WAC 173-446-600

(1) Additional required disclosures. Unless otherwise required by specific provisions of this regulation, all parties participating in the program must provide to ecology within 14 calendar days any additional information requested by ecology concerning their participation in the program.

(2) Compliance obligations. A compliance obligation is the requirement to surrender the number of compliance instruments or price ceiling units equivalent to a covered or opt-in entity's covered emissions during a compliance period.

(3) Emissions obligations. Ecology may divide the compliance obligation for a covered entity or opt-in entity into multiple different emissions obligations. This subsection describes the different kinds of emissions obligations that can make up compliance obligations, including their respective due dates and amounts.

(a) Annual obligation. By 5:00 p.m. Pacific Time on November 1st, or if November 1st is not a business day in Washington or an external GHG ETS to which Washington is linked, the next business day, a covered entity or opt-in entity must surrender compliance instruments that meet the requirements of subsection (5) of this section in an amount equal to at least 30 percent of its covered emissions for the previous calendar year.

(b) Full compliance period obligation. In each year following the final year of a compliance period, by 5:00 p.m. Pacific Time on November 1st, or if November 1st is not a business day in Washington or an external GHG ETS to which Washington is linked, the next business day, a covered entity or opt-in entity must surrender price ceiling units or compliance instruments that meet the requirements of subsection (5) of this section in an amount equal to all its covered emissions during the compliance period, excepting the number of compliance instruments the entity surrendered to fulfill annual obligations during the compliance period. If ecology determines that a covered entity or opt-in entity has over-reported its GHG emissions under chapter 173-441 WAC, ecology will reduce the entity's upcoming full compliance period obligation by an amount equal to the number of over-reported emissions. In no case will ecology reduce an entity's full compliance period obligation under this subsection to an amount less than zero.

(c) Offset invalidation obligation. No later than six months after ecology issues written notice of a decision to invalidate offset credits as described in WAC 173-446-580, a covered entity or opt-in entity must surrender price ceiling units or compliance instruments that meet the requirements of subsection (5) of this section in an amount equal to the number of invalidated offset credits it previously used for compliance.

(d) Under-reported emissions obligation. Whenever ecology determines that a covered entity or opt-in entity has under-reported its emissions under chapter 173-441 WAC, that entity must surrender price ceiling units or compliance instruments that meet the requirements of subsection (5) of this section in an amount equal to all the under-reported emissions by November 1st, or if November 1st is not a business day in Washington or an external GHG ETS to which Washington is linked, the next business day immediately following ecology's determination.

(4) Deferred compliance requirement for electricity exports. For any portion of covered emissions from a first jurisdictional deliverer in Washington exported from Washington and imported into an external GHG emissions trading program, as demonstrated to ecology's satisfaction through means established under chapter 173-441 WAC, the requirements of subsection (3)(a) of this section do not apply. Only the requirements of subsection (3)(b) of this section apply to that portion of covered emissions. This deferral is only in effect for the first compliance period, and for subsequent compliance periods the requirements of subsection (3)(a) and (b) of this section both apply.

(5) Surrender. Ecology may restrict the amounts or kinds of price ceiling units and compliance instruments a covered entity or opt-in entity may use to fulfill an emissions obligation. This subsection specifies the manner in which an entity may surrender compliance instruments or price ceiling units to fulfill an emissions obligation. Starting on the linkage effective date, a covered entity or opt-in entity may use compliance instruments issued by a jurisdiction with which Washington has linked to meet its compliance obligation as described in WAC 173-446-090, subject to the surrender rules in this section.

(a) Annual obligation. A covered entity or opt-in entity may only use the following kinds of compliance instruments to fulfill an annual obligation:

(i) Offset credits, subject to the requirements of (e) of this subsection.

(ii) Allowances obtained from the allowance price containment reserve.

(iii) Allowances of any vintage year prior to the calendar year in which the obligation is due.

(iv) If the entity received allocation under WAC 173-446-220 (2)(d)(iii), (2)(f)(i), (2)(f)(iii), or WAC 173-446-260 (5)(a), allowances of vintages of the two years following the year the relevant emissions occurred.

(b) Full compliance period obligation. A covered entity or opt-in entity may only use price ceiling units or the following kinds of compliance instruments to fulfill a full compliance period obligation:

(i) Offset credits, subject to the requirements of (e) of this subsection.

(ii) Allowances obtained from the allowance price containment reserve.

(iii) Allowances of any vintage year prior to the calendar year in which the obligation is due.

(iv) If the entity received allocation under WAC 173-446-220 (2)(d)(vii), (2)(f)(i), (2)(f)(iii), or WAC 173-446-260 (5)(a), allowances of vintages of the two years following the final year of the compliance period.

(c) Offset invalidation obligation. A covered entity or opt-in entity may only use price ceiling units as described in (c)(iv) of this subsection or the following kinds of compliance instruments to fulfill an offset invalidation obligation:

(i) Offset credits, subject to the requirements of (e) of this subsection.

(ii) Allowances obtained from the allowance price containment reserve.

(iii) Allowances of any vintage.

(iv) If the offset invalidation obligation's deadline is the same as a full compliance period obligation's deadline, price ceiling units.

(d) Under-reported emissions obligation. A covered entity or opt-in entity may only use price ceiling units as described in (d)(v) of this subsection or the following kinds of compliance instruments to fulfill an under-reported emissions obligation:

(i) Offset credits, subject to the requirements of (e) of this subsection.

(ii) Allowances obtained from the allowance price containment reserve.

(iii) Allowances of any vintage year prior to the calendar year in which the obligation is due.

(iv) If the entity received allocation under WAC 173-446-220 (2)(d)(ii), (2)(f)(i), (2)(f)(iii), or WAC 173-446-260 (5)(a), allowances of the vintage of the year following the year in which the under-reported emissions obligation is due, or any year prior to that year.

(v) If the under-reported emissions obligation's deadline is the same as a full compliance period obligation's deadline, price ceiling units.

(e) Offset credit usage.

(i) All offset credits used for compliance must have been issued for reporting periods wholly after July 25, 2021, or within two years prior to July 25, 2021.

(ii) Unless Washington is linked with an external GHG ETS, a covered entity or opt-in entity may only use offset credits from offset projects that provide direct environmental benefits to Washington state to fulfill its compliance obligation. Starting on the linkage effective date, a portion of offset credits used for compliance may be sourced from offset projects that are located in a jurisdiction with which Washington is linked, subject to the limits in this subsection.

(iii) To fulfill a portion of a compliance obligation resulting from covered emissions that occurred in the first compliance period:

(A) A covered entity or opt-in entity may use offset credits, whether or not they are from offset projects located on federally recognized tribal land, in an amount no greater than five percent of its covered emissions.

(B) In addition to, but separate from the limit in (e)(iii)(A) of this subsection, a covered entity or opt-in entity may also use offset credits from offset projects located on federally recognized tribal land that provide direct environmental benefits to Washington, as described in WAC 173-446-595, in an amount no greater than an additional three percent of its covered emissions.

(C) If Washington is linked with an external GHG ETS, beginning on the linkage effective date, at least 50 percent of any offset credits a covered entity or opt-in entity uses for compliance must be sourced from offset projects that provide direct environmental benefits in Washington state; the remaining amount, if any, must be sourced from offset projects that are located in a jurisdiction with which Washington is linked.

(iv) To fulfill a portion of a compliance obligation resulting from covered emissions that occurred in the second compliance period or any subsequent compliance period:

(A) A covered entity or opt-in entity may use offset credits, whether or not they are from offset projects located on federally recognized tribal land, in an amount no greater than four percent of its covered emissions.

(B) In addition to, but separate from the limit in (e)(iv)(A) of this subsection, a covered entity or opt-in entity may also use offset credits from offset projects located on federally recognized tribal land that provide direct environmental benefits to Washington, as described in WAC 173-446-595, in an amount no greater than an additional two percent of its covered emissions.

(C) If Washington is linked with an external GHG ETS, beginning on the linkage effective date, at least 75 percent of any offset credits a covered entity or opt-in entity uses for compliance must be sourced from offset projects that provide direct environmental benefits in Washington state; the remaining amount, if any, must be sourced from offset projects that are located in a jurisdiction with which Washington is linked.

(v) Ecology may reduce the limits in (e)(iii)(A) and (e)(iv)(A) of this subsection for a specific covered entity or opt-in entity if ecology, in consultation with the environmental justice council, determines that the covered entity or opt-in entity has or is likely to:

(A) Contribute substantively to cumulative air pollution burden in an overburdened community identified by ecology, in consultation with the environmental justice council.

(B) Violate any permits required by any federal, state, or local air pollution control agency where the violation may result in any increase in emissions.

(vi) Ecology shall limit the use of offset credits for compliance by an EITE, such that the quantity of no cost allowances plus the use of offset credits does not exceed 100 percent of the EITE's total compliance obligation over a compliance period.

(6) Retirement. This subsection specifies the manner in which ecology retires price ceiling units or compliance instruments to fulfill an emissions obligation.

(a) Once placed in a compliance account, price ceiling units and compliance instruments can only be removed by ecology. Immediately after the deadline for a covered entity or opt-in entity to fulfill an emissions obligation, ecology will remove from that entity's compliance account only the number of price ceiling units or compliance instruments needed to fulfill the emissions obligation, except as specified in WAC 173-446-320 (3)(b).

(b) When a covered entity or opt-in entity surrenders price ceiling units or compliance instruments that are eligible to fulfill an emissions obligation subject to the requirements of subsection (5) of this section, ecology will, before retiring price ceiling units, retire the compliance instruments in the following order:

(i) In order of vintage, from earliest to latest, offset credits.

(ii) Allowances obtained from the allowance price containment reserve.

(iii) In order of vintage, from earliest to latest, allowances not specified in (b)(ii) of this subsection.