Greenhouse Gas Reporting Requirements and State Limits.
The United States Environmental Protection Agency (EPA) and the Department of Ecology (Ecology) identify carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons, and sulfur hexafluoride as greenhouse gases (GHGs) because of their capacity to trap heat in the Earth's atmosphere. According to the EPA, the global warming potential (GWP) of each GHG is a function of how much of the gas is concentrated in the atmosphere, how long the gas stays in the atmosphere, and how strongly the particular gas affects global atmospheric temperatures. Under state law, the GWP of a gas is measured in terms of the equivalence to the emission of an identical volume of carbon dioxide over a 100-year timeframe (carbon dioxide equivalent or CO2e).
Under the federal Clean Air Act, GHGs are regulated as an air pollutant and are subject to several air regulations administered by the EPA. These federal Clean Air Act regulations include a requirement that facilities and fuel suppliers whose associated annual emissions exceed 25,000 metric tons of CO2e report their emissions to the EPA. At the state level, GHG reporting is regulated by Ecology under the state Clean Air Act. This state law requires facilities, sources, and sites whose emissions exceed 10,000 metric tons of CO2e each year to report their annual emissions to Ecology. Distributors of gasoline, diesel, and aircraft fuel whose GHG emissions exceed 10,000 metric tons and who pay fuel taxes to the Department of Licensing (DOL) must use the fuel sale information submitted for the DOL fuel tax purposes to report to the state the GHG emissions associated with the fuel.
Ecology and the Department of Commerce must report to the Governor and Legislature by December 31 of even-numbered years regarding total GHG emissions and GHG emissions by source sector in Washington. According to the most recent Ecology data, as of 2017 the total annual GHG emissions in Washington were estimated at 97.5 million metric tons (MMT) of CO2e. Of these emissions, a total of 43.26 MMT CO2e were attributable to transportation sources, of which on-road gasoline accounted for 21.53 MMT CO2e and on-road diesel accounted for 8.36 MMT CO2e.
In 2008 Washington enacted legislation that sets a series of limits on the emission of GHGs within the state. Ecology is responsible for monitoring and tracking the state's progress toward the emission limits. In 2020 additional legislation was enacted to update the state limits to the following:
State Clean Air Act.
Ecology and seven local air pollution control authorities (local air authorities) have each received approval from the EPA to administer aspects of the federal Clean Air Act in Washington. Local air authorities have primary responsibility for administering the state and federal Clean Air Acts in counties which have elected to activate a local air authority or to form a multicounty air authority. In other areas of the state, Ecology is responsible for administering state and federal Clean Air Act programs.
Under the federal Clean Air Act, each state maintains a State Implementation Plan (SIP) that describes how the state implements clean air programs to achieve the federal National Ambient Air Quality Standards (NAAQS) for certain air pollutants, known as criteria pollutants. If the state does not achieve NAAQS in a portion of the state for a particular criteria pollutant, that area is considered to be in nonattainment, and the state must revise its SIP with the goal of regaining attainment with NAAQS. Areas that have previously been designated as nonattainment areas but that subsequently regained NAAQS compliance are considered to be maintenance areas. In maintenance areas, the SIP must be revised to incorporate local maintenance plans designed to prevent those areas from relapsing into nonattainment status. Areas in Washington covered by maintenance plans for various criteria pollutants as of January 1, 2021, include areas of King, Pierce, Spokane, and Thurston counties, as well as the cities of Vancouver, Yakima, and Wallula. No areas of Washington are currently designated with nonattainment status.
Violations of Clean Air Act requirements are punishable by a variety of criminal and civil penalties. Civil penalties of up to $10,000 per violation are authorized by the state Clean Air Act.
Fuel Content.
The state Motor Fuel Quality Act (MFQA), enacted in 1990, adopted motor fuel standards, authorized the Washington State Department of Agriculture (WSDA) to set state fuel standards, and established a sampling, testing, and enforcement program administrated by the WSDA. Under the MFQA, it is unlawful to deceive the purchaser of fuel as to its nature or quality, among other aspects. Violations of this prohibition are enforced by the WSDA. Washington's Renewable Fuel Standard was enacted in 2006 as a component of the MFQA, and establishes requirements for the biodiesel content of diesel fuel, and the ethanol content of gasoline:
Clean Fuel Programs in Other States.
California and Oregon have each instituted policies that require reductions in the GHG emissions associated with transportation fuels, as measured against a standard unit of fuel energy (carbon intensity). California's program, which began in 2010, requires a 10 percent reduction by 2020 and a 20 percent reduction by 2030 in the carbon intensity of gasoline and diesel fuel, in conjunction with the use of fuels that serve as substitutes for those fuels. Oregon's program, which began in 2015, currently requires a 10 percent reduction by 2025 in the carbon intensity of transportation fuels, although additional targets for Oregon's program have been set for 2030 and 2035 by executive order but have not yet been adopted into program rules.
Both the California and Oregon programs function by assigning compliance obligations, also known as deficits, to persons associated with the production or import of fuels that exceed an average carbon intensity of fuel based on a baseline year. In tandem with the assignment of deficits, the programs provide for the generation of credits that denote the production or import of fuel with a carbon intensity of less than the baseline carbon intensity. Since 2019 California's program has allowed the generation of credits for certain other activities with a nexus to the transportation fuel supply chain, such as for the installation of electric vehicle charging infrastructure. The programs of both states measure the carbon intensity of transportation fuels based on a lifecycle analysis of direct and indirect GHG emissions associated with the production, distribution, and consumption of the fuels. Both programs provide exemptions for certain categories of transportation fuels.
2015 Transportation Revenue Package.
In 2015 the Legislature enacted a bill that raised revenue for transportation purposes from a variety of transportation-related sources ("Transportation Revenue Package"). Among other sources of revenue, the Transportation Revenue Package generated revenue by increasing fees for:
In general, the enhanced and commercial driver's license fees are deposited into the Highway Safety Fund (used for driver's license implementation, driver improvement, and financial responsibility, among other programs), while the vehicle weight fees are deposited into a combination of the Multimodal Transportation Account (used for transportation purposes) and the Freight Mobility Multimodal Account (used for certain freight mobility projects approved by the Freight Mobility Strategic Investment Board). However, if a clean fuel standard policy is adopted by rule or otherwise initiated by a state agency prior to July 1, 2023, the additional revenue raised from the driver's license and vehicle weight fee increases in the 2015 Transportation Revenue Package would be redirected from the Highway Safety Fund, Multimodal Transportation Account, and Freight Mobility Multimodal Account, and would instead be deposited into the Connecting Washington Account, which is used for projects that have been identified in a transportation appropriations act as "Connecting Washington" projects or improvements.
Program Goal.
The Department of Ecology (Ecology) is directed to adopt a rule establishing a Clean Fuels Program (CFP) limiting the greenhouse gas (GHG) emissions attributable to each unit of transportation fuel (carbon intensity) to 10 percent below 2017 levels by 2028 and 20 percent below 2017 levels by 2035. The rule must reduce the overall, aggregate carbon intensity of transportation fuels used in Washington. The rule may only require aggregate carbon intensity reductions, and may not require a reduction in carbon intensity to be achieved by any individual type of transportation fuel. The rule must establish a start date for the program of no later than January 1, 2023. By December 31, 2031, Ecology must update its CFP rules to reduce the carbon intensity of transportation fuel for each year through 2050 so that total emissions from transportation sources in 2050 are consistent with a 2050 reduction in overall emissions of GHGs in the state to 95 percent below 1990 levels, or 5 million metric tons, and achieving net-zero GHG emissions.
Covered and Exempt Fuels.
Electricity and liquid and gaseous fuels are within the scope of the CFP, so long as the fuels or electricity are used to propel motor vehicles or are intended for transportation purposes (transportation fuels). Excluded from the CFP carbon intensity reduction requirements are the following:
Until January 1, 2028, the following fuels are also exempt from the CFP's carbon intensity reduction requirements:
Mechanics of the Clean Fuels Program.
The rule adopted by Ecology to implement the CFP must include:
Except where inconsistent with specific statutory direction from the Legislature, Ecology's CFP rule must seek to harmonize with similar programs that have been adopted by other states with significant amounts of transportation fuel supplied to or from Washington.
Ecology may require electric utilities and transportation fuel suppliers to submit GHG emissions data and information that is different from the types of data currently submitted to the state by those entities. Ecology may also require periodic reporting on CFP activities from producers and importers of transportation fuels. Transactions that transfer ownership of fuels required to be covered by the CFP must be accompanied by documentation assigning compliance responsibility for the fuels. To the extent practicable, CFP reporting rules for persons associated with the supply chains of transportation fuels must be consistent with the reporting procedures of similar clean fuels programs in other states and with other state programs that require similar information to be reported by regulated parties, including electric utilities.
Alternative Credit-Generating Mechanisms.
In addition to the provision of transportation fuel with a carbon intensity below the Ecology-established standard, Ecology's CFP rules may allow the generation of credits from specified activities related to the reduction of GHG emissions associated with transportation, including:
Ecology's rules must allow the generation of credits from the provision of zero emission vehicle infrastructure and low-carbon fuel infrastructure. Ecology's rules may establish limits on the number of credits available from alternative credit-generating mechanisms, and any limits on refueling infrastructure credits must consider the return on investment necessary for a credit-generating activity to be financially viable.
Public Reporting Requirements.
Beginning in 2025, Ecology must submit a report to the Legislature every year on May 1 detailing certain information regarding the previous year's CFP activities, including volumes of credits and transportation fuels. An estimate of probable costs or cost savings per gallon of gasoline and diesel attributable to the CFP must be prepared annually by an independent consultant under contract to Ecology, and must be announced to the news media in a press release when the annual report is submitted to the Legislature. Ecology must also contract for a forecast that estimates probable costs or cost savings per gallon of gasoline and diesel from the program, which must be completed and submitted to the Legislature by December 1, 2021.
The Department of Commerce must develop a periodic fuel supply forecast to project the availability of fuels and credits necessary for compliance with CFP requirements. This forecast must be finalized no later than 90 days before the start of a CFP compliance period.
By December 1, 2029, the Joint Legislative Audit and Review Committee is required to perform an analysis of the first five years of the CFP. This analysis must include the costs and benefits of the program and an evaluation of the information summarized by Ecology in their annual reports.
Other Provisions.
The current distribution is retained for revenues granted by the 2015 Transportation Revenue Package, eliminating changes that would have been triggered as a result of the establishment of a clean fuels standard.
Ecology may require that persons electing or required to participate in the CFP pay a fee to cover the direct and indirect costs to Ecology and the Department of Commerce for developing and implementing the CFP. If Ecology elects to require program participants to pay a fee, it must adopt rules to set a payment schedule and the amount of the fee, and must enter into an interagency agreement with the Department of Commerce and complete a biennial workload analysis. Fees are deposited into a Clean Fuels Program Account (Account) used to carry out the CFP.
Ecology must establish and consult with a forestland and agricultural landowner stakeholder advisory panel to solicit input on how to incentivize the sequestration of GHGs on forest and agricultural lands through program credit allotment.
Violations of CFP requirements are subject to civil and criminal penalties under state Clean Air Act authority. Penalties collected from CFP violations must be deposited into the Account.
Fifty percent of revenues earned by electric utilities from electricity supplied to retail customers to generate credits under the CFP must be used for transportation electrification, which may include the production and provision of renewable hydrogen. Of this 50 percent, 60 percent of the transportation electrification projects must be in or directly benefit federal Clean Air Act maintenance or nonattainment areas, areas at risk of maintenance or nonattainment designation, areas designated as maintenance or nonattainment as of January 1, 2019, or areas identified by the Department of Health as disproportionately impacted communities, if such areas are within the service area of the utility. Ecology may adopt rules governing the limitations on the use of the other 50 percent of revenues earned by electric utilities from participating in the CFP, and must require some portion of these revenues to be used for the establishment of a program that provides a price reduction on new electric vehicle purchases or leases.
To the extent that the CFP conflicts with the state Motor Fuel Quality Act and biofuel requirements, the CFP's requirements supersede.
A severability clause is included.
The substitute bill makes the following changes to the original bill:
(In support) Transportation fuels, and on-road fuels in particular, are responsible for a large portion of Washington's greenhouse gas emissions. Washington will not achieve its overall greenhouse gas emission reduction goals without policies targeted to transportation emissions. Air pollution from transportation sources disproportionately impacts people of color and lower-income populations. A portion of Clean Fuels Program revenues should be invested in electric vehicle rebates for consumers, since electric vehicles are responsible for generating credits under the program. Successful Clean Fuels Programs have been implemented in California and Oregon without the negative impacts on gasoline and diesel prices that opponents forecasted. Auto manufacturers are committed to reducing greenhouse gas emissions from vehicles and support Clean Fuels Program policies because they are effective at reducing emissions. Without a Clean Fuels Program, Washington misses out on significant investments in alternative fuel infrastructure. A Clean Fuels Program provides long-term, technology-neutral regulatory certainty for companies to invest in lower-carbon solutions. Because Washington does not have in-state oil and gas production, money spent on fossil fuels largely flows out of state. Renewable hydrogen, renewable natural gas, and biogas are economically viable, home-grown fuels that will benefit from the Clean Fuels Program and will be key to the program's success. Emission reductions should be more significant and faster than the standards proposed in the bill. The negative impacts of climate change in Washington become clearer each year. Puget Sound is warming and acidifying due to climate change.
(Opposed) Clean Fuels Programs are a costly and ineffective way to reduce greenhouse gas emissions. Claims of improved air quality and other environmental benefits of the program are overstated and come at a high cost relative to other emission reduction policy options. The program is not likely to spur jobs in Washington, and will send economic investments out of the state. The Clean Fuels Programs in California and Oregon have increased fuel prices, and led the trucking industry to adopt surcharges for shipments into or out of California. A Clean Fuels Program will increase gas prices without raising revenues for investments in transportation infrastructure. The increase in gas prices caused by a Clean Fuels Program will make it harder to enact new fuel taxes. Increased gas prices increase operation costs for agricultural, trucking, and other businesses, and ultimately lead to increased prices for consumer goods. Clean Fuels Programs hurt people who live in rural areas and must travel long distances to employment opportunities. Increases in gas prices have regressive economic impacts that primarily hurt lower-income individuals.
(Other) A Clean Fuels Program would do little to improve air quality and is an ineffective way to reduce greenhouse gas emissions as measured on a cost-per-ton basis. The Clean Fuels Program should include cost-caps and regulatory off-ramps to reduce the risks of negative impacts from the program. Companies will adapt to a Clean Fuels Program and other regulations that shape the transportation fuel market. Utilities should use Clean Fuels Program revenues to ensure the equitable access to electric vehicle charging infrastructure.