowances still would be passed to consumers through higher fuel prices.

“While designed to begin in 2012, Washington’s cap-and-trade program would not take effect unless and until it is linked with other state or regional programs,” she writes.”

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