SB5373 – 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 – Senator Lovelett (D; 40th District; Anacortes) (Co-sponsors Saldaña, Salomon, Wellman, Das, Hunt, Claire Wilson, Kuderer, Stanford, Pedersen, Dhingra, Frockt, and Nguyen – Ds.)
Current status – Referred to the Senate Committee on Environment, Energy and Technology
Next step would be – Scheduling a hearing
Legislative tracking page for the bill.
HB1513 is a similar bill in the House.
The supporters have a brochure about the bill, and Carbon WA did an FAQ while the bill was being developed.
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 increase by 5% a year and be adjusted for inflation. By January 2031, after ten years, the Department of Ecology is to report on whether it expects these emissions to fall at a sufficient rate to produce their share of the reductions needed to meet the state’s targets, and to make recommendations about how to achieve that. 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 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; 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 exempts fossil fuels used to generate electricity within the state, 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, coal burned at the Transalta plant, agricultural and aircraft fuels, biogas, 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.
In consultation with Commerce and Ecology, the Department of Revenue is to develop rules by June 30, 2022 for designating exempted energy intensive trade exposed industries. By July 30, 2026, Ecology is to report to the Legislature on whether their exemption should be restricted or eliminated. It’s to solicit input and data from stakeholders in developing the rules, consider the availability of alternative fuels, and include recommendations for minimizing leakage, allowing Washington industries to grow, recognizing and providing credit for early actions to reduce emissions, and incorporating performance benchmarking of emissions intensity in production processes.
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 bill’s backers 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, with high priority given to funding projects that directly benefit economically distressed areas. (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 , including funding the sustainable farms and fields grant program established to assist participants with increasing the quantity of organic carbon in soils and reducing or avoiding carbon dioxide equivalent emissions in or from soils.
It can also be spent on forest investments to:
1. Increase resilience to wildfire in the face of increased seasonal temperatures and drought;
2. Improve forest health and reduce vulnerability to changes in hydrology, insect infestation, and other impacts of climate change; or
3. Assist forestland owners in the protection of riparian and other sensitive aquatic areas by providing compensation to small forestland owners for easements under the Stewardship of Nonindustrial Forests and Woodlands program.
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 establishes an environmental and economic justice panel appointed by the Governor to make recommendations on developing and implementing the programs, activities, and projects funded by the bill. It’s to be co-chaired by a tribal leader and a representative of the interests of the highly impacted communities identified by the Department of Health’s health disparities map. It’s to have at least ten members, including a tribal leader and four other people representing the interests of vulnerable populations in highly impacted communities in different rural and urban areas of the state; two people representing union labor with expertise in economic dislocation, clean energy economy, or energy-intensive, trade-exposed facilities; another person to represent tribal governments; and two people representing low-income and community advocacy organizations. (I think the co-chairs are members of the committee, rather than additional appointments, but I’m not sure.) The panel’s to:
1. Provide recommendations in the development of the investment plans and funding proposals authorized by the bill;
2. Provide a forum to determine if policies adopted lead to improvements in highly impacted communities;
3. Recommend procedures and criteria for evaluating programs, activities, or projects for funding;
4. Evaluate the level of funding provided to assist vulnerable populations, low-income individuals, and displaced workers, and the funding in or benefiting highly impacted communities;
5. Provide recommendations to agencies for meaningful consultation with vulnerable populations; and
6. Periodically evaluate the economic impacts and outcomes of the bill’s emissions reduction policies and financial assistance on low and middle-income households and vulnerable populations, including communities of color and tribal communities.
Agencies receiving funding under the bill have to consult with tribes on all decisions that may affect their rights and interests in tribal lands, using a framework for consultation developed in coordination with tribal governments. Projects directly affecting tribal lands can’t be funded without a written resolution from the affected tribe or tribes providing consent.