Chapter 173-446 WAC

Ecology is planning to conduct rulemaking under the “emergency rulemaking” provisions of RCW 34.05.350 to amend Chapter 173-446 WAC, Climate Commitment Act Program Rule. The purpose of the rulemaking is to clarify aspects of the Allowance Price Containment Reserve (APCR) auctions under the cap-and-invest program.

The APCR is a tool designed to assist in containing compliance costs for covered and opt-in entities (RCW 70A.65.150(2)). If, during a quarterly auction, the settlement price reaches a certain threshold (the APCR Tier I price, which is $51.90 for 2023), Ecology holds a separate APCR auction. Only covered and opt-in entities can participate in an APCR auction. Adding the APCR allowances into the market helps make sure that covered and opt-in entities can obtain enough allowances at a reasonable price to meet their compliance obligations. Unlike other allowances, the allowances sold in an APCR auction do not have a “vintage,” so they can be used for compliance in any year or any compliance period.

We are adopting two changes to the rules about the APCR to clarify that:

  • Holding limits apply to APCR allowances (WAC 173-446-150(2)(a)). This means that an entity cannot hold more than a certain number of allowances in its account at a time. The limit applies to all allowances an entity has in its compliance and holding accounts.
  • Any allowances purchased in an APCR auction must be deposited directly into an entity’s compliance account (WAC 173-446-370). This means that those APCR allowances cannot be sold or traded on the secondary market and can only be used to meet compliance obligations.

Emergency rulemaking

Emergency rulemaking is a modified rulemaking process that allows Ecology to immediately amend a rule if there is a statutory basis for doing so. In this case, we have identified that making the above changes to the APCR auction mechanism meets the statutory basis of being “necessary… for the general welfare” because the changes are needed in order to protect against manipulation of the allowance market, which could result in price distortions that would harm the public interest in the efficient operation of Washington’s carbon markets. 

An APCR auction can be triggered after any regular quarterly auction and these rule amendments are needed in advance of an APCR auction taking place. Ecology has tentatively scheduled an APCR auction for August 9, 2023, which would occur only if the regular auction scheduled for May 31, 2023, triggers the requirement to hold an APCR auction.

Once filed, this rule change will go into effect immediately. It will stay in effect for up to 120 days and may be renewed. Ecology intends to announce a permanent rulemaking process concerning these changes soon.


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