Washington Carbon Cap Rule for Large Emitters Now on the Books

By Rick Adair

Clearing Up/Energy NewsData

Republished with Permission

Washington adopted a rule Sept. 15 to limit greenhouse gas emissions from large emitters that it says account for 60 percent of the state’s carbon emissions.

“Today marks a watershed moment in our country’s history,” Department of Ecology Director Maia Bellon said at a waterfront news conference in Seattle. “We are taking leadership under our Clean Air Act, adopting a strong and practical plan to reduce greenhouse gases, and doing our fair share to tackle climate change.”

With Bellon’s signature, the carbon-cap regulation— known as the Clean Air Rule—was finalized after months of hearings and comment-gathering that included withdrawal of the original version (CU No. 1730 [10]) in February (CU No. 1737 [16]) and rolling out of another in May (CU No. 1547 [18]).

It goes into effect Oct. 17, and will be managed by Ecology’s Air Quality Program.

A state analysis of the rule’s economic impact found that, “as a worst-case scenario,” it would add $16 per year to electricity costs by 2020 and add a penny to gas prices.

It also found that costs for all businesses to comply over 20 years would be $410 million to $6.9 billion, depending on how they comply. The rule is also estimated to provide $9.6 billion in benefits over that period by improving environmental and health conditions, according to the state.

Ecology estimates that 68 of the state’s top emitters could fall under the rule, which requires a gradual reduction in carbon emissions over time through 2035. Sectors affected by it include natural gas utilities, power plants, oil refineries, fuel distributors, and pulp and paper mills.

The threshold for compliance starts at 100,000 metric tons of carbon equivalents and drops by 5,000 MT every three years, an initial average of about 1.7 percent per year, until it reaches 70,000 MT in 2035, when it plateaus.

Beginning in 2017, 24 companies will need to start mitigating their emissions. These two-dozen companies include all four of the state’s natural-gas investor-owned utilities, 10 power plants (including five owned by Puget Sound Energy), five refineries and five landfills.

Among those allowed a late start to GHG reductions are 15 “energy intensive and trade exposed” facilities

(EITEs) that will join in 2020 or later, to provide time for Ecology to tailor their compliance. These include NuCor Steel, REC Silicon, and several paper and pulp mills, smelters and cement manufacturers.

Companies could be fined up to $10,000 per day under existing state regulations for non-compliance, Ecology staff said.

Excluded from the rule is electricity imported into the state and TransAlta’s coal-fired Centralia power plant, which is scheduled to shutter by 2025.

Also, in-state power plants under the rule would “move over” to EPA’s Clean Power Plan if it passes, Stu Clark, Ecology’s Air Quality Program manager, said at the press conference.

“This would include nine baseload plants, which only make up about 6 percent of the covered emissions,” he said.

Most of these provisions were present in the original proposed rule, including the ability to use offset projects or trade credits to meet the reduction mandate. The biggest difference is in providing more clarity and an additional pathway for EITE industries.

The agency said limiting the emissions will protect health and the environment, and that the state faces economic and environmental disruption from rising sea levels, and increased drought and wildfire.

“This is the biggest day in my career,” Bellon said of the rule.

 

Gov. Jay Inslee directed Ecology in July 2015 to develop a cap on carbon emissions under the state’s Clean Air Act, after the Legislature didn’t take up his ambitious carbon cap-and-fee package (CU No. 1708 [17]).

“This is an important part of making sure Washington does its part on climate and is one of the important tools to help us reduce carbon pollution,” Tara Lee, Inslee’s deputy director of communications, told Clearing Up,” adding, “This is a good step forward building on the existing clean air law.”

Republican legislators have criticized Inslee for taking executive action on the issue, saying the Legislature should set carbon policy.

In fact, Sen. Doug Ericksen (R-Ferndale), the chair of the Senate energy committee, spiked several energy bills in the last session by adding a poison-pill provision that would kick in if the rule was implemented (CU No. 1737 [16]).

In comments posted to his Facebook page, Ericksen reiterated his opposition to the CAR, saying, “Today Gov. Jay Inslee has chosen to impose a new rule on energy and carbon that will have no impact on the world climate, but will have a chilling effect on our economy.”

He added, “Inslee has repeatedly opposed commonsense legislation to promote Washington’s hydroelectric system, the potential of nuclear power, and opportunities to bring more manufacturing jobs to Washington.”

Ericksen also said Inslee “is exceeding the authority delegated to the executive branch and we can anticipate a costly legal challenge.”

In addition, there was no love for the rule from the state’s largest business group. Kris Johnson, president of the Association of Washington Business, said in a statement that the group was “disappointed” Inslee moved forward with the rule in its current form, saying it was “a case of regulatory overreach” that would be costly for the state.

However, Rep. Joe Fitzgibbon (D-Burien), who championed Inslee’s cap-and-fee legislation package, said in a release, “I welcome the adoption of a rule that caps and reduces greenhouse gas emissions in our state.”

He said lawmakers could take the rule further with “a flexible approach” to GHG reduction. “I hope that the 2017 Legislature can build on this rule to create a policy that meets the needs of our state.”

Several environmental groups also praised Inslee for pushing ahead, calling it an important first step.”

“This [rule] begins to address the next threat to our climate—plans to invest in expensive, dirty gas-fired power plants in our state,” said Sierra Club’s Brian Grunkemeyer in a statement. “We look forward to working with Inslee, the state Legislature and local utilities to make sure that we’re not replacing dirty coal plants with yet another fossil fuel.”

Sasha Pollack, with the Washington Environmental Council, said, “We must continue to work toward a comprehensive climate policy” that puts a price on emissions and reinvests the money in clean-energy programs and communities most impacted by climate change.

Washington voters will consider an initiative in November that would directly tax carbon emissions from fossil fuels burned in the state, but would lower state sales and business taxes.

Initiative 732—designed to be revenue-neutral—would set the tax at $15/MT of emissions in the first year, raise it to $25/MT in the second year, and follow with annual increases until it reaches a $100/MT cap.

However, it hasn’t been supported by environmental groups who helped craft the state’s RPS, because it doesn’t apply the tax revenue to clean-energy programs or climate-impacted communities.

This article is republished with permission from Energy NewsData, the premiere intelligence source on energy policy, market news, and resource development for the western U.S. and Canada. You can learn more and subscribe at https://www.newsdata.com/.

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