Washington state has proposed adopting a cap-and-invest program to reduce greenhouse gas emissions and drive investment in clean energy. This program, referred to as ‘cap and invest’, would set a statewide limit or ‘cap’ on emissions that would decline over time. Major emitters would need to obtain allowances for each ton of emissions, with the allowances sold at auction or distributed for free. Revenues would fund clean energy and community investments. This article provides an overview of the key details and status of Washington’s cap and invest proposal, which remains under debate as stakeholders consider design options. With multiple mentions of the ‘cap and invest’ program and Washington state’s climate investment priorities, this article analyzes the current landscape and future outlook.
Washington’s economy-wide cap would cover 80% of emissions
Washington state’s cap-and-invest proposal would place an economy-wide limit on greenhouse gas emissions, covering about 80% of the state’s total emissions. This cross-sector emissions cap sets Washington apart from other state programs focused exclusively on the electricity sector. Major emitters from transportation, industry, commercial buildings, and more would need to surrender an emissions allowance for each ton of carbon dioxide equivalent emitted. This economy-wide scope creates challenges but enables broader transformation of Washington’s economy over time as the cap tightens.
Auction revenues would fund clean energy and communities
A key piece of Washington’s cap-and-invest proposal is the investment of cap-and-trade auction proceeds into local communities and clean energy. Investments would prioritize transition assistance for workers and investments in overburdened communities, including rural areas and communities of color. Investments would also fund transportation electrification, energy efficiency upgrades, renewable energy, forest health improvements, and more. Legislation directs where funds are allocated, ensuring investments meet communities’ needs.
Emissions would decline over time to meet targets
Washington’s cap on emissions would decline by 5% per year starting in 2030, resulting in 80% below 1990 levels by 2050. This trajectory aligns with state climate targets and Washington’s share of reductions needed to avoid severe global warming impacts. The ratcheting down of the emissions cap would drive rising carbon prices over time, incentivizing the private sector to invest in clean solutions while giving companies regulatory certainty. Achieving Washington’s targets would also position the state as a climate leader.
Program design choices carry tradeoffs
There are outstanding questions regarding program details like allowance allocation methods, cost containment mechanisms, and linkage with other programs that carry tradeoffs to balance. For example, free allocation of allowances reduces compliance costs but limits auction proceeds for investment. Strong containment policies manage costs but can dampen the market signal. Washington continues to explore design options, including via pilot testing, to optimize climate impact and economic outcomes.
Washington state’s economy-wide cap-and-invest proposal sets an ambitious emissions reduction trajectory through 2050. Declining caps drive climate investment while managing costs and prioritizing support for workers and overburdened communities. While policy design details remain under discussion, the cap and invest framework offers a meaningful path to achieving Washington’s climate goals.