The legislature finds that the 2020 legislature updated the state's greenhouse gas emissions limits that are to be achieved by 2030, 2040, and 2050, based on current science and emissions trends, but did not enact a comprehensive program to ensure that the emissions limits would be achieved. The greenhouse gas emissions limits established in RCW 70A.45.020 are not merely aspirational. Rather, they are intended to guide the implementation of all other state laws and policies that have an impact on greenhouse gas emissions in the state. Meeting the state's science-based, greenhouse gas emissions limits set forth in RCW 70A.45.020 will require coordinated, comprehensive, and multisectoral implementation of policies, programs, and laws. Furthermore, enacted state policies, programs, and laws are currently insufficient for Washington to meet the greenhouse gas emissions limits contained in RCW 70A.45.020. The 2021 state energy strategy developed pursuant to RCW 43.21F.090 provides a road map for decarbonizing the energy sectors of the economy, including transportation, buildings, industry, and electricity. However, the state lacks an effective regulatory, financial, and policy framework to prioritize, implement, and hold programs accountable for meeting the greenhouse gas emissions limits.
The legislature further finds that Washington is already experiencing environmental and community impacts due to climate change through increasingly devastating wildfires, flooding, droughts, rising temperatures and sea levels, and ocean acidification. Greenhouse gas emissions already in the atmosphere will increase impacts for some period of time. Actions to increase resilience of our communities and ecosystems can prevent and reduce impacts to communities and our environment and improve their ability to recover. Despite the requirement of RCW 70A.05.010 to develop an integrated climate change response strategy, implementing a comprehensive climate resilience strategy will require greater cross-agency coordination, strategic action, and investment.
The legislature further finds that many natural disasters in Washington, such as flooding, wildfires, and drought, are exacerbated by climate change. In 2020, the office of the insurance commissioner's disaster resiliency work group recommended creation of a statewide disaster resilience office in the governor's office to better prepare and mitigate impacts from natural disasters through enhanced coordination. Duties suggested for the disaster resilience office included developing and administering a state resiliency strategy.
The legislature further finds that climate change is an environmental harm that threatens human health and access to clean air, safe drinking water, nutritious food, and shelter; and that vulnerable populations and overburdened communities experience a disproportionate, cumulative risk from environmental burdens, including climate change. Fossil fuel combustion is responsible for pollutants in addition to greenhouse gases, such as nitrogen dioxide, carbon monoxide, benzene, particulate matter, and others that contribute to respiratory diseases like asthma and lung cancer, which compromise public health and shorten life expectancy. This pollution affects all Washingtonians, but falls disproportionately on low-income communities, communities of color, and the most vulnerable of our population. Reducing our reliance on fossil fuels will therefore contribute to improved air quality and improved public health outcomes.
The legislature finds that communities experiencing environmental health disparities and other burdens created by the disproportionate impacts of pollution are less able to adapt to or recover from climate change impacts. In 2020, the environmental justice task force stated that environmental equity will be achieved when no single group or community faces disadvantages in dealing with the effects of the climate crisis, pollution, environmental hazards, or environmental disasters. The environmental justice task force recommended measurable goals and model policies to: Improve government accountability to communities; incorporate environmental justice into government structures, systems, and policies; invest equitably; and improve environmental enforcement.
The legislature finds that Washington state is home to some of the world's most innovative companies, a highly skilled workforce, and important industries. As our state transitions away from a fossil fuel-based economy, we must do so in a way that protects these assets and allows our businesses and workforce to thrive. By implementing a comprehensive climate program that invests in clean and resilient infrastructure, we can reduce our state's greenhouse gas emissions while supporting good paying jobs. In doing so, we recognize that some industries are emissions-intensive and trade-exposed, and thus have the incentive to be energy efficient. These industries must be given special consideration enabling them to innovate, remain globally competitive, and ensure these industries and jobs remain in Washington.
In 2020, the legislature passed chapter 120, Laws of 2020 (Engrossed Second Substitute House Bill No. 2528), which requires that any state carbon program must support the policies stated in that act and must recognize the forest product industry's contribution to the state's climate response. Therefore, the legislature finds that a comprehensive climate program should include investing in industry sectors that act as sequesterers of carbon. It is stated as the policy of the state to support the complete forest products sector, which includes landowners, mills, bioenergy, pulp and paper, and the related harvesting and transportation infrastructure; and to utilize carbon accounting land use, land use change, and forestry reporting principles consistent with established reporting guidelines, such as those used by the intergovernmental panel on climate change and as used in the United States' national greenhouse gas reporting inventories.
The legislature finds that additional statutory authority is needed in order to adopt certain emission standards to meet the greenhouse gas limits and implement a comprehensive climate program. In Association of Washington Business v. Washington Department of Ecology (No. 12 95885-8, January 16, 2020), the Washington supreme court held that certain regulations establishing emission standards for producers and distributors of fossil fuels were invalid because the department of ecology lacked sufficient statutory authority to establish emission standards for indirect emissions associated with the combustion of the fuel produced or distributed by those particular entities.
Therefore, the legislature intends to fully institutionalize and operationalize the greenhouse gas limits by expressly providing such authority under chapter 70A.15 RCW, the clean air act, to enact emission standards, and create a cap on greenhouse gas emissions, as part of a comprehensive state climate, energy, and resilience program. The purpose of this program is to meet Washington state's commitment to its present and future generations to fully address the climate crisis by achieving the state's greenhouse gas limits in RCW 70A.45.020, improving our resilience to climate change impacts, and ensuring an equitable and inclusive transition to a carbon-neutral economy by 2050.
It is the intent of the legislature that the programs authorized by this act be implemented in a manner that is consistent with the recommendations of the environmental justice task force, and in consultation with tribal governments; be implemented alongside the clean fuels standard program established in chapter . . . (House Bill No. 1036), Laws of 2021, and other complementary policies and programs that reduce greenhouse gas emissions associated with the consumption of fossil fuels and electricity in the state; and support investments in clean transportation, natural climate resilience solutions, clean energy transition and assistance, and emissions reduction projects that prioritize the equitable distribution of benefits to vulnerable populations and overburdened communities.
The definitions in this section apply throughout this chapter unless the context clearly requires otherwise.
"Allowance" means an authorization to emit up to one metric ton of carbon dioxide equivalent. An allowance is not a property right.
"Allowance price containment reserve" means an account maintained by the department with allowances available for sale through separate reserve auctions at predefined prices to assist in containing compliance costs for covered and opt-in entities in the event of unanticipated high costs for compliance instruments.
"Annual allowance budget" means the total number of greenhouse gas allowances allocated for auction and distribution for one calendar year by the department.
"Auction" means the process of selling greenhouse gas allowances by offering them up for bid, taking bids, and then distributing the allowances to winning bidders.
"Auction floor price" means a price for allowances below which bids at auction would not be accepted.
"Auction purchase limit" means the limit on the number of allowances one registered entity or a group of affiliated registered entities may purchase from the share of allowances sold at an auction.
"Carbon dioxide equivalent" means a measure used to compare the emissions from various greenhouse gases based on their global warming potential.
"Climate commitment" means the process and institutional mechanism established pursuant to this act for the state to achieve the statewide greenhouse gas limits established in RCW 70A.45.020 by certain dates.
"Climate resilience" is the ongoing process of anticipating, preparing, and adapting to changes in climate and minimizing negative impacts to our natural systems, infrastructure, and communities. For natural systems, increasing resiliency involves restoring and increasing the health, function, and integrity of our ecosystems and improving their ability to absorb and recover from climate-driven disturbances. For communities, increasing resiliency means enhancing their ability to understand, prevent, adapt, and recover from climate impacts to people and infrastructure.
"Compliance instrument" means an allowance or offset credit issued by the department or by an external greenhouse gas emissions trading program to which Washington has linked its greenhouse gas emissions cap and trade program. One compliance instrument is equal to one metric ton of carbon dioxide equivalent.
"Compliance obligation" means the requirement to turn in to the department the number of compliance instruments equivalent to a covered or opt-in entity's covered emissions during the compliance period.
"Compliance period" means the four-year period for which the compliance obligation is calculated for covered entities.
"Comprehensive program" means the governance structure established pursuant to this act to carry out the state's greenhouse gas limits in RCW 70A.45.020, ensure a coordinated and strategic approach to advancing climate resilience and environmental justice, and achieving an equitable and inclusive transition to a carbon-neutral economy.
"Covered emissions" means the emissions for which a covered entity has a compliance obligation under section 7 of this act.
"Covered entity" means a person that is designated by the department as subject to sections 5 through 18 of this act.
"Cumulative impact" means the combined impact of multiple environmental health factors on a population.
"Department" means the department of ecology.
"Emissions containment reserve allowance" means a conditional allowance that is withheld from sale at an auction by the department or its agent to secure additional emission reductions in the event prices fall below the emissions containment reserve trigger price.
"Emissions containment reserve trigger price" means the price below which allowances will be withheld from sale by the department or its agent at an auction, as determined by the department by rule.
"Emissions threshold" means the greenhouse gas emission level at or above which a person has a compliance obligation.
"Environmental benefits" are those that: (a) Prevent or reduce existing environmental burdens or associated risks that contribute significantly to the cumulative impact; (b) meaningfully protect highly impacted communities and vulnerable populations from, or support community response to, the impacts of environmental harm; or (c) meet a community need identified by a vulnerable population that is consistent with the intent of this act and endorsed by the environmental justice work group.
"Environmental harm" means the individual or cumulative risks to communities caused by: Historic, current, and projected exposure to conventional and toxic hazards in the air, water, and land; adverse environmental conditions caused or made worse by contamination or pollution or that create vulnerabilities to climate impacts; and impacts from climate change.
"Environmental impacts" are those that create environmental benefits or environmental burdens.
"Environmental justice" means the fair treatment and meaningful involvement of all people regardless of race, color, national origin, or income with respect to the development, implementation, and enforcement of environmental laws, regulations, and policies.
"Environmental justice assessment" means using an intersectional lens to address disproportionate environmental and health impacts in all laws, rules, and policies with environmental impacts by prioritizing vulnerable populations in overburdened communities, equitably distributing resources and benefits, and eliminating harm.
"External greenhouse gas emissions trading program" means a government program, other than Washington's program created in this chapter, that restricts greenhouse gas emissions from sources outside of Washington through emissions trading.
"Facility" has the same definition as in RCW 70A.15.2200(5)(h)(iv).
"First jurisdictional deliverer" means the first person over which the state of Washington has jurisdiction that generates or procures electricity for use within the state and delivers the electricity to the first point of delivery into the state.
"General market participant" means a registered entity that is not identified as a covered entity or an opt-in entity that is registered in the program registry and intends to purchase, hold, sell, or voluntarily retire compliance instruments.
"Greenhouse gas" has the same meaning as in RCW 70A.45.010.
"Holding limit" means the maximum number of allowances that may be held for use or trade by a registered entity at any one time.
"Imported electricity" means electricity generated outside the state of Washington and delivered for use within the state, but which did not originate from any jurisdiction with which Washington has a linkage agreement.
"Leakage" means a reduction in emissions of greenhouse gases within the state that is offset by a directly attributable increase in greenhouse gas emissions outside the state.
"Limits" means the greenhouse gas emissions reductions required by RCW 70A.45.020.
"Linkage agreement" means a formal agreement that connects two or more greenhouse gas market programs to reciprocally recognize each jurisdiction's compliance instruments.
"Offset credit" means a tradable compliance instrument that represents an emissions reduction or emissions removal of one metric ton of carbon dioxide equivalent.
"Offset project" means a project that reduces or removes greenhouse gases that are not covered emissions under this chapter.
"Offset protocols" means a set of procedures and standards to quantify greenhouse gas reductions or greenhouse gas removals achieved by an offset project.
"Overburdened communities" has the same meaning as "highly impacted community" as defined in RCW 19.405.020.
"Person" has the same meaning as defined in RCW 70A.15.2200(5)(h)(iii).
"Point of delivery" means a point on the electricity transmission or distribution system physically located in Washington where a power supplier delivers electricity for use in the state. This point may be an interconnection with another system or a substation where the transmission provider's transmission and distribution systems are connected to another system, or a distribution substation where electricity is imported into the state over a multijurisdictional retail provider's distribution system.
"Program" means the greenhouse gas emissions cap and invest program created by and implemented pursuant to this chapter.
"Program registry" means the data system in which covered parties, opt-in entities, and general market participants are registered and in which compliance instruments are recorded and tracked.
"Registered entity" means a covered entity, opt-in entity, or general market participant that has completed the process for registration in the program registry.
"Resilience" is the ability to prepare, mitigate and plan for, withstand, recover from, and more successfully adapt to adverse events and changing conditions, and reorganize in an equitable manner that results in a new and better condition.
"Retire" means to permanently remove a compliance instrument such that the compliance instrument may never be sold, traded, or otherwise used again.
"Supplier" means a supplier of fuel in Washington state as defined in RCW 70A.15.2200(5)(h)(ii).
"Transfer" means to transfer an allowance or compliance instrument to the department, either to meet a compliance obligation or on a voluntary basis.
"Vulnerable populations" has the same meaning as defined in RCW 19.405.020.
The governor shall establish a comprehensive program to implement the state's climate commitment. The purpose of the comprehensive program is to provide accountability and authority for achieving the state's greenhouse gas limits in RCW 70A.45.020, to establish a coordinated and strategic statewide approach to climate resilience, and to build an equitable and inclusive clean energy economy.
The comprehensive program for implementing the state's climate commitment must be based on the state's following principles:
The program must be holistic and address the needs, challenges, and opportunities to meet the climate commitment.
The program must address emission reductions from all relevant sectors and sources by ensuring that emitters are responsible for meeting targeted greenhouse gas reductions and that the government provides clear policy and requirements, financial tools, and other mechanisms to support achieving those reductions.
The program must support an equitable transition for vulnerable populations and overburdened communities, including through early and meaningful engagement of overburdened communities and workers to ensure the program achieves equitable and just outcomes.
The program must build increasing climate resilience for at-risk communities and ecosystems through cross-sectoral coordination, strategic planning, and cohesive policies.
The program must apply the most current, accurate, and complete scientific and technical information available to guide the state's climate actions and strategies.
The program must be developed and implemented in consultation and collaboration with all levels of government and civil society.
The program must be implemented with sustained leadership, resources, clear governance, and prioritized investments at the scale necessary to meet the statutory emissions limits.
The program must achieve progress in meeting emissions limits in the most effective and efficient manner possible and must include periodic measurement and reporting of progress and changes to the program as needed to meet the limits.
The comprehensive program for implementing the state's climate commitment must include, but not be limited to, the following elements:
A strategic plan for aligning existing law, rules, policies, programs, and plans with the state's greenhouse gas limits, to the full extent allowed under existing authority;
Common state policies, standards, and procedures for addressing greenhouse gas emissions and climate resilience, including grant and funding programs, infrastructure investments, and planning and siting decisions;
A process for prioritizing and coordinating funding consistent with strategic needs for greenhouse gas reductions, equity and environmental justice, and climate resilience actions;
An updated statewide strategy for addressing climate risks and improving resilience of communities and ecosystems;
A comprehensive community engagement plan that addresses and mitigates barriers to engagement from vulnerable populations, overburdened communities, and other historically or currently marginalized groups;
An analysis of gaps and conflicts in state law and programs, with recommendations for improvements to state law;
To ensure mutual respect for the rights, interests, and obligations of each sovereign Indian tribe, the governor must develop a framework for government-to-government consultation with Indian tribes consistent with the centennial accord, chapter 43.376 RCW, and applicable tribal policies. The consultation must ensure meaningful tribal engagement on the implementation of this act, including rule making, programmatic decisions, and investment decisions. Within this framework, at least once each year the governor must invite all federally recognized Indian tribes with reserved rights within the geographical boundaries of the state to meet in government-to-government consultation. The purpose of the meeting is to share information, views, tribal knowledge and science, and recommendations regarding the progress of implementing the state's carbon commitment and investing carbon-related revenues, to strengthen climate resilience in communities throughout the state, to strengthen climate resilience in the water and natural resources shared by all citizens in the state, and to ensure a just transition to a clean energy economy.
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The governor's office shall convene a climate commitment task force with state agencies, other governments, and stakeholders by July 1, 2021. In making these appointments the governor shall seek diverse representation of stakeholders, including members of overburdened communities. The governor or the governor's designee must chair the climate commitment task force convened under this section and must appoint task force members. The governor or the governor's designee must convene the initial meeting of the task force. The task force is a class one group under RCW 43.03.220.
The duties of the climate commitment task force are to develop recommendations to the legislature on the establishment of a state comprehensive climate, energy, and resilience program to implement the state's climate commitment in accordance with the purpose, principles, and elements in section 3 of this act.
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The climate commitment task force must develop preliminary recommendations by November 1, 2021. By December 1, 2021, the governor's office must submit, in compliance with RCW 43.01.036, a report to the legislature with findings and recommendations of the climate commitment task force. The report must include recommendations for the following:
A governance structure to achieve the desired outcomes described in section 3 of this act that considers both existing state capacity, resources, expertise, and authorities, and necessary enhancements to these governance features;
Reporting requirements and frequency, and other accountability measures, including mechanisms for legislative and executive oversight and any changes to existing statutory reporting requirements, such as RCW 70A.45.020;
A formal process for coordinating across state government, with other governments, including tribal and local governments, and with key stakeholder groups, such as interagency councils, advisory boards, or expert panels;
The funding authorities and structures necessary to facilitate investments, including recommendations around public-private partnerships;
Suggested duties and roles related to resilience that considers recommendations and 2020 reports on disaster resilience and climate resilience from the office of the insurance commissioner and office of financial management;
The definitions in section 2 of this act apply throughout this section unless the context clearly requires otherwise.
This section expires December 31, 2022.
In order to ensure that greenhouse gas emissions are reduced consistent with the limits established in RCW 70A.45.020, the department must implement a cap on greenhouse gas emissions from covered entities and a program to track, verify, and enforce compliance through the use of compliance instruments.
The program must consist of:
Annual allowance budgets that limit emissions from covered entities, as provided in sections 5 through 7 of this act;
Defining those entities covered by the program, and those entities that may voluntarily opt into coverage under the program, as provided in sections 5 through 7 of this act;
Distribution of emission allowances by auction, as provided in section 9 of this act, and through the allowance price containment provisions under sections 13 and 14 of this act;
Providing for offset credits as a method for meeting a compliance obligation, pursuant to section 15 of this act;
Defining the compliance obligation for covered entities, as provided in section 16 of this act;
Establishing the authority of the department to enforce the program requirements, as provided in section 17 of this act;
Creating a climate investment account for the deposit of receipts from the distribution of emission allowances, as provided in section 20 of this act;
Providing for the transfer of allowances and recognition of compliance instruments, including those issued by jurisdictions that enter into linkage agreements with the state;
Providing monitoring and oversight of the sale and transfer of allowances; and
Creating, in section 22 of this act, an environmental justice and equity advisory panel to monitor for and advise on achieving positive workforce and job outcomes and the equitable distribution of benefits to overburdened communities.
The department shall consider opportunities to implement the program in a manner that allows linking the state's program with other jurisdictions having similar programs, considering if such linkage will provide for a more cost-effective means for Washington covered entities to meet their compliance obligations while recognizing the special characteristics of the state's economy and industries. The department is authorized to enter into a linkage agreement with another jurisdiction after formal notice and opportunity for a public hearing.
The department shall commence the program by January 1, 2023, by determining the proportionate share that the total greenhouse gas emissions of covered entities for the first compliance period bears to the total anthropogenic greenhouse gas emissions in the state during 2017 through 2021, based on data reported to the department under RCW 70A.15.2200. The department may exclude a year from the baseline determination if the department identifies that year to have been an outlier due to a state of emergency. By October 1, 2022, the department shall adopt a program budget of allowances for the first compliance period of the program, calendar years 2023 through 2026, for all covered entities to be distributed from January 1, 2023, through December 31, 2026. By October 1, 2026, the department shall adopt a program budget of allowances for the second compliance period of the program, calendar years 2027 through 2030, for all covered entities to be distributed from January 1, 2027, through December 31, 2030. By October 1, 2028, the department shall adopt by rule the annual program budgets for the calendar years 2031 through 2040. The program budgets must be set to achieve the share of reductions by covered entities necessary to achieve the 2030, 2040, and 2050 statewide emissions limits established in RCW 70A.45.020, based on data reported to the department under chapter 70A.15 RCW. The department must adopt annual allowance budgets for the program on a calendar year basis that provide for substantially equivalent reductions on an absolute basis for each year.
The department must complete an evaluation by December 31, 2035, of the performance of the program, including its performance in reducing greenhouse gases and criteria pollutants in overburdened communities. If the evaluation shows that adjustments to the annual budgets are necessary to ensure achievement of 2040 emission reduction limits identified in RCW 70A.45.020 and reduce greenhouse gases and criteria pollutants in overburdened communities, the department shall adjust the annual budgets accordingly. The department must complete an evaluation by December 31, 2045, of the performance of the program, and make adjustments in the annual budgets to ensure achievement of 2050 emission reduction limits identified in RCW 70A.45.020. Nothing in this subsection precludes the department from making additional adjustments as necessary to ensure successful achievement of emission reduction limits.
Data reported to the department under RCW 70A.15.2200 for 2017 through 2021 is deemed sufficient for the purpose of adopting annual program budgets and demonstrating compliance under the first compliance period of the program. Data reported to the department under RCW 70A.15.2200 for 2023 through 2025 is deemed sufficient for adopting annual program budgets and demonstrating compliance under the second compliance period of the program.
A person is a covered entity as of the beginning of the first compliance period and all subsequent compliance periods if the person reported emissions under RCW 70A.15.2200 for any calendar year from 2017 through 2021 that equals or exceeds any of the following thresholds:
Where the person operates a facility and the facility's emissions equal or exceed 25,000 metric tons of carbon dioxide equivalent;
Where the person generates electricity in the state and emissions associated with this generation equals or exceeds 25,000 metric tons of carbon dioxide equivalent; and
Where the person is a supplier of fuel other than natural gas and has reported 25,000 metric tons or more of carbon dioxide equivalent emissions that would result from the full combustion or oxidation of the supplied fuels and has a compliance obligation for the emissions from the full combustion or oxidation of those supplied fuels consistent with subsection (6) of this section.
A person is a covered entity as of the beginning of the second compliance period and all subsequent compliance periods if the person reported emissions under RCW 70A.15.2200 for any calendar year from 2023 through 2025 that equals or exceeds any of the following thresholds:
Where the person is a first jurisdictional deliverer bringing electricity into the state and the cumulative annual total of emissions associated with imported electricity into the state from specified or unspecified sources equals or exceeds 25,000 metric tons of carbon dioxide equivalent. For a specified source, the person must have either full or partial ownership in the facility, or a written power contract to procure electricity at the facility, at the time of entry of the transaction to procure electricity;
Where the person supplies natural gas in amounts that would result in exceeding 25,000 metric tons of carbon dioxide equivalent if fully combusted or oxidated, excluding the amounts supplied to covered entities under subsection (1)(a) through (c) of this section or (a) of this subsection;
Where the person operates a facility and is a direct purchaser of electricity from a federal power market agency or from a joint operating entity and the associated emissions from both the facility and purchased electricity equals or exceeds 25,000 metric tons of carbon dioxide equivalent; and
Where the person is a supplier of fuel other than natural gas and has reported 25,000 metric tons or more of carbon dioxide equivalent emissions that would result from the full combustion or oxidation of the supplied fuels and has a compliance obligation for the emissions from the full combustion or oxidation of those supplied fuels consistent with subsection (6) of this section.
When a covered entity reports, during a compliance period, emissions from a facility under RCW 70A.15.2200 that are below the thresholds specified in subsection (1) or (2) of this section, the covered entity continues to have a compliance obligation through the current compliance period. When a covered entity reports emissions below the threshold during an entire compliance period, or has ceased all processes at the facility requiring reporting under RCW 70A.15.2200, the entity is no longer a covered entity unless the department provides notice at least 12 months before the end of the compliance period that the facility's emissions were within 10 percent of the threshold and that the person will continue to be designated as a covered entity in order to ensure equity among all covered entities.
For types of emission sources described in subsection (1) of this section that begin or modify operation after January 1, 2023, and types of emission sources described in subsection (2) of this section that begin or modify operation after 2027, coverage under the program starts in the calendar year in which emissions from the source exceed the applicable thresholds in subsection (1) or (2) of this section, or upon formal notice from the department that the source is expected to exceed the applicable emissions threshold, whichever happens first. Sources meeting these conditions are required to transfer their first allowances on the first transfer deadline of the year following the year in which their emissions were equal to or exceeded the emissions threshold.
For emission sources described in subsection (1) or (2) of this section that are in operation or otherwise active between 2017 and 2021 but were not required to report emissions for those years under RCW 70A.15.2200 as written for the reporting periods between 2017 and 2021, coverage under the program starts in the calendar year following the year in which emissions from the source exceed the applicable thresholds in subsection (1) or (2) of this section as reported pursuant to RCW 70A.15.2200, or upon formal notice from the department that the source is expected to exceed the applicable emissions threshold for the first year that source is required to report emissions, whichever happens first. Sources meeting these conditions are required to transfer their first allowances on the first transfer deadline of the year following the year in which their emissions, as reported under RCW 70A.15.2200, were equal to or exceeded the emissions threshold.
The following emissions are exempt from coverage in the program, regardless of the emissions reported under RCW 70A.15.2200:
Emissions from the combustion of aviation fuels supplied in Washington that are combusted outside of Washington;
Emissions from watercraft fuels supplied in Washington that are combusted outside of Washington;
Emissions from a coal-fired electric generation facility exempted from additional greenhouse gas limitations, requirements, or performance standards under RCW 80.80.110; and
Emissions from facilities with North American industry classification system code 92811 (national security).
All covered entities must register to participate in the program, following procedures adopted by the department by rule.
Entities registering to participate in the program must describe any direct or indirect affiliation with other registered entities.
A person responsible for greenhouse gas emissions that is not a covered entity may voluntarily participate in the program by registering as an opt-in entity. An opt-in entity must satisfy the same registration requirements as covered entities. Once registered, an opt-in entity is allowed to participate as a covered entity in auctions and must assume the same compliance obligation to transfer compliance instruments equal to their emissions at the appointed transfer dates. An opt-in entity may opt out of the program at the end of any compliance period by providing written notice to the department at least six months prior to the end of the compliance period. The opt-in entity continues to have a compliance obligation through the current compliance period. An opt-in entity is not eligible to receive allowances directly distributed under section 10, 11, or 12 of this act.
A person that is not covered by the program and is not a covered entity or opt-in entity may voluntarily participate in the program as a general participant. General participants must meet all applicable registration requirements specified by rule.
Tribal governments and federal agencies may elect to participate in the program as opt-in entities or general participants.
The department shall use a secure, online electronic tracking system to: Register entities in the state program; issue compliance instruments; track ownership of compliance instruments; enable and record compliance instrument transfers; facilitate program compliance; and support market oversight.
The department must use an electronic tracking system that allows two accounts to each covered or opt-in entity:
A compliance account where the compliance instruments are transferred to the department for retirement. Compliance instruments in compliance accounts may not be sold, traded, or otherwise provided to another account or person.
A holding account that is used when a registered entity is interested in trading allowances. Allowances in holding accounts may be bought, sold, or traded. The amount of allowances a registered entity may have in its holding account is constrained by the holding limit.
Registered general market participants are each allowed an account, to hold, trade, sell, or transfer allowances.
The department shall maintain an account for the purpose of retiring allowances transferred by registered entities.
Except as provided in sections 10, 11, and 12 of this act, the department shall distribute allowances through auctions as provided in this section and in rules adopted by the department to implement these sections. An allowance is not a property right.
The department shall hold a maximum of four auctions annually, plus any necessary reserve auctions. An auction may include allowances from the annual allowance budget of the current year and allowances from the annual allowance budgets from prior years that remain to be distributed. The department must make future vintage allowances available through parallel auctions at least twice annually in addition to the auctions through which current vintage allowances are exclusively offered.
The department shall engage a qualified, independent contractor to run the auctions. The department shall also engage a qualified financial services administrator to hold the bid guarantees, evaluate bid guarantees, and inform the department of the value of bid guarantees once the bids are accepted.
Auctions are open to covered entities, opt-in entities, and general market participants that are registered entities in good standing. The department shall adopt by rule the requirements for a registered entity to register and participate in a given auction.
Registered entities intending to participate in an auction must submit an application to participate at least 30 days prior to the auction. The application must include the documentation required for review and approval by the department. A registered entity is eligible to participate only after receiving a notice of approval by the department.
Each registered entity that elects to participate in the auction must have a different representative. Only a representative with an approved auction account is authorized to access the auction platform to submit an application or confirm the intent to bid for the registered entity, submit bids on behalf of the registered entity during the bidding window, or to download reports specific to the auction.
The department may require a bid guarantee, payable to the financial services administrator, in an amount greater than or equal to the sum of the maximum value of the bids to be submitted by the registered entity.
To protect the integrity of the auctions, a registered entity or group of registered entities with a direct corporate association are subject to the following auction purchase limits:
A covered entity or an opt-in entity may not buy more than 10 percent of the allowances offered during a single auction;
A general market participant may not buy more than four percent of the allowances offered during a single auction;
No registered entity may buy more than the entity's bid guarantee; and
No registered entity may buy allowances that would exceed the entity's holding limit at the time of the auction.
Upon completion and verification of the auction results, the financial services administrator shall notify winning bidders and transfer the auction proceeds to the state treasurer for deposit in the climate investment account created in section 20 of this act.
The department shall adopt by rule provisions to guard against bidder collusion and minimize the potential for market manipulation. A registered entity may not release or disclose any bidding information including: Intent to participate or refrain from participation; auction approval status; intent to bid; bidding strategy; bid price or bid quantity; or information on the bid guarantee provided to the financial services administrator. The department may cancel or restrict a previously approved auction participation application or reject a new application if the department determines that a registered entity has:
Provided false or misleading facts;
Withheld material information that could influence a decision by the department;
Violated any part of the auction rules;
Violated registration requirements; or
Violated any of the rules regarding the conduct of the auction.
Any cancellation or restriction approved by the department under subsection (8) of this section may be permanent or for a specified number of auctions and the cancellation or restriction imposed is not exclusive and is in addition to the remedies that may be available pursuant to chapter 19.86 RCW or other state or federal laws, if applicable.
The department shall design allowance auctions so as to allow, to the maximum extent practicable, linking with external greenhouse gas emissions trading programs in other jurisdictions and to facilitate the transfer of allowances when the state's program is linked with other external greenhouse gas emissions trading programs. The department may conduct auctions jointly with other jurisdictions with which it has a linkage agreement.
During the first compliance period of the program, a covered entity must receive an allocation under this subsection at no cost if the entity is classified as emissions-intensive and trade-exposed, as determined by being engaged in one or more of the processes described by the following industry descriptions and codes in the North American industry classification system:
Primary metal manufacturing, including iron and steel milling, ferroalloy, and primary metal manufacturing North American industry classification system codes beginning with 331;
Secondary metals manufacturing, including smelting, refining, and alloying of nonferrous metal, North American industry classification code 331492;
Paper manufacturing, including pulp mills, paper mills, and paperboard milling, North American industry classification system codes beginning with 322;
Aerospace product and parts manufacturing, North American industry classification system codes beginning with North American industry classification system code 3364;
Wood products manufacturing, North American industry classification system codes beginning with 322;
Nonmetallic mineral manufacturing, including glass container manufacturing, North American industry classification system codes beginning with 327;
Chemical manufacturing, North American industry classification system codes beginning with 325;
Computer and electronic product manufacturing, including semiconductor and related device manufacturing, North American industry classification system codes beginning with 334;
Food manufacturing, North American industry classification system codes beginning with 311; and
Cement manufacturing, North American industry classification system code 327310.
The annual allocation of allowances for direct distribution to an entity identified as emissions-intensive and trade-exposed under subsection (1) of this section during the first compliance period of the program must be equal to the covered entity's proportional obligation of the program budget for phase one established under section 6 of this act, multiplied by:
During calendar year 2023, 90 percent;
During calendar year 2024, 85 percent;
During calendar year 2025, 80 percent; and
During calendar year 2026, 75 percent.
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By January 1, 2024, the department must adopt by rule objective criteria for both emissions' intensity and trade exposure for the purpose of identifying emissions-intensive, trade-exposed manufacturing businesses during the second compliance period of the program and subsequent compliance periods. A manufacturing business that can demonstrate to the department that it meets this criteria, whether or not it is listed in subsection (1)(a) through (j) of this section, is eligible for treatment as an emissions-intensive, trade-exposed industry and is eligible for free allocation of allowances as described in this section, and by the department by rule.
By July 1, 2024, the department must adopt rules for allocating allowances that must be transferred by those covered entities that the department determines are engaged in emissions-intensive, trade-exposed processes during the second compliance period of the program. The rules must establish a schedule for the second compliance period of the program that provides for a declining portion of the allocation to such covered entities that must be provided at no cost. By December 31, 2029, the department must adopt rules following the same process and requirements for 2031 through 2040. Both sets of rules may be amended to align with adjustments made under section 5 of this act.
Rules adopted under this section may utilize a combined output-based and emissions intensity-based assessment benchmarking methodology for determining the allocation of allowances to emissions-intensive, trade-exposed industries. A covered entity or process with a lower emissions intensity benchmark may receive a larger allocation than other covered entities engaged in the same industry with higher emissions intensities. The rules must provide a means for attributing a covered entity's emissions to the manufacture of goods and requirements for providing pertinent records to verify the output data used to calculate the emissions intensity benchmark.
The annual allocation of allowances for direct distribution to an entity identified as emissions-intensive and trade-exposed in the second compliance period of the program must be equal to the sum of the annual goods-specific emissions calculation for the goods manufactured by the covered entity, multiplied by a percentage that is adjusted annually, as set forth in a schedule adopted by the department by rule. The schedule must result in an amount of annual allowances that a covered entity may receive under this section and from the allowance price containment reserve that declines annually by a constant amount proportionate to the decline in the amount of allowances available in annual allowance budgets pursuant to section 6 of this act.
The department shall by rule provide for covered entities to apply to the department for an adjustment to the allocation for direct distribution of allowances. The department may grant the adjustment based on either:
A significant change in the emissions attributable to the manufacture of an individual good or goods in this state by a covered entity based on a finding by the department that an adjustment is necessary to accommodate for changes in the manufacturing process that have a material impact on emissions; or
Significant changes to a covered entity's external competitive environment that result in a significant increase in leakage risk.
The department must withhold or withdraw the relevant share of allowances allocated to a covered entity under this section in the event that the covered entity curtails production in the state. Any allowances withheld or withdrawn under this subsection must be permanently retired.
The legislature intends by this section to allow first jurisdictional deliverers of electricity that are also consumer-owned electric utilities or investor-owned electric utilities subject to the requirements of chapter 19.405 RCW, the Washington clean energy transformation act, to be eligible for free allowance allocation as provided in this section.
In order to mitigate the impact on rates or charges on citizens of the state for electricity services, by October 1, 2022, the department shall adopt rules, in consultation with the department of commerce, for allocating allowances at no cost to covered entities that are electricity generators owned by or under contract with a consumer-owned or investor-owned electric utility. By October 1, 2026, the department shall adopt rules for allocating allowances during the second compliance period of the program at no cost to: (a) First jurisdictional deliverers of electricity that are also consumer-owned utilities with a clean energy implementation plan approved under the requirements of chapter 19.405 RCW, consistent with an emissions allowance budget based on their approved clean energy implementation plan, or an allowance budget determined by the department by rule consistent with the requirements in section 5 of this act, whichever is less.
Allowances allocated at no cost to consumer-owned or investor-owned electric utilities must be consigned to auction for the benefit of ratepayers.
Nothing in this section affects the requirements of chapter 19.405 RCW.
Allowances must be allocated at no cost to covered entities that are natural gas utilities for the exclusive purpose of providing assistance to low-income residential natural gas customers. Rules adopted under this subsection must allow for a natural gas utility to be directly distributed allowances at no cost in an amount equal to the covered emissions attributable to the provision of natural gas service to the natural gas utility's low-income residential customers who receive any other form of rate or bill assistance from the utility. By January 1st of the first year of the second compliance period and each subsequent compliance period, the department shall determine by rule, after consultation with the utilities and transportation commission, the quantity of allowances to allocate directly at no cost to a natural gas utility over the course of the compliance period.
Allowances allocated at no cost to natural gas companies must be consigned to auction for the benefit of low-income customers. The allowances must be used exclusively to minimize cost impacts on low-income residential customers through actions that include, but are not limited to, weatherization, electrification, conservation and efficiency services, and bill assistance.
To help ensure that the price of allowances remains sufficient to incentivize reductions in greenhouse gas emissions, the department must establish an emissions containment reserve and set an emissions containment reserve trigger price by rule. The price must be set at a reasonable amount above the auction floor price. The purpose of withholding allowances in the emissions containment reserve is to secure additional emissions reductions consistent with the greenhouse gas emissions limits in RCW 70A.45.020 in the event auction prices fall below the emissions containment reserve trigger price.
In the event that the emissions containment reserve trigger price is met during an auction, the department must automatically withhold allowances as needed. The department must convert and transfer any allowances that have been withheld from auction into the emissions containment reserve account.
Emissions containment reserve allowances may only be withheld from an auction if the demand for allowances would result in an auction clearing price that is less than the emissions containment reserve trigger price prior to the withholding from the auction of any emissions containment reserve allowances.
To help minimize allowance price volatility in the auction, the department shall adopt by rule an auction floor price and a schedule for the floor price to increase by a predetermined amount every year. The department may not sell allowances at bids lower than the auction floor price. The department's rules must specify holding limits that determine the maximum number of allowances that may be held for use or trade by a registered entity at any one time. The department shall also establish an auction ceiling price to limit extraordinary prices and to determine when to offer allowances through the allowance price containment reserve auctions authorized under this section.
For calendar years 2023 through 2026, the department must place no less than four percent of the total number of allowances available from the allowance budgets for those years in an allowance price containment reserve. The reserve must be designed as a mechanism to assist in containing compliance costs for covered and opt-in entities in the event of unanticipated high costs for compliance instruments.
The department shall adopt rules for holding auctions of allowances from the price containment reserve when the settlement prices in the preceding auction approach the adopted auction ceiling price. The auction must be separate from auctions of other allowances.
Only covered and opt-in entities may participate in the auction of allowances from the allowance price containment reserve.
The process for reserve auctions is the same as the process provided in section 9 of this act and the proceeds from reserve auctions must be treated the same.
The department shall by rule:
Set the reserve auction floor price in advance of the reserve auction. The department may choose to establish multiple price tiers for the allowances from the reserve;
Establish the requirements and schedule for the allowance price containment reserve auctions; and
Establish the amount of allowances to be placed in the allowance price containment reserve after the first compliance period ending in 2026.
The department shall adopt by rule the protocols for establishing offset projects and securing offset credits that may be used to meet a portion of a covered or opt-in entity's compliance obligation under section 16 of this act. The protocols adopted by the department under this section must align with the policies of the state established under RCW 70A.45.090 and 70A.45.100.
Offset projects must:
Be located in the United States or in a jurisdiction with which the department has entered into a linkage agreement;
Result in greenhouse gas reductions or removals that:
Are real, permanent, quantifiable, verifiable, and enforceable; and
Are in addition to greenhouse gas emission reductions or removals otherwise required by law and other greenhouse gas emission reductions or removals that would otherwise occur; and
Have been certified by a recognized registry within two years prior to the effective date of this section.
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A total of no more than eight percent of a covered or opt-in entity's compliance obligation during the first compliance period may be met by transferring offset credits. During these years, at least 75 percent of a covered entity's compliance obligation satisfied by offset credits must be sourced from offset projects that provide direct environmental benefits in the state.
A total of no more than six percent of a covered or opt-in entity's compliance obligation during the second compliance period may be met by transferring offset credits. During these years, at least 50 percent of a covered entity's compliance obligation satisfied by offset credits must be sourced from offset projects that provide direct environmental benefits in the state.
The limits in (a) and (b) of this subsection may be modified by rules adopted by the department when appropriate to ensure achievement of the statewide emissions limits established in RCW 70A.45.020 and to provide for alignment with other jurisdictions to which the state has entered or proposes to enter a linkage agreement.
The limits in (a) and (b) of this subsection may be reduced for a specific covered entity if the department determines that the covered entity contributes substantively to cumulative air pollution burden in an overburdened community.
An offset project on tribal land does not count against the offset credit limits described in (a) and (b) of this subsection. No more than five percent of a covered or opt-in entity's compliance obligation may be met by transferring offset credits from projects on tribal land.
In adopting protocols governing offset projects and covered and opt-in entities' use of offset credits, the department shall:
Take into consideration standards, rules, or protocols for offset projects and offset credits established by other states, provinces, and countries with programs comparable to the program established in this chapter;
Encourage opportunities for the development of offset projects in this state by adopting offset protocols that may include, but need not be limited to, protocols that make use of aggregation or other mechanisms to reduce transaction costs related to the development of offset projects;
Adopt a process for monitoring and invalidating offset credits as necessary to ensure the credit reflects emission reductions or removals that continue to meet the standards required by subsection (1) of this section. If an offset credit is invalidated, the covered or opt-in entity must, within six months of the invalidation, transfer replacement credits or allowances to meet its compliance obligation. Failure to transfer the required credits or allowances is a violation subject to penalties as provided in section 17 of this act.
The offset credit must be registered and tracked as a compliance instrument.
A covered or opt-in entity has a compliance obligation for its emissions during each four-year compliance period, with the first compliance period commencing January 1, 2023. A covered or opt-in entity shall transfer a number of compliance instruments equal to their allocated allowances under section 5 of this act by November 1st of each calendar year in which a covered or opt–in entity has a compliance obligation.
Submission of allowances occurs through the transfer of compliance instruments, on or before the transfer date, from the holding account to the compliance account of the covered or opt-in entity as described in section 7 of this act.
A covered or opt-in entity submitting insufficient compliance instruments to meet its compliance obligation is subject to a penalty as provided in section 17 of this act.
Allowances must be transferred in the order in which they were purchased.
A covered or opt-in entity may not borrow an allowance from a future allowance year to meet a current or past compliance obligation.
Upon receipt by the department of all compliance instruments transferred by a covered entity or opt-in entity to meet its compliance obligation, the department shall retire the allowances or offset credits.
All covered and opt-in entities are required to submit compliance instruments in a timely manner to meet the entities' compliance obligations and shall comply with all requirements for monitoring, reporting, holding, and transferring emission allowances and other provisions of this chapter.
If a covered or opt-in entity does not submit sufficient allowances to meet its compliance obligation by the specified transfer dates, a penalty of four allowances for every one allowance that is missing must be submitted to the department within six months. When a covered entity or opt-in entity reasonably believes that it will be unable to meet a compliance obligation, the entity shall immediately notify the department. Upon receiving notification, the department shall issue an order requiring the entity to submit the penalty allowances.
If a covered entity or opt-in entity fails to submit penalty allowances as required by subsection (2) of this section, the department may issue an order or issue a penalty of up to $10,000 per day per violation, or both, for failure to submit penalty allowances as required by subsection (2) of the section. The order may include a plan and schedule for coming into compliance. The department may issue a penalty up to $50,000 per day per violation for violations of section 9(8) (a) through (e) of this act.
Except as provided in subsection (3) of this section, any person that violates the terms of this chapter or an order issued under this chapter may incur a penalty of up to $10,000 per day per violation for each day that the person does not comply. All penalties under subsections (3) and (4) of this section must be deposited into the air pollution control account created in RCW 70A.15.1010.
Appeals of orders and penalties issued under this chapter must be to the pollution control hearings board under chapter 43.21B RCW.
For the first compliance period, the department may reduce the amount of the penalty by adjusting the monetary amount or the number of penalty allowances described in subsections (2) and (3) of this section.
The department shall seek to link with other jurisdictions with established allowance-based greenhouse gas emission reduction programs in order to:
Allow for the mutual use and recognition of compliance instruments issued by Washington and other linked jurisdictions;
Broaden the greenhouse gas emission reduction opportunities to reduce the costs of compliance on covered entities and consumers;
Enable allowance auctions to be held jointly and provide for the use of a unified tracking system for compliance instruments;
Enhance market security;
Reduce program administration costs; and
Provide consistent requirements for covered entities whose operations span jurisdictional boundaries.
The director of the department is authorized to execute linkage agreements with other jurisdictions with established allowance-based greenhouse gas emission reduction programs consistent with the requirements in this chapter. A linkage agreement must cover the following:
Provisions relating to quarterly auctions, including requirements for eligibility for auction participation, the use of a single auction provider to facilitate joint auctions, publication of auction-related information, processes for auction participation, purchase limits by auction participant type, bidding processes, dates of auctions, and financial requirements;
Provisions related to holding limits to ensure no entities in any of the programs are disadvantaged relative to their counterparts in the other jurisdictions;
Other requirements, such as greenhouse gas reporting and verification, offset protocols, criteria and process, and supervision and enforcement, to prevent fraud, abuse, and market manipulation;
Common program registry, electronic auction platform, tracking systems for compliance instruments, and monitoring of compliance instruments;
Provisions to ensure coordinated administrative and technical support;
Provisions for public notice and participation; and
Provisions to collectively resolve differences, amend the agreements, and delink or otherwise withdraw from the agreements.
Before entering into a linkage agreement under this section, the department must establish a finding that the linking jurisdiction and the linkage agreement meets certain criteria identified under this subsection. In the event that the department determines that a full linkage agreement is unlikely to meet the criteria, it may enter into a linkage agreement with limitations, including limits on the share of compliance that may be met with allowances originating from linked jurisdictions and other limitations deemed necessary by the department. A linkage agreement approved by the department must:
Achieve the purposes identified in subsection (1) of this section;
Ensure that the linking jurisdiction has provisions to ensure the distribution of benefits from the program to vulnerable populations and overburdened communities;
Include an agreement to not yield net adverse impacts to either jurisdictions' highly impacted communities or analogous communities in the aggregate, relative to the baseline level of emissions; and
Not adversely impact Washington's ability to achieve the emission reduction limits established in RCW 70A.45.020.
The state must retain legal and policymaking authority over its program design and enforcement.
The department shall adopt rules to implement the provisions of the program established in sections 5 through 18 of this act. The department may adopt emergency rules pursuant to RCW 34.05.350 for initial implementation of the program, to implement the state omnibus appropriations act for the 2021-2023 fiscal biennium, and to ensure that reporting and other program requirements are determined early for the purpose of program design and early notice to registered entities with a compliance obligation under the program.
The climate investment account is created in the state treasury. All receipts from the auction of allowances authorized in this chapter must be deposited into the account. Projects or activities funded from the account must meet high labor standards, including family sustaining wages, providing benefits including health care and pensions, career development opportunities, and maximize access to economic benefits from such projects for local workers and diverse businesses. Each contracting entity's proposal must be reviewed for equity and opportunity improvement efforts, including: (a) Employer paid sick leave programs; (b) pay practices in relation to living wage indicators such as the federal poverty level; (c) efforts to evaluate pay equity based on gender identity, race, and other protected status under Washington law; (d) facilitating career development opportunities, such as apprenticeship programs, internships, job-shadowing, and on-the-job training; and (e) employment assistance and employment barriers for justice affected individuals.
Moneys in the account may only be spent after appropriation and must be used for the following purposes:
To cover the department's and other agencies' costs to support and administer the program, including coordination of allowance auctions, tracking of emissions and allowances, rule making, evaluation, monitoring, and verification, and stakeholder communication and outreach, as appropriated pursuant to enacted biennial and supplemental operating budgets;
Deposited into the state general fund to implement the working families tax rebate in RCW 82.08.0206;
Clean transportation programs, activities, or projects that reduce transportation-related greenhouse gas emissions, including but not limited to programs, activities, or projects that: (i) Accelerate the deployment of zero-emission fleets and vehicles, including off-road and maritime vehicles and vessels; (ii) create zero-emission vehicle refueling infrastructure or deploy grid infrastructure to integrate electric vehicles and electric vehicle supply equipment; (iii) reduce vehicle miles traveled or increase public transportation, including investing in public transit, transportation demand management, nonmotorized transportation, affordable transit-oriented housing, and high-speed rural broadband to facilitate telecommuting options such as telemedicine or online job training; or (iv) increase fuel efficiency in vehicles and vessels where options to convert to zero-emissions, low-carbon fuels, or public transportation are cost-prohibitive and inapplicable or unavailable;
Natural climate resilience solutions that improve the resilience of the state's waters, forests, and other vital ecosystems to the impacts of climate change, and increase their carbon pollution reduction capacity through sequestration, storage, and overall ecosystem integrity. This includes programs, activities, or projects that: (i) Restore and protect estuaries, fisheries, and marine shoreline habitats, and prepare for sea level rise; (ii) increase the ability to remediate and adapt to the impacts of ocean acidification; (iii) reduce flood risk and restore natural floodplain ecological function; (iv) increase the sustainable supply of water and improve aquatic habitat, including groundwater mapping and modeling; (v) improve infrastructure treating stormwater from previously developed areas within an urban growth boundary designated under chapter 36.70A RCW, with a preference given to projects that use green stormwater infrastructure; (vi) either preserve or increase, or both, carbon sequestration and storage benefits in forests and agricultural soils; (vii) increase forest and community resilience to wildfire in the face of increased seasonal temperatures and drought; or (viii) improve forest health and reduce vulnerability to changes in hydrology, insect infestation, and other impacts of climate change;
Clean energy transition and assistance programs, activities, or projects that assist affected workers or people with lower incomes during the transition to a clean energy economy, or grow and expand clean manufacturing capacity in communities across Washington state including, but not limited to:
Programs, activities, or projects that directly improve energy affordability and reduce the energy burden of people with lower incomes, as well as the higher transportation fuel burden of rural residents, such as bill assistance programs and weatherization programs;
Reductions in dependence on fossil fuels used for transportation, including public and shared transportation for access and mobility;
Community renewable energy projects that allow qualifying participants to own or receive the benefits of those projects at reduced or no cost;
Programs, activities, or other worker-support projects for bargaining unit and nonsupervisory fossil fuel workers who are affected by the transition away from fossil fuels to a clean energy economy. Worker support may include, but is not limited to: (A) Full wage replacement, health benefits, and pension contributions for every worker within five years of retirement; (B) full wage replacement, health benefits, and pension contributions for every worker with at least one year of service for each year of service up to five years of service; (C) wage insurance for up to five years for workers reemployed who have more than five years of service; (D) up to two years of retraining costs, including tuition and related costs, based on in-state community and technical college costs; (E) peer counseling services during transition; (F) employment placement services, prioritizing employment in the clean energy sector; and (G) relocation expenses;
Direct investment in workforce development, via technical education, community college, apprenticeships, and other programs;
Moneys in the account may not be used for projects that would violate tribal treaty rights or result in significant long-term damage to critical habitat or ecological functions. Investments from this account must result in long-term environmental benefits and increased resiliency to the impacts of climate change.
When allocating funds from the climate investment account created in section 20 of this act or administering grants funded by the account, agencies shall conduct an environmental justice analysis and ensure that a meaningful percentage of total investments authorized under this chapter provide direct and meaningful benefits to vulnerable populations within the boundaries of overburdened communities through: (a) The direct reduction of environmental burdens in overburdened communities; (b) the reduction of disproportionate, cumulative risk from environmental burdens, including climate change; (c) the support of community-led project development, planning, and participation costs; or (d) meeting a community need identified by vulnerable members of the community that is consistent with the intent of this chapter.
The environmental justice analysis must adhere to the following principles: (a) Benefits should be directed to areas and targeted to vulnerable populations and overburdened communities to reduce statewide disparities; (b) investments should be made proportional to the health disparities that a specific community experiences to eliminate the disparities; (c) investments should focus on creating environmental benefits, including eliminating health burdens, creating community and population resilience, and raising the quality of life of those in the community; (d) efforts should be made to balance investments across the state and within counties, local jurisdictions, and unincorporated areas as appropriate to reduce disparities by location and to ensure efforts contribute to a reduction in disparities that exist based on race or ethnicity.
Agencies allocating funds or administering grants from the climate investment account must report annually to the environmental justice and equity advisory panel and the office of equity regarding progress toward meeting environmental justice and environmental health goals.
The office of equity shall establish an environmental justice and equity advisory panel to provide recommendations to the legislature and the governor in the development and implementation of the program established in sections 5 through 18 of this act, and the programs funded from the climate investment account created in section 20 of this act.
The office of equity must convene the environmental justice and equity advisory panel by January 1, 2023. The office equity may seek nominations or recommendations from organizations across the state representing the interests specified in this section. Members of the panel must be selected for geographic and organizational diversity and must include the following:
Individuals representing the interests of vulnerable populations residing in overburdened communities in different geographic areas of the state with expertise in environmental justice and equity issues;
Individuals representing union labor with expertise in economic dislocation, clean energy economy, or emissions-intensive, trade-exposed facilities; and
Two members representing tribal communities, one from eastern Washington and one from western Washington.
The purpose of the panel is to:
Provide recommendations to the legislature and the governor in the development of investment plans and funding proposals for the programs funded from the climate investment account;
Provide a forum to analyze policies adopted under this chapter to determine if the policies lead to improvements within overburdened communities;
Recommend procedures and criteria for evaluating programs, activities, or projects for review;
Evaluate the level of funding provided to assist vulnerable populations, low-income individuals, and impacted workers and the funding of projects and activities located within or benefiting overburdened communities;
Recommend environmental justice and environmental health goals for programs, activities, and projects funded from the climate investment account, and review agency annual reports on outcomes and progress toward meeting goals; and
Provide recommendations to implementing agencies for meaningful consultation with vulnerable populations.
The environmental justice and equity advisory panel shall meet on a schedule established by the office of equity, in consultation with the department, to allow for timely and substantive input into processes and decisions consistent with its purpose.
The environmental justice and equity advisory panel constitutes a class one group under RCW 43.03.220. Expenses for this group must be included in costs to support and administer the program and are an allowable expense under section 20(2)(a) of this act.
Before allocating funding or administering grant programs appropriated from the climate investment account, agencies must consult with Indian tribes on all funding decisions that affect Indian tribes' rights and interests in their tribal lands. The consultation must occur pursuant to chapter 43.376 RCW and must be independent of any public participation process required by state law, or by a state agency, and regardless of whether the agency receives a request for consultation from an Indian tribe. Agencies must develop a consultation framework in coordination with tribal governments that includes best practices, protocols for communication, and collaboration with Indian tribes.
This section modifies existing section 70A.15.1030. Here is the modified chapter for context.
The definitions in this section apply throughout this chapter unless the context clearly requires otherwise.
"Air contaminant" means dust, fumes, mist, smoke, other particulate matter, vapor, gas, odorous substance, or any combination thereof.
"Air pollution" is presence in the outdoor atmosphere of one or more air contaminants in sufficient quantities and of such characteristics and duration as is, or is likely to be, injurious to human health, plant or animal life, or property, or which unreasonably interfere with enjoyment of life and property. For the purpose of this chapter, air pollution shall not include air contaminants emitted in compliance with chapter 17.21 RCW.
"Air quality standard" means an established concentration, exposure time, and frequency of occurrence of an air contaminant or multiple contaminants in the ambient air which shall not be exceeded.
"Ambient air" means the surrounding outside air.
"Authority" means any air pollution control agency whose jurisdictional boundaries are coextensive with the boundaries of one or more counties.
"Best available control technology" (BACT) means an emission limitation based on the maximum degree of reduction for each air pollutant subject to regulation under this chapter emitted from or that results from any new or modified stationary source, that the permitting authority, on a case-by-case basis, taking into account energy, environmental, and economic impacts and other costs, determines is achievable for such a source or modification through application of production processes and available methods, systems, and techniques, including fuel cleaning, clean fuels, or treatment or innovative fuel combustion techniques for control of each such a pollutant. In no event shall application of "best available control technology" result in emissions of any pollutants that will exceed the emissions allowed by any applicable standard under 40 C.F.R. Part 60 and Part 61, as they exist on July 25, 1993, or their later enactments as adopted by reference by the director by rule. Emissions from any source utilizing clean fuels, or any other means, to comply with this subsection shall not be allowed to increase above levels that would have been required under the definition of BACT as it existed prior to enactment of the federal clean air act amendments of 1990.
"Best available retrofit technology" (BART) means an emission limitation based on the degree of reduction achievable through the application of the best system of continuous emission reduction for each pollutant that is emitted by an existing stationary facility. The emission limitation must be established, on a case-by-case basis, taking into consideration the technology available, the costs of compliance, the energy and nonair quality environmental impacts of compliance, any pollution control equipment in use or in existence at the source, the remaining useful life of the source, and the degree of improvement in visibility that might reasonably be anticipated to result from the use of the technology.
"Board" means the board of directors of an authority.
"Control officer" means the air pollution control officer of any authority.
"Department" or "ecology" means the department of ecology.
"Emission" means a release of air contaminants into the ambient air.
"Emission standard" and "emission limitation" mean a requirement established under the federal clean air act or this chapter that limits the quantity, rate, or concentration of emissions of air contaminants on a continuous basis, including any requirement relating to the operation or maintenance of a source to assure continuous emission reduction, and any design, equipment, work practice, or operational standard adopted under the federal clean air act or this chapter.
"Emission," "emission standard," and "emission limitation," as applied to greenhouse gases as defined in RCW 70A.45.010, include indirect emissions of greenhouse gases resulting from production or distribution of petroleum products, natural gas, or other products, where the release of air contaminants into the ambient air occurs during the consumption, use, combustion, or oxidation of the products.
"Fine particulate" means particulates with a diameter of two and one-half microns and smaller.
"Lowest achievable emission rate" (LAER) means for any source that rate of emissions that reflects:
The most stringent emission limitation that is contained in the implementation plan of any state for such class or category of source, unless the owner or operator of the proposed source demonstrates that such limitations are not achievable; or
The most stringent emission limitation that is achieved in practice by such class or category of source, whichever is more stringent.
In no event shall the application of this term permit a proposed new or modified source to emit any pollutant in excess of the amount allowable under applicable new source performance standards.
"Modification" means any physical change in, or change in the method of operation of, a stationary source that increases the amount of any air contaminant emitted by such source or that results in the emission of any air contaminant not previously emitted. The term modification shall be construed consistent with the definition of modification in Section 7411, Title 42, United States Code, and with rules implementing that section.
"Multicounty authority" means an authority which consists of two or more counties.
"New source" means (a) the construction or modification of a stationary source that increases the amount of any air contaminant emitted by such source or that results in the emission of any air contaminant not previously emitted, and (b) any other project that constitutes a new source under the federal clean air act.
"Permit program source" means a source required to apply for or to maintain an operating permit under RCW 70A.15.2260.
"Person" means an individual, firm, public or private corporation, association, partnership, political subdivision of the state, municipality, or governmental agency.
"Reasonably available control technology" (RACT) means the lowest emission limit that a particular source or source category is capable of meeting by the application of control technology that is reasonably available considering technological and economic feasibility. RACT is determined on a case-by-case basis for an individual source or source category taking into account the impact of the source upon air quality, the availability of additional controls, the emission reduction to be achieved by additional controls, the impact of additional controls on air quality, and the capital and operating costs of the additional controls. RACT requirements for a source or source category shall be adopted only after notice and opportunity for comment are afforded.
"Silvicultural burning" means burning of wood fiber on forestland consistent with the provisions of RCW 70A.15.5120.
"Source" means all of the emissions units including quantifiable fugitive emissions, that are located on one or more contiguous or adjacent properties, and are under the control of the same person, or persons under common control, whose activities are ancillary to the production of a single product or functionally related group of products.
"Stationary source" means any building, structure, facility, or installation that emits or may emit any air contaminant.
"Trigger level" means the ambient level of fine particulates, measured in micrograms per cubic meter, that must be detected prior to initiating a first or second stage of impaired air quality under RCW 70A.15.3580.
This section modifies existing section 70.15.2200. Here is the modified chapter for context.
The board of any activated authority or the department, may classify air contaminant sources, by ordinance, resolution, rule or regulation, which in its judgment may cause or contribute to air pollution, according to levels and types of emissions and other characteristics which cause or contribute to air pollution, and may require registration or reporting or both for any such class or classes. Classifications made pursuant to this section may be for application to the area of jurisdiction of such authority, or the state as a whole or to any designated area within the jurisdiction, and shall be made with special reference to effects on health, economic and social factors, and physical effects on property.
Except as provided in subsection (3) of this section, any person operating or responsible for the operation of air contaminant sources of any class for which the ordinances, resolutions, rules or regulations of the department or board of the authority, require registration or reporting shall register therewith and make reports containing information as may be required by such department or board concerning location, size and height of contaminant outlets, processes employed, nature of the contaminant emission and such other information as is relevant to air pollution and available or reasonably capable of being assembled. In the case of emissions of greenhouse gases as defined in RCW 70A.45.010 the department shall adopt rules requiring reporting of those emissions. The department or board may require that such registration or reporting be accompanied by a fee, and may determine the amount of such fee for such class or classes: PROVIDED, That the amount of the fee shall only be to compensate for the costs of administering such registration or reporting program which shall be defined as initial registration and annual or other periodic reports from the source owner providing information directly related to air pollution registration, on-site inspections necessary to verify compliance with registration requirements, data storage and retrieval systems necessary for support of the registration program, emission inventory reports and emission reduction credits computed from information provided by sources pursuant to registration program requirements, staff review, including engineering or other reliable analysis for accuracy and currentness, of information provided by sources pursuant to registration program requirements, clerical and other office support provided in direct furtherance of the registration program, and administrative support provided in directly carrying out the registration program: PROVIDED FURTHER, That any such registration made with either the board or the department shall preclude a further registration and reporting with any other board or the department, except that emissions of greenhouse gases as defined in RCW 70A.45.010 must be reported as required under subsection (5) of this section.
All registration program and reporting fees collected by the department shall be deposited in the air pollution control account. All registration program fees collected by the local air authorities shall be deposited in their respective treasuries.
This subsection does not apply to a grain warehouse or grain elevator if the warehouse or elevator handles more than ten million bushels of grain annually.
For the purposes of subsection (3) of this section:
A "grain warehouse" or "grain elevator" is an establishment classified in standard industrial classification (SIC) code 5153 for wholesale trade for which a license is required and includes, but is not limited to, such a licensed facility that also conducts cleaning operations for grain;
A "license" is a license issued by the department of agriculture licensing a facility as a grain warehouse or grain elevator under chapter 22.09 RCW or a license issued by the federal government licensing a facility as a grain warehouse or grain elevator for purposes similar to those of licensure for the facility under chapter 22.09 RCW; and
"Grain" means a grain or a pulse.
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The department shall adopt rules requiring persons to report emissions of greenhouse gases as defined in RCW 70A.45.010 where those emissions from a single facility, or from electricity or fossil fuels sold in Washington by a single supplier**,** meet or exceed ten thousand metric tons of carbon dioxide equivalent annually. The rules adopted by the department must support implementation of the program created in section 5 of this act. In addition, the rules must require that:
Emissions of greenhouse gases resulting from the combustion of fossil fuels be reported separately from emissions of greenhouse gases resulting from the combustion of biomass; and
Each annual report must include emissions data for the preceding calendar year and must be submitted to the department by March 31st of the year in which the report is due.
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i.
The department may by rule include additional gases to the definition of "greenhouse gas" in RCW 70A.45.010 only if the gas has been designated as a greenhouse gas by the United States congress , by the United States environmental protection agency**, or included in external greenhouse gas emission trading programs where Washington has a linkage agreement in effect pursuant to section 18 of this act**. Prior to including additional gases to the definition of "greenhouse gas" in RCW 70A.45.010, the department shall notify the appropriate committees of the legislature.
ii. The department may by rule exempt persons who are required to report greenhouse gas emissions to the United States environmental protection agency and who emit less than ten thousand metric tons carbon dioxide equivalent annually.
iii. The department must establish a methodology for persons who are not required to report under this section to voluntarily report their greenhouse gas emissions.
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i. The department shall review and if necessary update its rules whenever **:**
(A) The United States environmental protection agency adopts final amendments to 40 C.F.R. Part 98 to ensure consistency with federal reporting requirements for emissions of greenhouse gases**; or**
(B) Needed to ensure consistency with emissions reporting requirements for jurisdictions with a linkage agreement pursuant to section 18 of this act.
ii. **The** department shall not amend its rules in a manner that conflicts with this **section**.
d. The department shall share any reporting information reported to it with the local air authority in which the person reporting under the rules adopted by the department operates.
e. The fee provisions in subsection (2) of this section apply to reporting of emissions of greenhouse gases. Persons required to report under (a) of this subsection who fail to report or pay the fee required in subsection (2) of this section are subject to enforcement penalties under this chapter. The department shall enforce the reporting rule requirements **. When a person that holds a compliance obligation under section 8 of this act fails to submit an emissions data report or fails to obtain a positive emissions data verification statement in accordance with (g)(ii) of this subsection, the department may assign an emissions level for that person**.
f. The energy facility site evaluation council shall, simultaneously with the department, adopt rules that impose greenhouse gas reporting requirements in site certifications on owners or operators of a facility permitted by the energy facility site evaluation council. The greenhouse gas reporting requirements imposed by the energy facility site evaluation council must be the same as the greenhouse gas reporting requirements imposed by the department. The department shall share any information reported to it from facilities permitted by the energy facility site evaluation council with the council, including notice of a facility that has failed to report as required. The energy facility site evaluation council shall contract with the department to monitor the reporting requirements adopted under this section.
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i. The **department must establish by rule the methods of verifying the accuracy of emissions reports.**
ii. **Verification requirements apply at a minimum to persons required to report under (a) of this subsection with emissions that equal or exceed 25,000 metric tons of carbon dioxide equivalent emissions, including carbon dioxide from biomass-derived fuels, or to persons who have a compliance obligation under section 7 of this act in any year of the current compliance period**.
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i. The definitions in RCW 70A.45.010 apply throughout this subsection (5) unless the context clearly requires otherwise.
ii. For the purpose of this subsection (5), the term "supplier" includes: (A) **Suppliers that produce, import, or deliver, or any combination of producing, importing, or delivering, a quantity of fuel products in Washington that, if completely combusted, oxidized, or used in other processes, would result in the release of greenhouse gases equivalent to or higher than the threshold established under (a) of this subsection; and (B) suppliers of carbon dioxide that produce, import, or deliver a quantity of carbon dioxide in Washington that, if released, would result in emissions equivalent to or higher than the threshold established under (a) of this subsection**.
iii. For the purpose of this subsection (5), the term "person" includes: (A) An owner or operator**of a facility; (B) a supplier; or (C) an electric power entity.**
iv. **For the purpose of this subsection (5), the term "facility" includes facilities that directly emit greenhouse gases in Washington equivalent to the threshold established under (a) of this subsection with at least one source category listed in the United States environmental protection agency's mandatory greenhouse gas reporting regulation, 40 C.F.R. Part 98 Subparts C through II and RR through UU, as adopted on April 25, 2011.**
v. **For the purpose of this subsection (5), the term "electric power entity" includes any of the following that supply electric power in Washington with associated emissions of greenhouse gases equal to or above the threshold established under (a) of this subsection: (A) Electricity importers and exporters; (B) retail providers, including multijurisdictional retail providers; (C) federal power market agencies; and (D) first jurisdictional deliverers, as defined in section 2 of this act, not otherwise included here**.
This section modifies existing section 70A.15.3000. Here is the modified chapter for context.
The department shall have all the powers as provided in RCW 70A.15.2040.
The department, in addition to any other powers vested in it by law after consideration at a public hearing held in accordance with chapters 42.30 and 34.05 RCW shall:
Adopt rules establishing air quality objectives and air quality standards;
Adopt emission standards which shall constitute minimum emission standards throughout the state. An authority may enact more stringent emission standards, except for emission performance standards for new woodstoves and opacity levels for residential solid fuel burning devices which shall be statewide, but in no event may less stringent standards be enacted by an authority without the prior approval of the department after public hearing and due notice to interested parties;
Adopt by rule air quality standards and emission standards for the control or prohibition of emissions to the outdoor atmosphere of radionuclides, dust, fumes, mist, smoke, other particulate matter, vapor, gas, odorous substances, or any combination thereof. Such requirements may be based upon a system of classification by types of emissions or types of sources of emissions, or combinations thereof, which it determines most feasible for the purposes of this chapter. The department may require persons who produce or distribute fossil fuels or other products that emit greenhouse gases in Washington to comply with air quality standards, emission standards, or emission limitations on emissions of greenhouse gases. If the program review in section 6(2) of this act finds that greenhouse gases and criteria pollutants are not being reduced in communities identified as highly impacted by the department of health's environmental health disparities map, then, as a means of ensuring that the program created in sections 5 through 18 of this act achieves reductions in greenhouse gas emissions and other criteria pollutants in overburdened communities highly impacted by pollution, the department shall prioritize the adoption of air quality standards, emission standards, or emission limitations on fuel suppliers or covered entities located in those areas. However, an industry, or the air pollution control authority having jurisdiction, can choose, subject to the submittal of appropriate data that the industry has quantified, to have any limit on the opacity of emissions from a source whose emission standard is stated in terms of a weight of particulate per unit volume of air (e.g., grains per dry standard cubic foot) be based on the applicable particulate emission standard for that source, such that any violation of the opacity limit accurately indicates a violation of the applicable particulate emission standard. Any alternative opacity limit provided by this section that would result in increasing air contaminants emissions in any nonattainment area shall only be granted if equal or greater emission reductions are provided for by the same source obtaining the revised opacity limit. A reasonable fee may be assessed to the industry to which the alternate opacity standard would apply. The fee shall cover only those costs to the air pollution control authority which are directly related to the determination on the acceptability of the alternate opacity standard, including testing, oversight and review of data.
The air quality standards and emission standards may be for the state as a whole or may vary from area to area or source to source, except that emission performance standards for new woodstoves and opacity levels for residential solid fuel burning devices shall be statewide, as may be appropriate to facilitate the accomplishment of the objectives of this chapter and to take necessary or desirable account of varying local conditions of population concentration, the existence of actual or reasonably foreseeable air pollution, topographic and meteorologic conditions and other pertinent variables.
The department is directed to cooperate with the appropriate agencies of the United States or other states or any interstate agencies or international agencies with respect to the control of air pollution and air contamination, or for the formulation for the submission to the legislature of interstate air pollution control compacts or agreements.
The department is directed to conduct or cause to be conducted a continuous surveillance program to monitor the quality of the ambient atmosphere as to concentrations and movements of air contaminants and conduct or cause to be conducted a program to determine the quantity of emissions to the atmosphere.
The department shall enforce the air quality standards and emission standards throughout the state except where a local authority is enforcing the state regulations or its own regulations which are more stringent than those of the state.
The department shall encourage local units of government to handle air pollution problems within their respective jurisdictions; and, on a cooperative basis provide technical and consultative assistance therefor.
The department shall have the power to require the addition to or deletion of a county or counties from an existing authority in order to carry out the purposes of this chapter. No such addition or deletion shall be made without the concurrence of any existing authority involved. Such action shall only be taken after a public hearing held pursuant to the provisions of chapter 34.05 RCW.
The department shall establish rules requiring sources or source categories to apply reasonable and available control methods. Such rules shall apply to those sources or source categories that individually or collectively contribute the majority of statewide air emissions of each regulated pollutant. The department shall review, and if necessary, update its rules every five years to ensure consistency with current reasonable and available control methods. The department shall have adopted rules required under this subsection for all sources by July 1, 1996.
For the purposes of this section, "reasonable and available control methods" shall include but not be limited to, changes in technology, processes, or other control strategies.
This act may be known and cited as the Washington climate commitment act.
Sections 5 through 18 of this act, and any rules adopted by the department of ecology to implement the program established under those sections, expire December 31, 2055, in the event that the department of ecology determines by December 1, 2055, that the 2050 emissions limits of RCW 70A.45.020 have been met for two or more consecutive years.
Upon the occurrence of the events identified in subsection (1) of this section, the department of ecology must provide written notice of the expiration date of sections 5 through 18 of this act to affected parties, the chief clerk of the house of representatives, the secretary of the senate, the office of the code reviser, and others as deemed appropriate by the department.
If any provision of this act or its application to any person or circumstance is held invalid, the remainder of the act or the application of the provision to other persons or circumstances is not affected.