Reducing carbon pollution by moving to a clean energy economy (Carlyle, Ranker, Palumbo)

Imposes a carbon pollution tax on: (1) The sale or use within this state of fossil fuels, including fossil fuels used in generating electricity; or (2) The sale or consumption within this state of electricity generated through the combustion of fossil fuels. Authorizes each light and power business or gas distribution business to claim a credit against the carbon pollution tax for approved clean energy investments. Requires the utilities and transportation commission and the department of commerce to create a technical advisory committee to advise certain parties on utility reinvestment of certain credited money. Establishes clean energy investment programs and clean energy investment plans. Creates the carbon pollution reduction account, the energy transformation account, the transition assistance account, and the water and natural resources resilience account.

The tax rate begins at $10 per metric ton, beginning July 1, 2019. Beginning in 2021, the tax rate increases $2 each year until it is capped at $30 per metric ton. Natural gas is taxed at end use. Electricity is taxed at the utility level. For unspecified sources of electricity, carbon content is measured by a default standard adopted by the California Air Resources Board by regulation. Exemptions are added for manufacturers of renewable energy equipment, and specific North American Industry Classifications System (NAICS) code industries in addition to Commerce designations based on numeric criteria and considering other jurisdictions with carbon prices. Credit is provided for any federal carbon tax beyond the state carbon tax. Refineries may get credit for up to 10 percent of tax liability if they spend on specified purposes. Specific annual reports are required from Commerce. Commerce is required to review the tax rate in 2030 and report to the Legislature on whether or not to adjust the tax rate based on progress toward 2035 limits. Prior to distributing receipts from the Carbon Pollution Reduction account, $100 million per year is transferred to the Multimodal Transportation Account. Of the remaining funds, the Water and Natural Resources Resilience Account is reduced from 35 percent to 20 percent. A Rural Economic Development Account is added with 15 percent of the remaining revenues.

The Clean Energy Investment Fund has different requirements for IOUs and COUs. An investment plan must be approved by the UTC for the IOUs and by the governing boards for the COUs. The IOUs and natural gas companies may claim up to 100 percent credit in the same year, except, for electricity generated by coal which, beginning Jan 1, 2020, decreases on a pro rata basis until reaching 0 percent in 2036. COUs may aggregate funds through agreement with a joint operating agency to develop a joint investment plan.

Grant awards from Commerce must be aligned with a strategy anticipated to achieve cumulative reduction of GHG emissions by 2035. Priority is also given to funding COUs with less than $5 million in tax credits. Funding is allowed for carbon sequestration activities. An implementation plan is required by June 30, 2019.

The Department of Health is required to conduct or adopt a cumulative impact analysis to designate communities highly impacted by fossil fuel pollution. Car tab fees are reduced for all low-income owners. Criteria for determining eligible workers is specified and types of assistance are listed.

Funding is divided between water and fires and forest health activities. Projects funded are prohibited from violating tribal treaty rights or damaging critical habitat or ecological functions. Ocean acidification adaptation is included in Ecology's implementation plan. Ecology and DNR are required to develop performance-based numeric criteria for project funding and progress reports.

The rural economic development account is created. Commerce is directed to provide financial assistance to rural communities including low-carbon innovation, transportation options, broadband, and telecom services. Competitive grants are created for small businesses. Intent to appropriate $30 million for rural broadband projects in FY 2020 is included.

A seven-member Joint Committee on Climate Programs Oversight is created that will meet at least quarterly starting in July 2019. The 21-member Pollution Cleanup Fund and Advisory Board (Advisory Board) is created to oversee implementation of the act toward reducing pollution and facilitating the transition to a clean energy economy. An economic and environmental Justice Oversight Panel is created as a subcommittee of the Advisory Board to analyze whether policies lead to improvements within highly impacted communities. Government-to-government consultation is required on all programs under the act, at least annually.

Federal incremental hydroelectricity is added as an eligible renewable resource under Initiative 937. IOUs are allowed to use renewable energy credits (REC) generated from federal incremental hydroelectricity under an agreement with the Bonneville Power. Enforcement of the Clean Air Rule is prohibited. The Act expires if any other law is enacted, by Legislature or Initiative, that creates a GHG emissions charge, tax, or cap.

(1) Adds intent language about the ability of working forests to absorb carbon with lumber and other forest products. Narrows Commerce's rule-making to the provisions of the bill relating to determining energy intensive trade exposed facilities. (2) Specifies that the state auditor will assist with the initial Commerce report that includes recommendations for auditing account uses. (3) Specifies that the exemptions for EITE facilities apply only to electricity and fossil fuels used on-site by manufacturers. (4) Establishes an application process for EITE facilities to qualify for an exemption. (5) Requires that a facility erroneously qualifying for an EITE must repay exempted amounts plus interest. (6) Provides an exemption for facilities that produce components or materials used exclusively to manufacture eligible renewable resources. (7) Makes technical clarifying changes to the tax provisions of the proposed substitute. (8) Allows the UTC to set an annual fee of up to 1 percent of the moneys in each clean energy investment account to pay for administering the clean energy investment fund for IOUs. (9) Clarifies that a clean energy investment plan for IOUs must eliminate to the extent feasible and at a reasonable cost any carbon tax obligation associated with electricity by 2050. (10) Adds to the list of eligible investments under the clean energy plan for IOUs: Investments that support the use of alternative fuels in the transportation sector for medium- and heavy-duty vehicles and equipment that reduce GHG emissions if the UTC determines the alternative fuel is more cost-effective and commercially accepted than electrification; and Pumped storage facilities whose development does not conflict with existing state and federal fish recovery plans and laws and regulations. (11) Adds low carbon architecture to the categories of projects that Commerce may consider under the Energy Transformation Account. (12) Requires the Recreation and Conservation Office, with technical assistance from DNR, to award grants for carbon sequestration projects and activities. (13) Adds that priority uses of funds in the working forest conservation program must be to prevent the loss of working forests and purchase non-forested land for afforestation and establishing working forests. (14) Clarifies that grants for rural electrification projects must be awarded in counties with a population of 250,000 served by a consumer-owned utility with an existing portfolio of 90 percent renewable resources. (15) Provides a definition of "cap" under state preemption provisions. (16) Includes direction to agencies to use the cumulative impact analysis that expenditures prioritize highly impacted communities in several provisions throughout the bill. (17) Requires consultation with the Climate Impacts Group at the University of Washington and Indian Tribes in several provisions throughout the bill. (18) Delays the effective date for the exemptions for vehicle registration fees for low income individuals (Sections 507-509) until April, 2019.

Hearing Date: Thursday, February 15, 2018 -- 3:30 pm

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