Official Text and Analysis.

• Establishes a cap and invest program for greenhouse gas emissions to be implemented by the Department of Ecology. • Directs distribution of auction revenues for the Forward Flexible Account and for specified purposes including clean transportation, natural climate resiliency, clean energy transition and assistance, and energy efficiency projects. • Requires an environmental justice review to ensure that the cap and invest program achieves reduction sin criteria pollutants in overburdened communities highly impacted by air pollution. • Convenes an Environmental Justice and Equity Advisory Panel to provide recommendations on the development and implementation of the cap and invest program.

Striking amendment. Imposes a carbon pollution tax beginning July 1, 2022, equal to $15 per metric ton of greenhouse gas emissions on the sale or use of all fossil fuel within the state of Washington, except for the sale or use of electricity in Washington generated using fossil fuels. Increases the tax rate annually by inflation, as measured by the consumer price index, plus 5 percent beginning July 1, 2023. Implements the working families tax exemption beginning in 2023 equal to the greater of 10 percent of the federal credit or fifty dollars. Eliminates the B&O tax for all manufacturing and timber extracting activities. Exempts the first $100,000 of valuation of a person's principal residence from state property tax beginning in calendar year 2023. Dedicates state sales and use tax on new and used motor vehicles to transportation purposes over a five-year period beginning in FY 2022. Requires the first $500 million of carbon pollution tax proceeds to be deposited in a proposed forest resiliency account for implementation of the department of natural resources' forest health plan and requires all remaining proceeds to be deposited in the state general fund. Submits the act to the voters for a referendum vote.

The cap and invest program terminates December 1, 2038, unless the legislature reauthorizes it.

Expires any agency rule making related to auctions of allowances under the program after one year unless expressly reauthorized by the Legislature.

Expires any agency rule making related to the allocation of allowances to EITE industries after one year unless expressly reauthorized by the Legislature.

Expires any agency rule making related to the allocation of allowances to electric utilities after one year unless expressly reauthorized by the Legislature.

Expires any agency rule making related to the allocation of allowances to natural gas utilities after one year unless expressly reauthorized by the Legislature.

Expires any agency rule making related to the creation and operation of an emissions containment reserve after one year unless expressly reauthorized by the Legislature.

Expires any agency rule making related to establishing offset credits and projects after one year unless expressly reauthorized by the Legislature.

Requires the contractor that will run the state's allowance auctions to be certified as a minority women business enterprise by the Washington State Office of Minority and Women's Business Enterprises.

(1) Adds intent language regarding wildfires as a source of black carbon. (2) Clarifies the definition of imported electricity for a multijurisdictional electric company to mean electricity, other than from in-state facilities, that contributes to a common system power pool that is allocated to serve retail load in Washington. (3) If criteria pollutant reductions are not occurring in identified overburdened communities, provides that the department must, rather than may, adopt stricter air quality standards, emission standards, or emissions limitations; reduce offset limits; or revise a linkage agreement. (4) Adds reduction of the allocation of no cost allowances to an emissions-intensive trade-exposed facility as one of the options of actions that the department may take, if a covered entity is identified as a high priority emitter of criteria pollutants and the department finds that criteria pollutants are not being reduced in an identified overburdened community. (5) Moves up the first program evaluation one year from December 2028 to 2027.

Prohibits the act from taking effect unless it can be determined that the act, combined with all other Washington state greenhouse gas emissions policies, will cause an average annual reduction of global greenhouse gas emissions totaling at least 0.2 percent.

Prohibits the act from going into effect until the People's Republic of China reduces its annual greenhouse gas emissions by at least 20 percent below its 2020 levels.

Prohibits expenditure decisions for the Climate Investment Account being made on the basis of race, sex, color, ethnicity, or national origin.

Prohibits a covered entity from transferring the allocation of no cost allowances to a compliance account for a separate division, facility, or other sub-entity of the same company.

Requires the Department of Ecology to suspend the cap and invest program if the Legislature revises the state greenhouse gas emissions limits.

Requires linkage agreements to be renewed every two years, and for the cap and invest program to be suspended if a linked jurisdiction does not agree to renewal.

Provides that a supplier of fossil fuel other than natural gas is not a covered entity under the cap and invest program if the 67th Legislature enacts E3SHB 1091 relating to reducing greenhouse gas emissions by reducing the carbon intensity of transportation fuel.

Removes provisions authorizing program linkage with other jurisdictions.

Removes provisions providing that an emissions allowance is not a property right, and instead provides that an allowance is a property interest and that the holder of an allowance may not be deprived of it without due process of law.

Provides that for an emissions-intensive trade-exposed (EITE) facility that uses a mass-based baseline, these facilities may be awarded no cost allowances up to the mass-based baseline, for the second compliance period the baseline declines by 3 percent, and for the third four-year compliance period the baseline declines by an additional 3 percent. Provides that an aerospace products and parts manufacturing facility that is using a mass-based baseline must receive an additional no cost allocation in order to accommodate an increase in production which increases its emissions above the baseline on a basis equivalent in principle to those awarded to entities using a carbon intensity benchmark. Directs the department of ecology to establish methods to award additional no cost allowance allocations for EITEs, if appropriate based on projected production, to achieve a similar on-going result through the adjustment of the facility's mass-based baseline. Requires the department of ecology to provide a recommendation to the legislature whether to provide an annual allocation to EITEs beyond 2034 for process emissions based on a best available technology limitation.

Designates cattle feedlots as emissions-intensive, trade- exposed facilities.

Removes the Department of Ecology's authority to adopt criteria for determining whether an entity is an emissions-intensive, trade-exposed entity.

Requires the Department of Ecology to suspend the cap and invest program if auction proceeds deposited in the forward flexible account do not exceed $127,341,000 in any fiscal year after 2022.

Removes the authorization for general market participants to participate in the cap and invest program.

Requires the Department of Ecology to notify the Legislature whenever a covered entity is no longer covered by the cap and invest program.

Removes the provision that would prevent the cap and invest program's compliance obligations from taking effect until a separate additive transportation funding act is enacted.

Requires the Department of Ecology to maintain a public roster of all covered entities, opt-in entities, and general market participants on its website.

Removes the Department of Ecology's ability to exclude years that are identified as emissions outliers due to a state of emergency when determining the addition to the emissions baseline from new covered entities in the second compliance period.

Provides that a person that is a first jurisdictional deliverer who generates electricity in the state is not a covered entity under the cap and invest program if the first jurisdictional deliverer is required to comply with the Washington Clean Energy Transformation Act.

Requires that all rule making under the act be conducted according to the standards for significant legislative rules.

Requires the Department of Ecology to repeal the Clean Air Rule.

Provides that the Forward Flexible Account is created in the Motor Vehicle Fund.

Expires any agency rule making related to the program budget and timelines after one year unless expressly reauthorized by the Legislature.

Expires any agency rule making related to the entire program after one year unless expressly reauthorized by the Legislature.

Requires 25 percent of forward flexible account expenditures be used for projects, programs, and activities that help the Department of Transportation provide for fiberoptic infrastructure in order to attain the state goal of providing high- speed broadband access to every Washington resident by 2028.

Prohibits moneys in the Climate Investment Account to be used for projects that involve the exercise of eminent domain.

Provides that a wind energy facility may only generate eligible offset credits if it was subject to a local review process and not certified under the Energy Facility Site Evaluation Council certification process.

Expires any agency rule making related to program coverage after one year unless expressly reauthorized by the Legislature.

Expires any agency rule making related to general program requirements after one year unless expressly reauthorized by the Legislature.

Requires the Department of Ecology to maintain a regularly updated searchable website that shows the contents of each holding account, including but not limited to the number of allowances.

• Establishes a cap and invest program for greenhouse gas emissions to be implemented by the Department of Ecology. • Directs distribution of auction revenues for the Forward Flexible Account and for specified purposes including clean transportation, natural climate resiliency, clean energy transition and assistance, and energy efficiency projects. • Requires an environmental justice review to ensure that the cap and invest program achieves reduction sin criteria pollutants in overburdened communities highly impacted by air pollution. • Convenes an Environmental Justice and Equity Advisory Panel to provide recommendations on the development and implementation of the cap and invest program.

The striking amendment, as amended, does the following: (1) Makes technical changes, including conforming amendments. (2) Adds imported electricity to the list of covered emissions sources under the first compliance period of the Cap and Invest Program. (3) Exempts motor vehicle and special fuel used for agricultural purposes by a farm fuel user from the Cap and Invest Program. (4) Aligns environmental justice provisions with those of the Washington HEAL Act, except for the definition of "overburdened community," which has a new definition. (5) Replaces references to the Forward Flexible Account for transportation expenditures with the new Carbon Emissions Reduction Account. (6) Creates two subaccounts within the Climate Investment Account: The Climate Commitment Account and the Natural Climate Solutions Account. (7) Directs 75 percent of the funds deposited into the Climate Investment Account into the Climate Commitment Account and 25 percent into the Natural Climate Solutions Account. (8) Creates a new Air Quality and Health Disparities Improvement Account. (9) Creates a program for assistance to small forestland owners seeking to develop projects for carbon offset markets. Modifies various appropriations.

Requires the Department of Ecology (Ecology) to prepare a report that identifies all distributions of moneys from the Carbon Emissions Reduction Account, the Climate Investment Account, the Climate Commitment Account, the Natural Climate Solutions Account, and the Air Quality and Health Disparities Improvement Account.

Requires Ecology to include in the report, at a minimum, the recipient of the funding, the amount of the funding, the purpose of the funding, the actual end result or use of the funding, whether the project that received the funding produced any verifiable reduction in greenhouse gas emissions or other long-term impact to emissions, and if so, the quantity of reduced greenhouse gas emissions, the cost per carbon dioxide equivalent metric ton of reduced greenhouse gas emissions, and a comparison to other greenhouse gas emissions reduction projects in order to facilitate the development of cost-benefit ratios for greenhouse gas emissions reduction projects. Requires Ecology to require by rule that recipients of funds from the accounts listed above report to Ecology, in a form and manner prescribed by Ecology, the information required for Ecology to carry out its reporting obligations. Requires Ecology to post the information on its website and to update the website as appropriate but no less frequently than quarterly per calendar year. Requires Ecology to submit the report to the appropriate committees of the Legislature no less frequently than quarterly per calendar year..

Replaces references to the Climate Investment Account and the Air Quality and Health Disparities Improvement Account with references to the Union Solidarity Account. Authorizes expenditures from the Union Solidary Account for worker transition programs for workers in economic sectors negatively affected by the Cap and Invest Program. Removes the restrictions on the eligible transportation uses of the Carbon Emissions Reductions Account. Directs the first $500 million of auction proceeds per year to the Carbon Emissions Reductions Account, with the balance of auction proceeds each year going to the Union Solidarity Account. Eliminates the Climate Investment Account, the Climate Commitment Account, the Natural Climate Solutions Account, and the Air Quality 30 and Health Disparities Account.

Replaces references to the Climate Investment Account and the Air Quality and Health Disparities Improvement Account with references to the Taxpayers Fairness Account..

Replaces references to the Climate Investment Account and the Air Quality and Health Disparities Improvement Account with references to the Taxpayers Fairness Account..

(1) Clarifies the definition of "overburdened communities." (2) Amends provisions relating to the review of criteria pollutants and greenhouse gas emissions in overburdened communities. (3) Clarifies coverage of imported electricity under the Cap and Invest Program. (4) Clarifies coverage of fuel suppliers under the Cap and Invest Program. (5) Exempts persons who own or operate railroad companies from coverage under the Cap and Invest Program for the first two compliance periods. (6) Amends provisions relating to the siting of facilities under the State Environmental Policy Act. (7) Removes the prohibition against the transfer of auction proceeds to the Carbon Emissions Reduction Account after December 31, 2027, if a clean fuel standard with a carbon intensity reduction of greater than 10 percent is not enacted by that date. (8) Amends provisions relating to the allocation of no cost allowances to emissions-intensive, trade-exposed (EITE) entities. (9) Requires protocols for the allocation of no cost allowances to a new EITE facility that is built on tribal lands or is determined by the Department of Ecology to impact tribal lands and resources to be developed in consultation with the affected tribal nations. (10) Restores language pertaining to the allocation of no cost allowances to electric utilities as it exists in the underlying Senate bill.