S-0601.2
SENATE BILL 5373
State of Washington 67th Legislature 2021 Regular Session
By Senators Lovelett, Saldaña, Das, Dhingra, Frockt, Hunt, Kuderer,
Nguyen, Pedersen, Salomon, Stanford, Wellman, and Wilson, C.
Read first time 01/28/21. Referred to Committee on Environment,
Energy & Technology.
1 AN ACT Relating to carbon pollution; adding a new chapter to
2 Title 82 RCW; and declaring an emergency.
3 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:
4 NEW SECTION. Sec. 1. (1) The emissions of greenhouse gases,
5 such as carbon dioxide, is a significant contributor to anthropogenic
6 climate change, and has devastating adverse impacts on Washington's
7 economy, environment, natural resources, and communities. Our state
8 is already experiencing rising sea levels, depleting snowpack,
9 increased flooding, acidifying oceans, and more frequent and severe
10 wildfires. These impacts impair our prosperity and impose burdensome
11 costs on our businesses and communities.
12 (2) Climate risk is economic risk and it is imperative that
13 Washington act now to safeguard the state's communities and
14 industries against future shocks and disasters by putting a price on
15 practices that increase the state's exposure to risk and investing in
16 those that increase resilience. From farmers whose business is
17 directly threatened by the climate crisis, to coastal communities at
18 risk of outright displacement, the state must act now by investing
19 locally at the scale needed to move all Washingtonians toward a
20 future of shared prosperity as we build the clean economy here in
21 Washington state.
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 1 (3) Washington state is home to some of the world's most
2 innovative companies, a highly skilled workforce, and important
3 industries. As our state transitions away from a fossil fuel-based
4 economy, we must do so in a way that protects these assets and allows
5 our businesses to thrive. By launching a comprehensive fiscal program
6 that incentivizes and invests in resilient infrastructure and
7 climate-smart investments across all areas of development, we can
8 reduce our state's carbon dioxide emissions while preparing our
9 economy for the future.
10 (4) The legislature recognizes that rural areas are home to the
11 state's working and natural lands, including forests and farms, and
12 have both climate-related challenges and opportunities that differ
13 from urban areas. Rural workers have further distances to travel to
14 their jobs and the state must provide assistance in the transition to
15 lower-carbon transportation options. Rural areas may also have
16 greater vulnerability to flooding, wildfires, and other events whose
17 harm and frequency is increased by climate change, and state
18 assistance should be directed toward increasing community resilience
19 to these harms. Programs to reduce carbon pollution and to sequester
20 carbon in the state's forests and farming soils also provide an
21 opportunity to benefit the state's farmers and forestland owners.
22 (5) More than half of Washington is forested with 22,000,000
23 acres of forests covering the state, including natural lands, private
24 lands, and state trust lands. The private and state lands represent
25 the foundation of a forest products industry that sequesters massive
26 amounts of carbon dioxide from the atmosphere simply through its
27 standard, baseline operations. These working forests are one of the
28 state's greatest natural assets in combating global greenhouse gas
29 emissions. A statewide carbon policy must support and maintain the
30 ecosystem values provided by the forest products industry. Healthy,
31 sustainable, working forests maximize the forests' ability to absorb
32 carbon dioxide with lumber and other forest products continuing to
33 sequester that carbon dioxide in their useful life. For these
34 reasons, this chapter exempts certain timber-related uses of fuels
35 subject to the carbon pollution tax imposed under this chapter.
36 (6) Washington is also home to one of the most productive and
37 innovative agricultural sectors in the world. Agriculture is not only
38 critical to our economy, but it is integral to our culture. With
39 farmers and farmworkers on the front lines of climate-related
40 disruption such as wildfire, flooding, drought, pests, and other
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 1 threats to the land, labor, and the business of farming, investing in
2 practices that increase the natural and economic resilience of and
3 decrease the greenhouse gas emissions from Washington agriculture is
4 critical. Farmers have been leading the way on land stewardship and
5 soil health for decades, while operating in a highly trade-exposed
6 and price-constrained industry that imposes singular economic
7 challenges. For these reasons, this chapter exempts certain
8 agricultural uses of fuels subject to the carbon pollution tax
9 imposed under this chapter.
10 (7) Washington is leading the transition to a clean energy
11 economy and in 2019 adopted chapter 19.405 RCW, the clean energy
12 transformation act, to eliminate coal-fired electricity, transition
13 the state's electricity supply to 100 percent greenhouse gas neutral
14 by 2030, 100 percent carbon free by 2045, and established strong
15 compliance mechanisms and significant penalties within chapter 19.405
16 RCW if a utility fails to meet the mandates. Because of the laws
17 created in 2019 to transition the electricity sector to 100 percent
18 carbon free, emissions from fossil fuels consumed in the electricity
19 sector is not included in the requirements of this chapter.
20 (8) The legislature recognizes the concern from imposing the
21 requirements of this chapter on energy intensive trade exposed
22 industries in our state and the possibility that it might provide a
23 comparative advantage to producers in unregulated states or
24 countries, leading to a migration of manufacturing to unregulated
25 states or countries and generating a corresponding increase in
26 greenhouse gas emissions that would undermine the efforts of this
27 chapter. Because of the concern of leakage, the department of ecology
28 must provide a report to the legislature by July 30, 2026, with
29 recommendations on imposing the requirements of this chapter on
30 energy intensive trade exposed entities identified by North American
31 industrial classification system code. The recommendations must
32 include input from individual energy intensive trade exposed
33 industries stakeholders, allow for growth, recognize and provide
34 credit for early actions, recognize the limits of best available
35 control technology, allow for either internal or external
36 benchmarking, and include an analysis of alternative fuels available
37 that could be feasibly used in lieu of fossil fuels.
38 (9) Fossil-fuel combustion is also responsible for other
39 pollutants, such as nitrous oxide, carbon monoxide, benzene,
40 particulate matter, and others that contribute to respiratory
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 1 diseases like asthma and lung cancer, which compromise public health,
2 shorten life expectancy, and strain our public health system. This
3 pollution affects all Washingtonians, but falls disproportionately on
4 low-income communities, communities of color, and the most vulnerable
5 of our population. Reducing our reliance on fossil fuels will
6 therefore contribute to improved air quality and improved public
7 health outcomes.
8 (10) The legislature recognizes and finds that the public
9 interest includes, but is not limited to: The equitable distribution
10 of energy benefits and reduction of burdens to vulnerable populations
11 and highly impacted communities; long-term and short-term public
12 health, economic, and environmental benefits and the reduction of
13 costs and risks; and energy security and resiliency. It is the intent
14 of the legislature that in achieving this policy for Washington,
15 there should not be an increase in environmental health impacts to
16 highly impacted communities.
17 (11) This chapter establishes a carbon pollution tax to account
18 for a significant share of the economic and environmental impacts of
19 greenhouse gas emissions. The revenue from the tax will facilitate
20 the transition from fossil fuels to clean energy and fund investments
21 that will benefit our businesses, our families, and our communities.
22 (12) Furthermore, this chapter establishes a 10-year climate
23 finance program that provides much needed additional capacity to
24 invest in a just transition that protects our communities and our
25 economy from future disasters and builds the low-carbon future here
26 in Washington state. This finance program mandates that investment
27 decisions are made in a manner that provides accountability in
28 government spending through a fiscally responsible bond program that
29 invests at scale in climate priorities and delivers maximum returns
30 in the form of both economic activity and carbon pollution reduction.
31 These investments will not only save Washington taxpayers billions of
32 dollars in avoidable future costs, but also foster growth and
33 stability for rural and urban communities alike, across diverse
34 economic sectors.
35 NEW SECTION. Sec. 2. The definitions in this section apply
36 throughout this chapter unless the context clearly requires
37 otherwise.
38 (1) "Aircraft fuel" has the same meaning as provided in RCW
39 82.42.010.
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 1 (2) "Carbon calculation" means a calculation made by the
2 department of ecology, in consultation with the department of
3 commerce, for purposes of determining the carbon dioxide emissions
4 from the complete combustion or oxidation of fossil fuels for use in
5 calculating the carbon pollution tax pursuant to section 3 of this
6 act. The carbon calculation also includes the life-cycle analysis of
7 emissions associated with these fuels determined under section 3 of
8 this act.
9 (3) "Carbon dioxide equivalent" means a metric measure used to
10 compare the emissions from various greenhouse gases based on their
11 global warming potential.
12 (4) "Carbon pollution tax" means the tax created in section 3 of
13 this act.
14 (5) "Coal" means a readily combustible rock of carbonaceous
15 material, including anthracite coal, bituminous coal, subbituminous
16 coal, lignite, waste coal, syncopal, and coke of any kind.
17 (6) "Department" means the department of revenue.
18 (7) "Direct access gas customer" means a person who purchases
19 natural gas for consumption from any seller other than a seller
20 registered with the department for purposes of paying taxes due under
21 chapter 82.04 or 82.16 RCW.
22 (8) "Facility" means any physical property, plant, building,
23 structure, source, or stationary equipment located on one or more
24 contiguous or adjacent properties in actual physical contact or
25 separated solely by a public roadway or other public right-of-way and
26 under common ownership or common control, that emits or may emit any
27 greenhouse gas.
28 (9) "Fossil fuel" means motor vehicle fuel, special fuel, dyed
29 special fuel, aircraft fuel, natural gas, coal, and any form of
30 solid, liquid, or gaseous fuel derived from natural gas, coal,
31 petroleum, or crude oil, including without limitation still gas,
32 propane, and petroleum residuals including bunker fuel.
33 (10) "Gas distribution business" has the same meaning as provided
34 in RCW 82.16.010.
35 (11) "Greenhouse gas" means carbon dioxide, methane, nitrogen
36 trifluoride, nitrous oxide, sulfur hexafluoride, hydrofluorocarbons,
37 perfluorocarbons, and other fluorinated greenhouse gases.
38 (12) "Highly impacted community" has the same meaning as defined
39 in RCW 19.405.020.
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 1 (13) "Motor vehicle fuel" has the same meaning as provided in RCW
2 82.38.020.
3 (14) "Natural gas" means naturally occurring mixtures of
4 hydrocarbon gases and vapors consisting principally of methane,
5 whether in gaseous or liquid form, including methane clathrate.
6 (15) "Person" has the same meaning as provided in RCW 82.04.030.
7 (16) "Sale" has the same meaning as provided in RCW 82.04.040.
8 (17) "Special fuel" has the same meaning as provided in RCW
9 82.38.020.
10 (18) "Taxpayer" means a person subject to the carbon pollution
11 tax created in section 3 of this act.
12 (19) "Tribal lands" has the same meaning as "Indian country" as
13 provided in 18 U.S.C. Sec. 1151, and also includes sacred sites,
14 traditional cultural properties, burial grounds, and other tribal
15 sites protected by federal or state law.
16 (20)(a) "Use," "used," "using," or "put to use" means, with
17 respect to any fossil fuel other than natural gas, the consumption in
18 this state of the fossil fuel by the taxpayer or the possession or
19 storage in this state of the fossil fuel by the taxpayer preparatory
20 to subsequent consumption of the fossil fuel within this state by the
21 taxpayer.
22 (b) "Use," "used," "using," or "put to use" means, with respect
23 to natural gas, the consumption in this state of the fossil fuel by
24 the taxpayer.
25 (c) For the purposes of this subsection, "possession" means the
26 control of fossil fuel located within this state and includes either
27 actual or constructive possession, or both. "Actual possession"
28 occurs when the person with control has physical possession.
29 "Constructive possession" occurs when the person with control does
30 not have physical possession. "Control" means the power to sell or
31 use a fossil fuel or to authorize the sale or use by another.
32 (21) "Vulnerable populations" has the same meaning as defined in
33 RCW 19.405.020.
34 (22) "Year" means the 12-month period commencing January 1st and
35 ending December 31st unless otherwise specified.
36 NEW SECTION. Sec. 3. (1)(a) Beginning January 1, 2022, a carbon
37 pollution tax is imposed on the sale or use within this state of all
38 fossil fuels, except fossil fuels used to generate electricity in the
39 state.
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 1 (b) The measure of the carbon pollution tax is the carbon dioxide
2 equivalent emissions:
3 (i) Resulting from the complete combustion or oxidation of fossil
4 fuels sold or used by the taxpayer within this state; and
5 (ii) For the purposes of measuring the tax rate under subsection
6 (2) of this section only, from the entire life cycle of the fossil
7 fuel.
8 (2) The tax rate as of July 1, 2022, is equal to $25.00 per
9 metric ton of greenhouse gas emissions. The tax rate automatically
10 increases annually each July 1st thereafter by five percent each year
11 and is adjusted for inflation using the consumer price index.
12 (3) By January 1, 2031, the department of ecology shall make a
13 determination of whether the sources of emissions covered by this tax
14 are predicted to achieve their combined share of the emissions
15 reductions necessary for the state to achieve the emissions limits
16 established in RCW 70A.45.020. By January 1, 2031, the department of
17 ecology must provide the legislature with a report detailing its
18 determination with recommendations, pursuant to the tax and covered
19 sources, for achieving the emissions limits established in RCW
20 70A.45.020.
21 (4) For the purposes of this chapter, the carbon pollution tax is
22 imposed:
23 (a) Only once with respect to the same unit of fossil fuel;
24 (b) At the time and place of the first event within this state in
25 which the tax is applicable, except as otherwise provided in this
26 section, occurring on or after the effective date of this section,
27 regardless of whether the fossil fuel was previously sold, used, or
28 consumed within this state before the effective date of this section;
29 and
30 (c) Upon the first person within this state upon which the tax
31 would be applicable, except as otherwise provided in this section.
32 Such a person includes:
33 (i) A person required to be registered with the department under
34 RCW 82.32.030(1);
35 (ii) The state, its political subdivisions, and municipal
36 corporations; and
37 (iii) A person who maintains a place of business in this state
38 but who is not required to be registered with the department under
39 RCW 82.32.030(1).
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 1 (5) As provided in this section, the carbon pollution tax on the
2 sale or use of fossil fuels is imposed on the seller or user of the
3 fossil fuel.
4 (6) The carbon pollution tax on the sale or use of natural gas is
5 imposed as follows:
6 (a) Natural gas transported through the state that is not
7 produced or delivered in the state is exempt from the carbon
8 pollution tax imposed by this section. Natural gas possessed or
9 stored in this state is exempt from the carbon pollution tax imposed
10 by this section unless the tax is otherwise applicable under (b) or
11 (c) of this subsection;
12 (b) For natural gas sold by a gas distributi