SB 5126, sponsored by Sen. Reuven Carlyle (D–Seattle), establishes a cap and invest program that would set emissions limits on facilities and fuel suppliers to support the state’s goal of reducing greenhouse gas (GHG) emissions.

The cap and invest program is comprised of two key elements:

1. A limit or cap on carbon emissions; and
2. Tradable carbon allowances.

Although the state’s Clean Air Rule (CAR) attempted to reduce entities emitting more than 100,00 metric tons of greenhouse gas emissions per year, the state Supreme Court issued a 5-4 opinion partially invalidating CAR. The Court argued that the Department of Ecology lacks the authority to apply emissions standards to entities that do not directly emit GHGs, such as natural gas distributors and petroleum producers.

In 2020, the Legislature updated statewide GHG emission reduction limits set in 2008, requiring the state to achieve net zero emissions by 2050.

The proposed legislation would establish a comprehensive program to implement the state’s climate commitment. The program must address a strategic statewide approach to climate resilience and build an equitable and inclusive clean energy economy.

Further, the bill requires Ecology to implement a GHG emissions cap and investment program to reduce GHG emissions consistent with statewide goals. Ecology is tasked with adopting a program budget of allowances for covered entities and providing substantial reductions each calendar year.

Covered entities include facilities, electricity generated in the state, and fuel suppliers (other than natural gas) that report emissions greater than or equal to the threshold of 25,000 metric tons of carbon dioxide. In subsequent compliance periods, covered entities are expanded to include natural gas suppliers, facilities that are direct purchasers of electricity, fuel suppliers (other than natural gas), first jurisdictional deliverer of electricity (including customer-owned and investor-owned utilities), and natural gas suppliers to non-covered entities.

SB 5126 also establishes the use of auctions for entities to purchase available allowances for carbon abatement. All receipts from the auction of allowances must be deposited in the newly created Climate Investment Account and may be used for projects such as clean transportation programs, natural climate resilience solutions, clean energy transition and assistance programs, and other emissions reduction projects and programs.

The bill also prohibits any city, town, or county from implementing a charge or tax based exclusively on quantity of GHG emissions. Sen. Carlyle introduced a substitute bill to replace existing language, and the bill’s work session addressed many of the proposed changes to the current bill (including provisions of environmental justice, allowance budgets, program timelines, covered entities, electric utilities, natural gas companies, and the Climate Investment Account).

To view the recording of last week’s work session in the Senate Environment, Energy, & Technology Committee, click here. AWC expects Sen. Carlyle will schedule the bill for executive hearing in the Committee later this week. Please contact Marian Dacca or Maggie Douglas with comments or concerns your city may have regarding the legislation.