HB1513 – Modifying SB5373 on issuing up to $4.943 billion in bonds, backed by a tax on fossil fuels, to be used for reducing greenhouse gas emissions and natural climate solutions.
Prime Sponsor – Representative Lekanoff (D; 40th District; parts of Whatcom, Skagit, & San Juan County) (Co-sponsor Shewmake – D)
Current status – Referred to the House Committee on Environment and Energy.
Next step would be – Scheduling a hearing.
SB5373 is a similar bill in the Senate.
Legislative tracking page for the bill.
Comments –
The bill maintains the general structure of SB5373, but modifies it in a number of ways. The Senate bill has Ecology make recommendations to the Legislature if it decides the tax isn’t high enough to produce specified reductions; this bill would raise the rate until it was predicted to achieve them. Its definition of “greenhouse gases” would include any Ecology designated. It would not exempt fossil fuel burned in the state to generate electricity, and would require refineries to report their fossil fuel use. It adds some details about collaborating with the Department of Licensing to administer the tax on motor fuels, and reporting by companies on how the costs of the tax are being passed on to consumers. It no longer includes a four year trial period in which emissions from any energy-intensive trade exposed industries that weren’t exempted by new Ecology rules would be taxed, though it keeps the Senate bill’s requirement for a 2026 report to the Governor and the Legislature with recommendations on taxing those emissions. It specifies that the tax doesn’t apply to electricity or to any fuels that aren’t fossil fuels, such as green hydrogen, not just biofuels. It drops specified funding for the sustainable farms and fields grants program, and for riparian easements. It would provide environmental justice oversight through the Environmental Justice Council that would be created by this session’s SB5141, rather than through SB5373’s Environmental and Economic Justice Panel, and define its responsibilities differently. It would create a new Climate Oversight Board. It no longer requires high priority to be given to funding projects that directly benefit the economically distressed areas defined in RCW 43.168.020, would not require 25% of the investments to benefit rural areas, and would drop the Senate bill’s section on required consultation with tribes. It makes a number of small changes about agency roles and other things.
It’s not clear to me whether it would increase Ecology’s current authorization to regulate greenhouse gases under the Clean Air Act if the tax were invalidated.
Summary –
The bill places a carbon tax of $25/metric ton on the life cycle CO2 equivalent emissions associated with the sale or use of fossil fuels burned in the state. It’s to begin in 2023, increase by 5% a year and be adjusted for inflation. Every two years the Department of Commerce, in consultation with Ecology, would have to reevaluate the tax rate needed to ensure the state achieved a goal of net-zero emissions by 2050. In January 2030, if Ecology determined that the emissions covered by the bill weren’t falling at a sufficient rate to produce their share of the reductions needed to meet the state’s targets, the rate would increase by $10/tonne, with an added annual increase of $2/tonne each year until Ecology estimated it would be sufficient to achieve the needed reductions. At that point, the added $2 annual increase would no longer apply. All the revenue is to be used to fund projects and activities that reduce greenhouse gas emissions or mitigate the environmental impacts of those emissions and of climate change. The bill would stop the Department of Ecology from regulating greenhouse gas emissions under the Clean Air Act, but would authorize it to use the full extent of its authority to regulate them under the Act to help achieve the state’s targets for reductions if the tax were invalidated.
The tax is to be paid by the state and political subdivisions like counties and cities as well as by businesses. Distribution companies are to pay the tax on natural gas sold to retail customers and to utilities for generating power; direct access customers are to pay the tax on their gas use. The tax on motor vehicle fuel and special fuel is to be paid by the same parties who are currently responsible for paying the fuel tax. The bill specifies reporting and payment requirements for refineries.
The bill exempts fuel brought into the state in a primary fuel supply tank and burned, fuels that the State’s prohibited from taxing by Federal law or by laws about Indians’ property, fuel exported from the state, coal burned at the Transalta plant, agricultural and aircraft fuels, any fuels that aren’t fossil fuels, and fuel bought in the state but burned outside it by ships and interstate motor carriers. During a five year transition period, it exempts fuels used for transporting logs and agricultural products, and for extracting timber. Fuels that have already paid a carbon tax or charge on their lifecycle emissions to another jurisdiction are eligible for a credit of up to that amount against the tax owed in Washington. By July 30th 2026, the Department of Ecology is to make recommendations to the Legislature on applying the tax to emissions from energy intensive trade exposed industries.
The bill gives the Departments of Revenue, Ecology, Licensing, Transportation, and Commerce the authority to adopt any rules they deem necessary to implement it; Ecology, Commerce, and the WSU Energy Extension Program are to provide technical assistance in administering the bill to the Department of Revenue if it requests it. The Department of Revenue is to issue a report every two years including:
1. The total carbon pollution taxes collected during the reporting period and a list of the taxpayers and the tax they paid;
2. Estimated costs incurred by the department, Commerce, and Ecology in administering the bill, as a dollar amount and as a percentage of the tax collected;
3. The impact on the state’s economy including verifiable data on emissions leakage and any job losses since the implementation of the tax, and
4. A summary of the investments made through Commerce’s allocations of the revenue, including amounts invested in each program area, project descriptions, names of grant recipients, an estimate of the emissions reductions achieved or anticipated via the investments, and other information requested by the Legislature.
The report’s to include recommendations for modifying or improving the act to ensure its goals are being met, and the first report is to include recommendations for auditing the expenditures. The Department of Commerce is to provide information on its website about the impacts of the tax on the price of natural gas and vehicle fuels by sector, and must provide an environmental justice analysis reporting on the environmental, health, and economic impacts of climate and of state measures taken to meet our emissions limits on highly impacted communities and vulnerable populations.
The Finance Committee is authorized to issue up to $4.943 billion in bonds during a ten year period, with terms that mean they’ll be fully repaid no later than December 31, 2050. They may be tax exempt or taxable, may be certified as green bonds or climate bonds, and may include new bonds to pay off outstanding bonds. They’re to be secured solely by pledged revenues from the carbon tax, and their repayment is to be the first priority for spending those. (Up to 5% of the remaining revenue may be used for administering the provisions of the bill.)
The backers of SB5373 estimate $16 billion will be raised by the tax over the first ten years, after the payment of 3.5% in debt service. Thus, funds will be available from the bonds when they are issued, and then from the portion of the ongoing revenue stream that isn’t needed for repayment of the principal, debt service and administrative expenses. 75% of that money available for investments is to be spent on reducing greenhouse gas emissions. (75% of this money is to be spent on programs, projects, and activities to reduce or mitigate the impact of transportation emissions, including:
1. Deploying clean alternative fuel vehicle charging and refueling infrastructure;
2. Supporting clean alternative fuel car sharing programs for underserved communities and low to moderate-income workers not readily served by transit, or in corridors with emissions that exceed federal or state standards;
3. Providing financing to facilitate the purchase of battery and fuel cell electric vehicles by lower-income residents;
4. Providing grants to transit authorities for cost-effective capital projects that reduce the carbon intensity of the transportation system including electrifying fleets, modifying
or replacing capital facilities to facilitate fleet electrification or hydrogen refueling, upgrading transmission and distribution systems, and constructing charging and fueling stations;
5. Providing support to small trucking firms in converting vehicles to cleaner alternative fuels, acquiring and accessing fueling infrastructure, and mitigating the costs of transitioning to cleaner vehicles;
6. Electrifying and decarbonizing the passenger ferry fleet; and
7. Converting state, county, city, and public transit agency fleets to battery or fuel cell electric vehicles.
The remaining 25% of this money for reducing emissions may be spent on programs, activities, or projects in the state including:
1. Supplementing the growth management planning and environmental review fund for making grants or loans to local governments for land use planning;
2. Deploying renewable energy resources or distributed generation, energy storage, demand side technologies and strategies, and modernizing the grid;
3. Increasing the energy efficiency or reducing the greenhouse emissions of industrial facilities including implementing combined heat and power, district energy, or on-site renewables, upgrading the energy efficiency of existing equipment, reducing process emissions, and switching to less emissions intensive fuel;
4. Achieving energy efficiency or emissions reductions in the agricultural sector through steps such as fertilizer management, soil management, bioenergy, and biofuels;
5. Increasing energy efficiency in new and existing buildings, or promoting low-carbon
architecture, including the use of building materials that result in a lower carbon footprint over the life cycle of the building and component materials;
6. Promoting the electrification and decarbonization of new and existing buildings, and
7. Improving energy efficiency, including supporting district energy, and investments in market transformation by energy efficiency products.
The other 25% of the initial revenue from the bonds, and what’s remaining from the ongoing tax revenue after servicing the bonds and paying administrative expenses, is to be spent on natural climate solutions – to increase the resilience of waters, forests, and other vital ecosystems to the impacts of climate change, and to increase their carbon pollution reduction capacity through sequestration, storage, and ecosystem integrity. It can be spent to:
1. Restore and protect estuaries, fisheries, and marine shoreline habitats, and prepare for sea level rise including making fish passage correction investments;
2. Increase the ability to remediate and adapt to ocean acidification;
3. Reduce flood risk and restore natural floodplain ecological function;
4. Increase the sustainable supply of water and improve aquatic habitat, including groundwater mapping and modeling;
5. Improve infrastructure treating stormwater from previously developed areas within an urban growth boundary, with a preference for projects that use green stormwater infrastructure; or to
6. Preserve or increase carbon sequestration and storage benefits in agricultural soils and timber stock.
It can also be spent on forest investments to:
1. Increase resilience to wildfire in the face of increased seasonal temperatures and drought; or
2. Improve forest health and reduce vulnerability to changes in hydrology, insect infestation, and other impacts of climate change.
At least 35% of the investments under the bill must provide direct benefits to vulnerable populations in highly impacted communities; at least 25% of them must benefit rural areas, and at least 10% of them must benefit tribes. The bill would have the Environmental Justice Council that would be created by this session’s SB5141 “prepare recommendations for and provide oversight of the impacts of the … tax … and associated programs …affecting low- income populations, vulnerable populations, and highly impacted communities.” It would define environmental justice progress indicators for the act including:
1. The elimination of materials emitting carbon dioxide, black carbon, methane, nitrogen oxides, and fluorinated gases imported into or extracted in the state;
2. The elimination of the emissions outside the state attributable to consumption in the state;
3. Air quality, water quality, and land and buildings free from toxins associated with fossil fuels;
4. The elimination of environmental health disparities that disproportionately impact households that are Black, indigenous, people of color’s, or are in areas that are highly impacted communities; and
5. The reduction of economic inequality and elimination of poverty and the prevalence of livelihoods and high-road employment opportunities accessible to all.
It would also “define and provide instruction on meaningful consultation with vulnerable populations and low-income populations” and provide opportunities for vulnerable populations to consult on the implementation of the act.
The bill would create a Climate Oversight Board appointed by the Governor and responsible for ongoing review of the implementation of the tax and funding to ensure the fairest, most equitable, most efficient, and timely achievement of bill’s objectives. Members would come from a specified list of stakeholders, would serve four yer terms, and would select a chair from the Board. It’s responsibilities would include reviewing plans for implementing the funding programs including the criteria for allocations and project awards, as well as information about projects and funding decisions. It would review progress reports by agencies and compliance with consultation requirements; and would provide recommendations for standards for measuring emissions reductions from investments. It’s authorized to act jointly with the Environmental Justice Council in carrying out these responsibilities, and to contract with the Washington Academy of Sciences to provide evaluations. It’s to report to the Legislature every two years.