Clean Fuel Standard and Climate Commitment Act set to launch Jan. 1

Regulations intended to meet emissions goals

PORT ANGELES — Two new state climate policies intended to work alongside each other to help the state achieve its goal of net zero emissions by 2050 by transforming how it acquires and uses energy will officially launch Jan. 1.

State Department of Ecology’s Abbey Brown and Claire Boyte-White joined the Clallam County Economic Development Council’s “Coffee with Colleen” program via Zoom on Wednesday to explain the Clean Fuel Standard (CFS) and Climate Commitment Act (CCA) regulations and answer questions about how they will work. The hour-long program can be found at tinyurl.com/yk9wcdp3.

Signed into law by Gov. Jay Inslee in 2021, the CFS and the CCA passed both houses of the state Legislature without a single Republican vote. Democratic District 24 Reps. Mike Chapman and Steven Tharinger voted for both measures, while Sen. Kevin Van De Wege was among four Democratic senators who voted against the CCA but joined his party to vote for the CFS. All three represent Clallam and Jefferson counties as well as a portion of Grays Harbor County.

Brown, the technical lead for the CFS, said regulations target transportation fuel because vehicle emissions are Washington’s greatest source of greenhouse gases, contributing about 45 percent of the state’s total.

Brown said the CFS incentivizes fuel producers to sell and invest in low-carbon impact fuels, such as electricity and biofuels.

“It requires fuel suppliers to gradually reduce the carbon intensity of transportation fuels 20 percent below 2017 levels by 2034,” Brown said.

“Fuels with carbon intensity above the standard incur deficits, and fuels with carbon intensity below the standard generate credits.”

(Carbon intensity is a measure of how much carbon pollution produced over a fuel’s life cycle for the energy it delivers.)

At the end of the year, businesses that make high-carbon fuels and accumulate deficits must purchase credits to meet the CFS standard, while those producing cleaner fuels can earn credits. In addition to collecting deficit fees, the Department of Ecology will charge businesses to participate in the program.

“This is a market-based system that is meant to provide financial incentive for low-carbon fuel,” Brown said, and is similar to programs in California, Oregon and British Columbia to push the transition to low-carbon fuels.

Brown explained that fuel suppliers will register with the state Fuel Reporting System starting in January, track fuel use and submit quarterly reports. The Department of Ecology will issue credits or deficits based on the carbon intensity of that use, which suppliers can save for future use or sell on the open market.

Earning credits are “a key part of the program,” Brown said.

Entities can earn credits by, among other things, switching to vehicles that use fuels considered clean, such as electricity, and investing in infrastructure upgrades such as hydrogen refueling and electric vehicle fast charging. Public entities also can borrow against future credit generation to fund clean vehicle purchases.

“If a company wanted to install an electric vehicle fast-charging station at their site, how would they apply for that?” EDC Executive Director Colleen McAleer asked.

“Essentially they would have to anticipate how much use that fueling station might get and how electricity might be generated in that particular area,” Brown said.

“There is an application process. We would look at the information provided to us and issue credits based on that.”

Jim McIntire, president of the Port Angeles Business Association, wanted to know if Ecology had any data on how the CFS would affect consumers at the pump.

“What has the impact been on wholesale fossil fuel prices and the ultimate downstream effect on retail fuel prices?” he asked.

Brown said that, overall, state regulatory programs like the CFS had less of an impact on the price of consumer fuels than global events such as issues with supply chains, the war in Ukraine and decisions made by fuel producers.

“There is some impact,” Brown said. “But all of the studies that have been done on estimates of future programs like ours and analyses done on existing programs in California and Oregon have shown minimal impact.”

(Note: According to Ecology’s website, an independent study estimated that the CFS will result in a less than a 1-cent rise in the price of a gallon of gas in 2023, with possible increases of 2 cents in 2024 and 4 cents in 2025. The study, Washington Department of Ecology: Clean Fuel Benefit Analysis Report by the Berkeley Research Group, also estimated the policy could increase by 19 cents the cost of a gallon of gas by 2031.)

The CCA is a cap-and-invest (or carbon trading) tool to move businesses toward reducing their carbon emissions. Washington is the second state after California to institute such a program, Boyte-White explained.

Entities that emit more than 25,000 metric tons of carbon dioxide a year, gasoline and diesel, and natural gas producers are required to participate in the program.

“We basically take a look at statewide greenhouse gas emissions and we cap them and then we lower that cap over time in order to meet statutory goals in state law,” Boyte-White said.

Entities can purchase allowances to meet statutory regulations. However, the number of allowances will decline over time while their cost will rise, thus making it more expensive to continue using carbon-emitting fuels.

“It’s another market-based program where it financially incentivizes businesses to decarbonize,” Boyte-White said.

The Department of Ecology estimates the CCA auction of allowances will generate $975 million during its first fiscal year (2024-2025).

“The auctions are the linchpin of the cap-and-invest program and will generate significant revenue for the state,” Boyte-White said.

Some industries that are vulnerable to fluctuations in regional and global markets will receive allowances at no cost. These include electric and natural gas utilities and oil refineries. In addition, emissions from agricultural businesses, aviation and marine fuels are not part of the program due to state laws and federal regulations, Boyte-White said.

Washington is required by law to reduce its carbon emissions 45 percent by 2030, 70 percent by 2040 and 95 percent by 2050.

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Reporter Paula Hunt can be reached at paula.hunt@soundpublishing.com.

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