HB1682 – Provides additional free allowances, reduced over time, for emissions-intensive trade-exposed facilities, and allows using cap and invest revenue for reducing their emissions.
Prime Sponsor – Representative Fitzgibbon (D; 34th District; Vashon Island & West Seattle) (Requested by the Department of Ecology)
Current status – Had a hearing in Environment & Energy Tuesday January 18th. Replaced by a substitute from the prime sponsor and passed out of committee February 1st. Referred to Appropriations, and had a hearing there February 5th. Replaced by a second substitute from the prime sponsor advancing the date for completion of Ecology’s report on alternative methods for managing the distribution of credits to EITEs from 2026 to 2024, providing a detailed statement of legislative intent about criteria for the policies which Ecology is to consider in preparing the report, and making some other changes that are summarized by staff at the beginning of it. Passed out of committee February 28th; referred to Rules.
Next step would be – Action by the Rules Committee.
Legislative tracking page for the bill.
Comments –
Section 26(5) of the Climate Commitment Act (aka the cap and invest bill) prohibited expenditures of the revenues after April 1st, 2023 unless the Legislature had considered and enacted legislation brought forth by Ecology, and developed in consultation with stakeholders, outlining a compliance pathway specific to emissions-intensive, trade-exposed businesses for achieving their proportionate share of the state’s emissions reduction limits through 2050.
Summary –
Substitute –
The substitute would make awards of no cost allowances to facilities using best available technology starting at the fourth compliance period rather than the third, and would replace the general criteria for those with detailed specifications about qualifying and the process; it also makes some minor changes. There’s a staff summary at the beginning of the substitute.
Original bill –
The bill would extend the period during which emissions-intensive trade-exposed businesses receive free allowances to help meet their obligations under the Climate Commitment Act (aka the cap and invest program). The Act stepped down the number of free allowances each facility received during two four year periods, ending January 1st, 2035. (It also prohibited the expenditure of any revenue from the program after April 1st, 2023 unless the Department of Ecology had proposed and the Legislature had enacted a pathway for these facilities to achieve their proportionate share of the state’s emissions reduction limits through 2050.)
In the last of the original Act’s compliance periods, from 2031 through 2034, it required facilities using mass-based estimates of their emissions to get free allowances to cover 94% of their original baseline emissions. (It lowered the free allowances for facilities reporting the carbon intensity of their operations with a 3% reduction from the previous level for each compliance period.) This bill would now grant both kinds of facilities additional free allowances to cover 88% of their emissions during 2035, and then set their free allowances at 6% below the previous year’s level each year until 2050.
The bill shifts from saying Ecology may adjust a facility’s benchmark for a compliance period upward if it demonstrates additional reductions in carbon intensity or mass emissions are not technically or economically feasible to saying that Ecology would be required to adopt rules to provide a process for these adjustments in the third and subsequent periods. (Raising the benchmark reduces the number of allowances a facility needs.) Ecology would be authorized to grant an adjustment based on that determination and other factors including a finding it’s necessary to accommodate for changes in the manufacturing process that have a material impact on emissions; changes to a facility’s external competitive environment that result in a significant increase in leakage risk; or abnormal operating periods when a facility’s carbon intensity has been materially affected. Any adjustments may not increase the total annual allowance budget for the program for any calendar year in the compliance period for which the adjustment was granted or any future calendar year; reduce the progressively equivalent reductions year over year in the annual allowance budgets; or prevent the achievement of this sector’s share of the emissions-intensive and trade-exposed businesses’ proportionate share of the State’s targets. The Department would also be able to adjust the numbers of all these additional free allowances if that was necessary to ensure achievement of this sector’s share of the State’s targets, or to provide for alignment with other jurisdictions to which the state had linked the cap and invest program.
The bill would add programs, activities, or projects that reduce the emissions of emissions-intensive, trade- exposed facilities to the list of those eligible for funding from the revenue generated by the cap and invest program.
It would also eliminate the requirement for a report to the Legislature by December 1, 2026, after consultation with manufacturers, about alternative methods for determining the allowances to be provided to emissions-intensive, trade-exposed facilities from 2035 through 2050, best practices for ensuring against emissions leakage and economic harm to businesses in carbon pricing programs, and alternative methods of emissions benchmarking and mass-based allocation of allowances. It would remove the original Act’s provision for continuing to award free allowances at their level in 2034 if the Legislature doesn’t adopt a program for continuing them by December 1, 2027.