HB1534 – Expands HB1513’s carbon tax to cover energy intensive trade exposed manufacturing industries, giving them a gradually reduced number of tradable credits against the tax over time, and ways to earn bonus credits.
Prime Sponsor – Representative Shewmake (D; 42nd District; Whatcom County) (Co-sponsor Lekanoff – D)
Current status – Referred to the House Committee on Environment and Energy.
Next step would be – Scheduling a hearing.
Legislative tracking page for the bill.
Summary –
HB1513 would have the Department of Ecology make recommendations to the Legislature about how to apply its carbon tax to energy intensive trade exposed industries. This bill would tax the carbon content of the full life cycle emissions of fossil fuels sold or used by energy intensive trade exposed manufacturing industries at the same rates and with the same potential increases as HB1513 – starting at $25/tonne in 2022, a year earlier than HB1513’s tax, and increasing at 2% a year plus inflation, with the same provisions for additional increases if the sector is not achieving its share of the reductions needed to meet the state’s targets. (If a particular facility had achieved its own share of those reductions it would be exempt from the additional increases on its sector.) Revenues from the tax could only be used to fund the working families tax exemption and for workforce transition investments.
By June 30, 2022, the Department of Commerce, in consultation with Ecology, would have to create objective numeric criteria for identifying the covered EITE facilities, including those in the cement, steel, aluminum, food processing, pulp and paper, and aircraft, missile, and space craft production industries, and for identifying their greenhouse gas emissions. The rules would also establish an emissions baseline for each facility, taking into account its output and the number of employees. The Department of Ecology is to create rules for calculating the carbon content of emissions, as in HB1513.
The bill would exempt fuels that the State’s prohibited from taxing by Federal law or by laws about Indians’ property, fuel exported from the state, aircraft fuels, and any fuels that aren’t fossil fuels. (Since it only applies to emissions from facilities, it drops a number of HB1534’s exemptions for things like agricultural fuels.) Fuels that have already paid a carbon tax or charge on their lifecycle emissions to another jurisdiction would be eligible for a credit of up to that amount against the tax owed in Washington.
EITE’s would pay the tax on natural gas sold to or used at their facilities. Motor vehicle fuel and special fuel used at facilities would be taxed through HB1513. The bill specifies other reporting requirements including new ones for refineries, and details about which parties would be responsible for paying the tax and when.
Until July 1, 2030, a facility would be able to take a credit against the tax equal to what it would have paid on 70% of its emissions in 2019, plus any bonus credits it earned. A new facility beginning activities in 2020 through 2029 would be able to take an initial credit for the tax on 70% of their emissions in the first year (plus bonus credits). If an estimate by Ecology of the emissions a facility was expected to produce given its output and current standards of technology were available before 2030, and was lower than its 2019 emissions, a facility could take a credit for 70% of that estimate, plus bonus credits. (Exactly which facilities can use which of these last two options isn’t clear to me.) Credits would be tradeable and bankable.
Beginning in July 2030, facilities would be able to claim bonus credits plus a credit for 70% of the tax that would be owed on the same industrial output at a best in class benchmark designated by Ecology, or bonus credits plus a credit for 70% of the emissions Ecology determines the facility would produce if all life-cycle cost-effective efficiency measures identified by a third-party energy service company using OFM’s Washington state life-cycle cost tool were implemented. (If a benchmark hasn’t been set, a facility can claim credits for 70% of the emissions Ecology estimates it’s expected to produce or 70% of its emissions for the most recent year with data, plus bonuses.)
The Department of Labor and Industries would develop a point system for various business practices, employee benefits, or policies concerning treatment of workers, and establish a minimum threshold of points to be used as a baseline for awarding bonus credits. It could consider a variety of practices, benefits, or policies, with a special emphasis on:
1. Having collective bargaining agreement, or a policy where the employer agrees to remain neutral, work with, or provide information to a labor organization for unionizing employees;
2. Offering at least 85% of employees health insurance, with the majority of premiums funded by the employer; coverage equal to or better than a silver plan on the Washington exchange, and including an option for dependents.
3. Providing at least 85% of employees a living wage, at a level the Department establishes as appropriate, but which must be at least the median hourly wage of the county in which a project is sited;
4. Offering at least 85% of employees retirement benefits;
5. Prioritizing hiring workers displaced from or having an elevated likelihood of being displaced from sectors vulnerable to a transition to a low-carbon economy; living close to the workplace, and facing barriers to employment; and,
6. Using state-registered apprenticeship programs.
The Department may establish different standards for different sectors to reflect variations in workplace conditions and may include other flexibility mechanisms to facilitate protection of workers and to ensure that project sponsors are highly likely to be able to comply with the criteria.
Facilities that have met the minimum threshold of points for employment performance standards that the Department establishes can earn bonus credits to apply against their carbon tax obligations. They can get credits covering an additional 2% of their emissions for exceeding the minimum threshold of points. If they exceed the threshold and have not reduced the number of full-time jobs associated with the facility over the most recent two years they can get credits covering an additional 3.5% of their emissions. If they exceed the threshold and increase employment they can get credits covering 3.5% of their emissions plus credits covering the percentage of their emissions corresponding to the percentage of increased full time employment at the facility over the previous year, up to a cap on bonus credits at covering 5% of their emissions.
The bill has the same provisions for reporting refineries’ emissions as HB1513 does, if they’re designated as EITEs. Like HB1513, it 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. It also requires Ecology to create rules for measuring the carbon content of covered emissions.