"NEW SECTION.  Sec. 1   FINDINGS. (1) The legislature reaffirms the state limits on greenhouse gas emissions adopted in RCW 70.235.020. Despite the recent economic downturn, the output of greenhouse gas emissions continues. It remains essential to fashion a long-term strategy for reduction of greenhouse gas emissions, consistent with previously enacted reduction goals of the state. The legislature further finds that full implementation of current policies regarding energy efficiency, new clean energy technologies, efficient building practices, new energy efficient transportation technologies, and other policies and programs may achieve nearly one-half of the estimated statewide emissions reductions needed to meet the state's 2020 emissions limits, but that additional reduction strategies will be needed.
     (2) Therefore, it is the intent of the legislature by this act to provide a thorough review and set of recommendations to the 2011 legislature regarding the merits of implementing a multisector emissions reduction program in the state, as well as recommended additional complementary policies to achieve the state's emission reduction requirements.

NEW SECTION.  Sec. 2   POLICY DECLARATION. When presenting the state's position on any regional or national emissions reduction program that relies on a multisector, market-based approach to regulating greenhouse gas emissions, the state shall adhere to the following policies:
     (1) Assuring that biomass combustion for electricity or process steam production is considered carbon neutral;
     (2) Assuring equitable economic benefits and opportunities for electric utilities operating in Washington that use hydroelectric generation;
     (3) Recognition must be provided to those emissions sources that have taken early action to reduce their emissions;
     (4) That the state's forest and agricultural lands that are managed in ways that increase carbon sequestration be recognized for the use of offsets to regulatory limits on emissions; and
     (5) Assuring the protection of low and moderate income households.

NEW SECTION.  Sec. 3   EMISSIONS CAPS. (1) In order to assist Washington in meeting the requirements in RCW 70.235.020, the department of ecology shall recommend a greenhouse gas emissions reduction program that sets statewide and sector emission caps for persons that annually emit at or above twenty-five thousand metric tons of carbon dioxide equivalents. The emissions reduction program must recognize early actions, complementary policies, and offsets as specified in section 5 of this act. The emissions reduction program must include protocols for directing technical and financial incentives to those persons who monitor and demonstrate their emissions reductions. No element of the program recommendations in this section may be implemented unless specifically authorized by a future act of the legislature.
     (2) The department of ecology's recommendations must include the following program design elements:
     (a) Phase one of the emissions reduction program should be designed to begin in 2012 and covers the following sectors: (i) Electricity generated in the state or generated out-of-state and delivered to the state by long-term financial commitments under chapter 80.80 RCW; (ii) industrial and commercial fuel combustion; and (iii) industrial process emissions;
     (b) Phase two of the emissions reduction program should be designed to begin in 2015 and covers the following sectors: (i) Transportation fuel combustion; (ii) residential fuel combustion; and (iii) fuel delivered or sold for industrial and commercial combustion where the fuel is used by persons not otherwise covered by the program in 2012. Phase two of the program may include complementary measures, except that measures for transportation fuels must focus on emissions reductions, not raising revenues, and consideration must be given to differing rural and urban circumstances;
     (c) For each compliance period, emissions caps must decline evenly in each sector until the state greenhouse gas emissions are reduced as required by RCW 70.235.020;
     (d) Except for purposes of reporting, the following carbon dioxide emissions are not covered by the program:
     (i) Emissions from industrial combustion of biomass in the form of fuel wood, wood waste, wood by-products, and wood residuals as long as the region's silvicultural sequestration capacity is maintained or increased; and
     (ii) Emissions from the combustion of biofuels or the biofuel component of blended fuels as the term "biofuel" is defined in RCW 43.325.010; and
     (e) No more than forty-nine percent of a sector's total emissions reductions from 2012 to 2020 may be satisfied with offsets.
     (3) The recommendations in this section must be submitted to the appropriate committees of the legislature by December 1, 2010.

NEW SECTION.  Sec. 4   ALTERNATIVE STRATEGIES FOR ACHIEVING EMISSIONS REDUCTIONS. (1) The department of ecology shall report to the legislature on alternative strategies the state may implement to meet the requirements in RCW 70.235.020. The report must include the following: A comprehensive examination of all measures, not market-based, that the state could employ to reduce the emissions of greenhouse gases, such as:
     (a) Regulatory emissions caps and other performance oriented regulations;
     (b) Economic and fiscal measures that would supplement a regulatory approach;
     (c) Measures for substantially reducing greenhouse gas emissions from the electricity sector, including measures to facilitate the transition from electricity generation derived from any coal-fired facility to generation with significantly reduced emissions;
     (d) Measures for reducing transportation emissions in urban areas of the state, including programs providing incentives and assistance for the deployment of electric vehicles and the necessary infrastructure for such vehicles and policies directing the increased use of these vehicles within state agency fleets; and
     (e) Measures for reducing emissions by increasing energy efficiency in buildings and commercial and industrial applications.
     (2) The report must include an analysis of the alignment of policies and standards among the participating jurisdictions in the western climate initiative.
     (3) The report must include recommendations for establishing a performance auditing mechanism to monitor the effectiveness of emissions reduction strategies.
     (4) The report must include recommendations on complementary measures the state may undertake to supplement a national emissions reduction program.
     (5) The report must incorporate an economic analysis by the forecasting office of the office of financial management, in consultation with members of the governor's council of economic advisors, of the impact to Washington consumers, businesses, and citizens if Washington entered into a regional or federal emissions reduction program. The economic analysis must include:
     (a) Various economic scenarios, such as when Washington has a robust economy and when Washington is in an economic downturn;
     (b) The economic impact sector by sector, including the impact to the forest products manufacturing sector and Washington's port districts;
     (c) How to address trade competition from countries and states that are not participating in an emissions reduction program;
     (d) How to ensure that economic benefits are available to both urban and rural communities; and
     (e) The impact on the cost and affordability of food, housing, energy, transportation, and other routine expenses on low and moderate-income households.
     (6) The report must be submitted to the appropriate committees of the legislature by December 1, 2010.

NEW SECTION.  Sec. 5   OFFSETS. (1) The department of ecology shall recommend criteria for issuing and accepting offset credits for offset projects that may be used to meet a person's compliance obligation in a state, regional, or national emissions reduction program. The department must give priority to investigating and developing criteria for offset projects within the forestry, agriculture, and waste management sectors, but must also develop criteria for recognizing offsets from all sources of emissions reductions that are additional to existing regulatory requirements and that are reductions beyond business as usual emission levels. The department shall present the state's policy on forestry offset projects established under section 6 of this act as the state's position when developing the criteria for forestry offset projects within any other regional or national cap and trade emissions reduction program.
     (2) With regard to forestry offsets, the department of ecology must give first priority for issuing offset credits for forestry offset projects located in Washington. Second priority must be given to offset projects within Washington, Oregon, Idaho, and Montana. Third priority must be given to offset projects that are located in any other jurisdiction in the United States. One offset credit must be issued for up to each metric ton of emissions as measured in carbon dioxide equivalent associated with an offset project.
     (3) Except as provided in this section, the department of ecology may accept offset credits for compliance purposes from other jurisdictions as well as annex 1 countries from the United Nations framework convention on climate change, but only if an offset project is not available in Washington.
     (4) The department of ecology may also accept for compliance purposes offset credits from developing countries, but only if an offset project is not available in Washington. Offset credits from developing countries must be in accordance with the clean development mechanism of the Kyoto protocol or if the clean development mechanism is replaced, a protocol developed by the department. The department may develop criteria for these offset projects to ensure similar rigor to offset projects within the state.
     (5) Any offset credit that is used to meet a compliance obligation must conform to the rules adopted by the department of ecology.
     (6) Upon receipt by the department of ecology of an offset credit to meet a compliance obligation, the department shall retire the offset credit.
     (7) The department of ecology shall ensure that all offset credits that it issues are tracked to ensure that the department knows who holds a given offset credit and when it is retired.
     (8) The department of ecology shall consult with tribal governments upon request on any offset criteria that may affect tribal governments, such as the voluntary development of offset projects by tribes.
     (9) The recommendations in this section must be submitted to the appropriate committees of the legislature by December 1, 2010.

NEW SECTION.  Sec. 6   FORESTRY OFFSET POLICY. The department of ecology, in consultation with the forest practices board, the department of natural resources, and the forest carbon working group, shall develop the state's policy for forestry offset projects within Washington. The agencies and the working group shall use the 2008 report of the forest carbon working group as the starting point in developing the policy. The final policy must be completed by December 31, 2009, unless the department of ecology notifies the agencies and working group that the policy is needed sooner. The public must be provided with the opportunity to review and comment on the policy as it is developed. The policy must include:
     (1) Specific standards and guidelines that will support carbon accounting in managed forests participating in an offset program;
     (2) How to ensure that any carbon that is reduced or sequestered by a forestry offset project will be eligible for an offset credit within a regional or national cap and trade emissions reduction program;
     (3) Recognition of management activities that increase carbon stocks including, but not limited to, thinning, lengthening rotations, increased retention of trees after harvest, fertilization, genetics, timber stand improvement, fire management, and specific site class and productivity of a managed forest;
     (4) Specific standards and guidelines to support wood products accounting, recognizing that carbon is stored in products after trees are harvested including the use of the one hundred year method which estimates the amount of carbon stored in the wood products that are projected to remain in use after one hundred years;
     (5) Guidelines on how forestry offset projects and forestry financial incentive programs can work together so that Washington's forest landowners will not be disadvantaged in comparison to other jurisdictions participating in a regional or national cap and trade emissions reduction program; and
     (6) Recommendations for how to verify or certify carbon stocks that will not be administratively burdensome.

NEW SECTION.  Sec. 7   FINANCIAL INCENTIVES FOR FORESTRY. The department of ecology, in consultation with the forest practices board, the department of natural resources, and the forest carbon working group, shall develop and deliver to the legislature by December 1, 2010, legislation to implement a financial incentives program for forestry and forest products that will recognize activities such as:
     (1) Forest landowners maintaining and actively managing their forest land using management activities such as thinning, lengthening of rotations, increased retention of trees at harvest, fertilization, genetics, timber stand improvement, and fire management;
     (2) Forest landowners continuing the production of wood products while maintaining or increasing their carbon stocks on the ground;
     (3) Retention by forest landowners of high carbon stocks where there is no obligation to retain such stocks; and
     (4) The use by developers and builders of wood building materials instead of more intensive fossil fuel products such as concrete and steel.

NEW SECTION.  Sec. 8   WESTERN CLIMATE INITIATIVE. The director of the department of ecology is authorized to continue discussions with other jurisdictions in the western climate initiative.

NEW SECTION.  Sec. 9   A new section is added to chapter 47.38 RCW to read as follows:
     (1) As a necessary and desirable step to expedite the transition to transportation technologies and infrastructure with reduced emissions, the department shall implement an electric vehicle and alternative fuel vehicle infrastructure program that accelerates planning and allocation of funding for pilot projects to demonstrate the feasibility of large scale deployment of charging and alternative fuels distribution infrastructure. The program must include the provisions in this section and other electric vehicle programs being implemented by the department.
     (2) The governor shall direct the department, in collaboration with the states of Oregon and California, to develop a multistate electric vehicle infrastructure initiative. The objective of the initiative is to implement large scale demonstration projects that support the charging and other necessary infrastructure for electric vehicles along shared interstate highways and in major urban areas in the three states. The governor shall work in a multistate collaboration to seek major federal funding for planning and projects in the initiative.
     (3) As an element of the program authorized under this section, the legislature authorizes an alternative fuels corridor pilot project capable of supporting electric vehicle charging and battery exchange technologies. To the extent permitted under federal programs, regulations, or laws, the department may enter into partnership agreements with other public and private entities for the use of land and facilities along state routes and within interstate highway rights-of-way for an alternative fuels corridor pilot project. The pilot project may allow for commercial activities only as necessary to attain basic economic sufficiency. The department is not responsible for providing capital equipment nor operating refueling or recharging services. At a minimum, the pilot project must:
     (a) Limit renewable fuel and vehicle technology offerings to those with a forecasted demand over the next fifteen years and approved by the department;
     (b) Ensure that a pilot project site does not compete with existing retail businesses for the provision of the same refueling services or recharging technologies in the same geographic area;
     (c) Provide existing truck stop operators and retail truck refueling businesses with an absolute right of first refusal over the offering of refueling services to class six trucks with a maximum gross vehicle weight of twenty-six thousand pounds within the same geographic area identified for a possible pilot project site;
     (d) Reach agreement with the department of services for the blind ensuring that any commercial activities at host sites do not materially affect the revenues forecasted from their vending operations at each site;
     (e) Regulate the internal rate of return from the partnership, including provisions to reduce or eliminate the level of state support once the partnership attains economic self-sufficiency;
     (f) Be limited to not more than five locations on state-owned land within federal interstate rights-of-way or state highway rights-of-way in Washington; and
     (g) Be limited in duration to a term of years reasonably necessary for the partnership to recover the cost of capital investments, plus the regulated internal rate of return.

NEW SECTION.  Sec. 10   A regional transportation planning organization containing any county with a population in excess of one million in collaboration with representatives from the department of ecology, the department of transportation, the department of community, trade, and economic development, local governments, and the office of regulatory affairs must seek federal or private funding for the planning for, deployment of, or regulations concerning electric vehicle infrastructure.

NEW SECTION.  Sec. 11   ACCOUNT CREATED. The emissions reduction assistance account is created in the state treasury. All appropriations to the account and twenty-five percent of all federal funds received pursuant to H.R. 1, P.L. 111-5 for the purpose of assisting with energy efficiency and renewable energy, including federal funds received for the state energy program, must be deposited in the account. Other funds, gifts, grants, and endowments from public or private sources, in trust or otherwise, may be directed into the account. Any moneys received from sponsor match payments must be deposited in the account. Moneys in the account may be spent only after appropriation. Expenditures from the account may be used for:
     (1) Assisting persons in achieving emissions reductions under section 3 of this act;
     (2) Assisting the transition of coal-fired facilities to cleaner-burning technologies;
     (3) Reducing price impacts for consumers with incomes within two hundred fifty percent of the federal poverty level;
     (4) Strategies to create jobs and provide for worker transition, especially in and for those communities and workers that have been disproportionately affected by economic downturns, through efforts to reduce emissions, reduce energy use, and develop clean energy supplies;
     (5) Supporting transit and transportation projects that will reduce greenhouse gas emissions;
     (6) Energy efficiency and renewable energy incentives including matching electric utility sponsored programs that support customer energy efficiency investment, new renewable energy resource development, including related transmission, energy storage, and integration technologies;
     (7) Promoting emissions reductions and carbon sequestration in agriculture, forestry, waste management, and other uncapped sectors;
     (8) Efforts funded by local governments to reduce community greenhouse gas emissions;
     (9) Adaptation to climate change impacts, including impacts on affected species, habitats, and communities; and
     (10) Research, development, demonstrations, and deployment of technology to reduce greenhouse gas emissions.

NEW SECTION.  Sec. 12   Captions used in this act are not any part of the law.

NEW SECTION.  Sec. 13   Sections 2 and 11 of this act are each added to chapter 70.235 RCW.

NEW SECTION.  Sec. 14   This act shall be in effect only to the extent that funds are specifically appropriated for the purposes of this act."