The Washington Legislature passed House Bill 1091, which directs the Washington State Department of Ecology (Ecology) to adopt rules establishing a Clean Fuels Program to limit the aggregate, overall greenhouse gas emissions per unit of transportation fuel energy to 20% below 2017 levels by 2035. With the April 25, 2021, passage of House Bill 1091, the legislature seeks to promote the use of low carbon transportation fuels and to spur growth of the biofuel sector in Washington similar to growth seen in California and Oregon after adoption of similar standards.
The legislation directs Ecology to adopt a rule establishing a Clean Fuels Program to be in place no later than January 1, 2023, to limit the greenhouse gas emissions attributable to each unit of transportation fuel (carbon intensity) to 20% below 2017 levels by 2035, with annual reductions no less than (1) 0.5% in each of 2023 and 2024; (2) 1.0% in each of 2025, 2026, and 2027; (3) 1.5% in each of 2028, 2029, 2030, and 2031; and (4) 2.5% in each of 2032, 2033, and 2034.
Ecology may not increase the applicable Clean Fuels Program standard after January 1, 2028, until it can demonstrate that:
- There has been a net increase of at least 25% in the volume of in-state liquid biofuel production and the use of agricultural feedstocks grown within the state relative to the start of the program; and
- At least one new biofuels production facility producing in excess of 60 million gallons of biofuels per year has received all necessary siting, operating, and environmental permits and applicable permit appeals are exhausted.
Clean Fuels Program Requirements
The Clean Fuel Program applies to transportation fuels. Transportation fuels include electricity and any liquid and gaseous fuels used to propel motor vehicles or intended for transportation purposes.
The Clean Fuel Program will not apply carbon intensity requirements to certain transportation fuels exported or otherwise not used in Washington; fuels used in aircraft, railroad locomotives, marine vessels, or military tactical vehicles; and any other fuels Ecology may exempt to avoid fuel shifting between markets or other outcomes not consistent with the program. To implement the Clean Fuels Program, Ecology must adopt by rule:
- Standards for Assigning Levels of Greenhouse Gas Emissions Attributable to Transportation Fuels. Ecology must base the standards on a life-cycle emissions analysis for each relevant fuel that considers emissions from the production, storage, transportation, and combustion of the fuels. Additionally, the analyses must consider associated changes in land use and any permanent greenhouse gas sequestration activities.
- Processes for Assigning and Verifying Bankable, Tradable Credits. Credits will be available for production, importation, or dispensation for use of transportation fuels with associated life-cycle greenhouse gas emissions less than the carbon intensity standards established by Ecology, or for other specified activities that support the reduction of greenhouse gas emissions associated with transportation in Washington. The following entities would be eligible to register and earn credits in the Clean Fuels Program:
- Entities associated with transportation fuels with a carbon intensity below the carbon intensity standard; and
- Entities associated with exempt transportation fuels, including electricity and fuel used to propel vessels, railroad locomotives, or aircraft.
- A Determination of the Carbon Intensity of Electricity and Hydrogen Supplied by Electric Utilities Participating in the Clean Fuels Program. Ecology must base the determination on the mix of generating resources used by each electric utility. The Clean Fuels Program must have mechanisms that allow for the certification of electricity that has a carbon intensity of zero. The Clean Fuels Program must have mechanisms that allow for the assignment of credits to an electric utility for, at minimum, residential electric vehicle charging or fueling. Fifty percent of revenues earned by electric utilities from electricity supplied to retail customers to generate credits under the Clean Fuels Program must be used for transportation electrification, which may include the production and provision of hydrogen and other gaseous fuels produced from non-fossil feedstocks.
Harmonization With Clean Fuels Programs of Other Jurisdictions
Unless conflicts arise, Ecology must seek to harmonize the Clean Fuels Program with similar programs adopted by other states with significant amounts of transportation fuel supplied to or from Washington. For example, Ecology may require electric utilities and transportation fuel suppliers to submit greenhouse gas emissions data and information different from the types of data currently submitted to the state by those entities. The legislation requires Ecology to conduct a biennial review of innovative technologies and pathways to reduce carbon and generate credits, and to modify rules or guidance as needed to maintain stable credit markets.
Alternative Credit-Generating Mechanisms
The Clean Fuels Program rule may allow the generation of credits from specified activities related to the reduction of greenhouse gas emissions associated with transportation, including:
- Specified carbon capture and sequestration projects, including crude oil production projects, project-based refinery mitigation, direct air capture;
- Deployment of machinery and equipment used for certain non-fossil feedstocks; fueling electric vehicles by commercial, public, and nonprofit entities that are not electric utilities; and
- Using smart vehicle charging technology that results in electric vehicle fueling during times of comparatively low carbon intensity of the electric grid.
Public Reporting Requirements
Beginning in 2025, Ecology must submit an annual report to the legislature on the previous year's Clean Fuels Program activities, including the number of credits and deficits, volumes of transportation fuels, and total greenhouse gas emissions reductions attributable to the Clean Fuels Program.
With the passage of House Bill 1091 and Senate Bill 5126 (the Climate Commitment Act), the Washington Legislature introduced major new greenhouse gas emissions regulatory programs. To implement the new programs, Ecology will need to engage in significant rulemaking before January 1, 2023. The Clean Fuels Program will affect large users, producers, and suppliers of transportation fuels in Washington, as well as entities seeking to develop alternative credit-generating projects that support the goals of the program.
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