No-cost allowance allocation
Electric utilities, natural gas utilities, and emissions-intensive, trade exposed (EITE) industries receive allowances at no-cost based on a baseline of their total emissions. Each of these groups receive differing amounts of no-cost allowances and must use them to mitigate their direct and indirect compliance costs, according to Ecology rules.
Electric utilities
Because they’re subject to the Clean Energy Transformation Act (CETA), consumer- and investor-owned electric utilities that meet the CCA’s emissions threshold are eligible to receive no-cost allowances to cover 100% of their emission baseline.
Electric utilities may not sell their no-cost allowances to other entities that are subject to the CCA. Electric utilities must use them for compliance, save them for future use, transfer them to electrical generation facilities, or sell them at auction and use the proceeds to benefit their customers.
Natural gas utilities
No-cost allocation to natural gas utilities is designed to minimize rate increases for customers-- receiving no-cost allowances reduces the cost of compliance, and those savings can be passed onto customers. Utilities received 93% of their emissions baseline in 2023, and the percentage decreases by 7% annually through 2030.
Like electric utilities, natural gas utilities may not sell their no-cost allowances to other entities that are subject to the CCA. Each year, natural gas utilities must sell an increasing percentage of their no-cost allowances at auction. They must use the proceeds to mitigate rate increases for their customers through bill credits, completely offsetting rate increases for low-income customers. The percentage of no-cost allowances required to be sold by natural gas utilities started at 65% in 2023 and increases by 5% each year until reaching 100% in 2030 and thereafter.
Emissions-intensive, trade-exposed industries (EITEs)
EITE facilities represent important industries in Washington’s economy and face significant national or global competition for their products. Because of this, an increase in costs could cause them to limit their operations, close, or relocate to a state without strong climate regulations. By providing EITEs with no-cost allowances, the CCA aims to keep those facilities in Washington, along with the jobs they provide, and allow them to decarbonize over a longer period of time than other entities.
EITEs will receive allowances equal to 100% of their emissions at no-cost during the first compliance period (2023-2026). EITEs will receive allowances equal to 97% of emissions for the second compliance period (2027-2030), and 94% of emissions in the third compliance period (2031-2034).