Cap-and-Invest offsets

For a project to offset greenhouse gas emissions, it needs to do one or more of the following things:

• Reduce the emissions of a process, such as improving the energy efficiency of a manufacturing operation.
• Avoid emissions altogether. For example, by switching from using natural gas to a zero-emissions energy source.
• Remove existing greenhouse gases from the atmosphere, such as through capturing methane produced by livestock to use as a renewable energy source.

The CCA requires that offset projects must result in greenhouse gas reductions that are real, permanent, quantifiable, verifiable, and enforceable. And the reductions must be in addition to those already required by law. All offsets used for compliance in Washington’s Cap-and-Invest Program must demonstrate direct environmental benefits to the state. 

In addition, offset projects registered in the Cap-and-Invest Program must be verified by an independent third party before credits can be issued.

You can read more about the requirements for offset projects under the CCA in the Cap-and-Invest Program rule.

To launch our program using the best available offset resources, we adopted four offset "protocols" from California's program. You can think of a protocol as a guidebook for a project developer to show that their project meets regulatory standards.

These four protocols were developed by the California Air Resources Board over several years, with peer review by an extensive team of forestry and carbon experts, and have been reviewed and refined over more than a decade.

The four protocols adopted from the California program are:

1. U.S. Forestry
   • Reforestation, avoided conversion (conserving a forest under threat), and improved forest management projects (geared toward working forests).
2. Urban Forestry
   • Planting and maintaining trees in urban areas.
3. Livestock Projects
   • Capturing methane on dairy or swine farms by installing specialized "digester" tanks.
4. Ozone Depleting Substances
   • Extracting and destroying certain greenhouse gases that are no longer being produced because of how damaging they are to the environment, such as hydroflurocarbons, which are typically found in commercial and industrial air-conditioning units and refrigerators.

We're considering developing new protocols or revising these existing protocols. Any new or revised protocols would be adopted through a rulemaking process. To learn about the rulemaking process and opportunities for public input, visit the offsets rulemaking webpage.

Generally speaking, our offset program mirrors the California Air Resources Board’s program, especially for how we register, verify, and monitor offset projects. However, there are some important differences, including:

• Our program requires that all offset projects provide direct environmental benefits to the state, while California only requires that 50% of the offset credits used to cover business emissions come from projects that provide direct environmental benefits.
• Offset credits in Washington are "under the cap," meaning we reduce the number of allowances we issue by the number of offset credits used, keeping us on track to meet our statutory commitment to reduce emissions by 95% by 2050.
• We have the ability to reduce the number of offset credits that can be used by a business if we determine that it contributes substantially to air pollution in an overburdened community.

An offset credit is a compliance instrument we issue to entities in return for their investment in an offset project. Once the credits are issued, they can be applied to a business's compliance obligation, saved for future years, or sold to other market participants. 

Unlike allowances, offset credits are not bought nor sold at quarterly auctions. Instead, credits are bought and sold directly between program participants.

You must have an approved account in the Compliance Instrument Tracking System Service to purchase offset credits, and, once your account is approved, you can buy them directly from project developers or from other market participants, just like stocks and bonds.

Since credits are bought and sold directly between program participants, we’re unable to provide price estimates. However, we do know that offset credits are a potentially lower-cost way to comply with the program compared to allowances. 

In the first four-year compliance period, January 2023 through December 2026, emitters can generally cover 5% of their emissions with offset credits and an additional 3% with credits from projects on federally recognized Tribal lands.

These percentages are reduced to 4% and 2%, respectively, during the six remaining compliance periods during 2027 to 2049.

Details about these limits can be found in Section 600 of the Cap-and-Invest Program rule.

At this time, credits can't be transferred. Only credits issued in Washington can be used to cover Washington emissions from Washington businesses.

If Washington's program were to link with the shared market in California and Québec, then we would expect to have more opportunities for transferability of credits between programs. However, the law directs us to undergo a robust, criteria-based public process to determine whether linkage would be beneficial. This process is currently underway, and you can learn more about linking and what the law directs us to consider on our Linkage webpage.

Washington's offset market is distinct from California's Air Resources Board's (CARB) offset market, and offsets issued in Washington's market are unique and non-transferable to CARB's market. 

As such, verifications completed for the development of an ozone depleting substances project in CARB's program don't count toward the maximum six out of nine project verifications completed by the same verification body or verification team member in Washington's market. 

WAC 173-446-535(2) states that for ozone depleting substances projects:

• Neither a verification body nor an offset verification team member may conduct offset verification services for more than any six out of nine consecutive offset projects developed by the following:
  • Any given offset project operator
  • Any authorized project designee on behalf of such an offset project operator
  • Any technical consultant(s) used by the offset project operator or its authorized project designee(s).

This guidance applies only to the treatment of offset project verifications in Washington's Cap-and-Invest Program and doesn't impact treatment of offset project verifications in California's Cap-and-Trade program.