ClearBlue Markets was thrilled to engage with attendees at our August 1st webinar on Washington's Carbon Cap-and-Invest Program and Clean Fuel Standard. It's important to us that you understand and feel confident when interacting with these new markets. Although we answered many participant questions during the webinar, we couldn't get to some. That's why we've compiled the most frequently asked questions received from participants both during and after the webinar.
For more information on these markets, you can also request to view the webinar recording here.
Carbon Cap-and-Invest Program
Q. How are emission reduction obligations for individual businesses determined?
A. Entities are not directly required to reduce emissions. Compliance obligations are based on the quantity of greenhouse gas (GHG) emissions in a given year. Regulated entities are required to remit one compliance instrument (Allowances or Offset Credits) per GHG emission. Reducing emissions would, in turn, reduce the compliance obligation under the program.
Q. When does compliance begin?
A. The first compliance period under the program began on January 1st, 2023, and ended on December 31st, 2026. The first compliance deadline is on November 1st, 2024 at which time entities will be required to comply with 30% of 2023 emissions.
Q. What vintage do Allowances need to be?
A. The vintage for Allowances is the first year of compliance for which they can be used. For example, for the first compliance deadline on November 1st, 2024, Allowances must be 2023 vintage to cover 30% of 2023 emissions.
Q. What is an APCR auction?
A. An APCR or "Reserve" auction is an Allowance Price Containment Reserve (APCR) auction that is triggered if the settlement price at quarterly auctions exceeds price levels established in regulation. The purpose is to provide an opportunity for regulated entities to acquire Allowances at pre-determined prices.
Q. How does an APCR auction work?
A. Only regulated entities can participate in an APCR auction (excluding general market participants). Bids can only be placed at one of the two Tier prices (USD 51.90 at Tier 1 or USD 66.68 at Tier 2). APCR Allowances are vintageless and are subject to the holding limit but are not subject to the purchasing limit (10% at auctions for compliance entities). APCR allowances are placed directly in compliance accounts (cannot be transferred or sold on the secondary market) and must be used for compliance.
Tier 1 allowances are sold first until all are sold, or all bids are filled. If any Tier 1 allowances remain, a random lottery system distributes them to Tier 2 bidders at the Tier 1 price. Once all Tier 1 allowances are sold, then Tier 2 allowances will be distributed to those bidders.
Clean Fuel Standard
Q. What entities are obligated under the Washington CFS?
A. Fuel producers and suppliers of regulated fuels, i.e., Gasoline, Diesel, Ethanol and blends, Biomass-based diesel and blends, as well as Fossil compressed natural gas (CNG).
Q. What Life Cycle Analysis (LCA) Model is used by Washington?
A. Washington uses the GREET model to calculate the carbon intensity of fuels across their entire lifecycle, similar to California and Oregon.
Q. Where can entities register for the CFS program?
A. Washington Fuels Reporting System (WFRS) to manage all data and processes related to CFS implementation, including fuel pathway certification, fuel transactions reporting and recordkeeping and credit generation and transfers.
Q. How much is the fee for registering for the CFS program?
A. Deficit generators will pay 95% of the program cost, while credit generators will pay 5% of the program cost.
Q. Are allowances from Cap-and-Invest fungible with CFS credits?
A. The two programs are operationally separate and cannot be used for compliance with the other program. However, compliance in one reduces the burden of compliance in the other.