ANALYSIS AND RECOMMENDATIONS TO INFORM WASHINGTON STATE’S OIL REFINERIES ON CAP-AND-INVEST

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2023-12
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In order to reach their greenhouse gas emission reduction goals, the State of Washington passed the Climate Commitment Act, which took effect in 2023. The Cap-and-Invest program rising from the Climate Commitment Act has placed increased regulatory requirements and financial burden on the oil refining sector in Washington State. The high costs and cost uncertainties refiners face from the Climate Commitment Act, and other climate related laws, as well as impacts from the geographical nearness of California’s carbon market, have led to an uncertain future for the state’s refineries. The following analysis outlines the challenges refineries are now confronted with, including the cost uncertainties associated with allowance auctions, the future of cost-free allowances, the impacts of carbon market fragmentation, and the additional financial burden of compliance with the Clean Fuel Standard. It then offers policy and business solutions such as linking Washington’s program with California and Quebec’s carbon market, and encourages refiners to make decarbonization a priority. The offered recommendations could allow oil refineries to remain financially viable long enough to support the energy transition, and be phased out slowly rather than shutting down prematurely, thereby avoiding carbon leakage.
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