Establishes cap and invest program in DEP to regulate major emitters of greenhouse gases.

A1022

ASSEMBLY, No. 1022

STATE OF NEW JERSEY

222nd LEGISLATURE

�

PRE-FILED FOR INTRODUCTION IN THE 2026 SESSION

Sponsored by:

Assemblyman BALVIR SINGH

District 7 (Burlington)

SYNOPSIS

���� Establishes cap and invest program in DEP to regulate
major emitters of greenhouse gases.

CURRENT VERSION OF TEXT

���� Introduced Pending Technical Review by Legislative
Counsel.

��

An Act
concerning greenhouse gas emissions, supplementing
Title 26 of the Revised Statues, and amending P.L.2007, c.340.

����
Be It
Enacted
by the Senate and General Assembly of
the State of New Jersey:

���� 1.� (New section) As used in
sections 1 through 11 of this act:

���� "Annual allowance
budget" means the total number of greenhouse gas emissions allowances
allocated for auction and distribution for one calendar year by the department.

���� "Biomass" means
nonfossilized and biodegradable organic material originating from plants,
animals, and microorganisms, including products, by-products, residues, and
waste from agriculture, forestry, and related industries as well as the
nonfossilized and biodegradable organic fractions of municipal wastewater and
industrial waste, including gases and liquids recovered from the decomposition
of nonfossilized and biodegradable organic material.

���� "Biofuels" means
fuels derived from biomass that have at least 40 percent lower greenhouse gas
emissions based on a full life-cycle analysis when compared to petroleum fuels
for which biofuels are capable of serving as a substitute.

���� "Compliance
instrument" means an allowance or offset credit, equal to one metric ton
of carbon dioxide equivalent, issued by the department or by an external
greenhouse gas emissions trading program to which New Jersey has linked its
greenhouse gas emissions cap and invest program.

���� "Compliance
obligation" means the requirement to submit to the department the number
of compliance instruments equivalent to a major emitter's covered emissions
during the compliance period.

���� "Compliance period"
means the four-year period for which the compliance obligation is calculated
for major emitters.

���� "Covered emissions"
means the greenhouse gas emissions for which a major emitter has a compliance
obligation under section 4 of this act.

���� "Department" means
the Department of Environmental Protection.

���� "Facility" means any
physical property, plant, building, structure, source, or stationary equipment
located on one or more contiguous or adjacent properties in actual physical
contact or separated solely by a public roadway or other public right-of-way
and under common ownership or common control, that emits or may emit any
greenhouse gas.

���� "Greenhouse gas"
means the same as the term is defined in section 3 of P.L.2007, c.112
(C.26:2C-39).

���� "Greenhouse gas emissions
allowance" or "allowance" means an authorization to emit up to
one metric ton of greenhouse gases, measured as carbon dioxide equivalent.

���� "Linkage agreement"
means a nonbinding agreement that connects two or more greenhouse gas market
programs and articulates a mutual understanding of how the participating
jurisdictions will work together to facilitate a connected greenhouse gas market.

���� "Major emitter"
means a person who meets at least one of the criteria provided in subsection a.
of section 4 of this act, or who opts in to the program pursuant to subsection
b. of section 5 of this act, and whose greenhouse gas emissions are therefore
to be regulated by the department under the program created by this act.

���� "Offset credit"
means a tradable compliance instrument that represents an emissions reduction
or emissions removal of one metric ton of carbon dioxide equivalent.

���� "Offset project"
means a project that reduces or removes greenhouse gases that are not covered
emissions under this act.

���� "Program" means the
greenhouse gas emissions cap and invest program created by and implemented
pursuant to this act.

���� "Retire" means to
permanently remove a compliance instrument such that the compliance instrument
may never be sold, traded, or otherwise used again.

���� 2.� (New section)� a.� In
order to ensure that greenhouse gas emissions are reduced consistently with the
State's greenhouse gas emissions reduction goals established by the
"Global Warming Response Act," P.L.2007, c.112 (C.26:2C-37 et al.),
the Department of Environmental Protection shall establish a cap on greenhouse
gas emissions from major emitters and a program to track, verify, and enforce
compliance through the use of greenhouse gas emissions allowances and offset
credits.� A major emitter shall not emit greenhouse gases unless it retires
greenhouse gas emissions allowances or offset credits commensurate with its
emissions, measured over a four-year compliance period.

���� b.� In establishing the
program, the department shall:

���� (1) develop annual allowance
budgets that limit emissions from major emitters, as provided in section 3 of
this act;

���� (2) create a method to
identify major emitters, and a method by which entities may voluntarily opt
into coverage under the program, as provided in sections 4 and 5 of this act;

���� (3) establish provisions
governing the sale, at auction, of greenhouse gas emission allowances, as
provided in section 6 of this act;

���� (4) develop a method for
meeting a compliance obligation through the use of offset credits, pursuant to
section 9 of this act;

���� (5) develop a method for
determining the annual compliance obligations of major emitters;

���� (6) establish provisions
governing the enforcement of this act consistent with the penalty provisions of
section 11 of this act; and

���� (7) establish provisions governing
the transfer of allowances, including those issued by jurisdictions with which New
Jersey has linkage agreements;

���� c.� The department may implement
the program in a manner that allows the State's program to be linked with those
of other jurisdictions. The department shall evaluate whether such linkage will
provide for a more cost-effective means for major emitters to meet their
compliance obligations in New Jersey while recognizing the special
characteristics of the State's economy, communities, and industries. The
department may enter into a linkage agreement with another jurisdiction when
consistent with the provisions of this act, after publication of the proposed
agreement, issuance of a formal notice of public hearing on the proposed
agreement, and following a public hearing at least one month prior to entering
into the agreement.

���� d.� No later than two years
after the effective date of this act, the department shall submit policy
proposals to the Senate Environment and Energy Committee and the Assembly
Environment, Natural Resources, and Solid Waste Committee, or their
successors.� The proposals shall be developed in consultation with
emissions-intensive, trade-exposed businesses, major emitters, environmental
advocates, and overburdened communities, and they shall outline a compliance
pathway specific to emissions-intensive, trade-exposed businesses for achieving
their proportionate share of the State's emissions reduction limits through
2050.

���� e.� No later than six years
after the effective date of this act, and at least every four years thereafter,
the department shall submit a report to the Governor and to the Legislature
pursuant to section 2 of P.L.1991, c.164 (C.52:14-19.1), which includes a
comprehensive review of the implementation of the program to date, including,
but not limited to, outcomes relative to the State's emissions reduction
limits, overburdened communities, major emitters, and emissions-intensive,
trade-exposed businesses.

���� f.� The department shall
submit suggestions for changes to this act to the Senate Environment and Energy
Committee and the Assembly Environment, Natural Resources, and Solid Waste
Committee, or their successors, if the department finds that any provision of
this act prevents linking New Jersey's cap and invest program with that of any
other jurisdiction.

���� 3.� (New section)� a.� No
later than one year after the effective date of this act, the department shall determine
an emissions baseline, which establishes the proportionate share that the total
greenhouse gas emissions of major emitters bears to the total anthropogenic
greenhouse gas emissions in the State, based on data reported to the department
under section 5 of P.L.2007, c.112 (C.26:2C-42) or provided as required by this
act, as well as other relevant data.

���� b.� No later than two years
after the effective date of this act, the department shall adopt annual
allowance budgets for the first four-year compliance period of the program, which
shall begin on the following calendar year.� The annual allowance budgets shall
be set to achieve the share of reductions by major emitters commensurate with
the
State's greenhouse gas emissions reduction goals
established by the "Global Warming Response Act," P.L.2007, c.112
(C.26:2C-37 et al.)
. �Annual allowance budgets shall be set such that
the use of offset credits as compliance instruments does not prevent the
achievement of the emissions limits. �The department shall adopt annual
allowance budgets for the program on a calendar year basis that provide for
progressively equivalent reductions year over year. An allowance distributed
under the program, either directly by the department pursuant to section 7 or 8
of this act or through auctions pursuant to section 6 of this act, shall not expire
and may be held or banked, provided that the person holding the allowance does
not exceed any holding limit established by the department pursuant to
subsection d. of section 6 of this act.

���� c.� No later than six years
after the effective date of this act, and again no later than 14 years after
the effective date of this act, the department shall complete an evaluation of
the performance of the program, including its performance in reducing
greenhouse gas emissions. �If the evaluation shows that adjustments to the
annual allowance budgets are necessary for major emitters to achieve their
proportionate share of the
State's greenhouse gas
emissions reduction goals established by the "Global Warming Response
Act," P.L.2007, c.112 (C.26:2C-37 et al.)
, the department shall
adjust the annual allowance budgets accordingly. �Nothing in this subsection shall
be construed to preclude the department from making additional adjustments to
annual allowance budgets as necessary to ensure successful achievement of the
proportionate emissions reductions by major emitters. �The department shall
make public the circumstances, metrics, and processes that caused the
department to adjust an annual allowance budget pursuant to this subsection.

���� 4.� (New section)� a.� Except
as provided in subsection b. of this section, a person shall be considered a
major emitter, for the purposes of this act, if the person:

���� (1) owns or operates a
facility and the facility's emissions equal or exceed 25,000 metric tons of
carbon dioxide equivalent;

���� (2) is an electric public
utility that distributes electric power to end-users in the State and the emissions
associated with the power equals or exceeds 25,000 metric tons of carbon
dioxide equivalent.� In consultation with any linked jurisdiction to the
program established pursuant to this act, the department, in consultation with
the Board of Public Utilities, shall adopt a methodology for addressing
imported electricity associated with the PJM-administered regional electricity
market;

���� (3) generates electric power
in the State, and the emissions associated with the power equals or exceeds
25,000 metric tons of carbon dioxide equivalent.

���� (4) is a supplier of fossil
fuels other than natural gas and from that fuel 25,000 metric tons or more of
carbon dioxide equivalent emissions would result from the full combustion or
oxidation, excluding the amounts for fuel products that are produced or
imported with a documented final point of delivery outside of the State and
combusted outside of the State;

���� (5) is a gas public utility
that supplies natural gas in amounts that would result in at least 25,000
metric tons of carbon dioxide equivalent emissions if fully combusted or
oxidized, excluding the amounts for fuel products that are produced or imported
with a documented final point of delivery outside of the State and combusted
outside of the State, and excluding the amounts (a) supplied to major emitters that
qualify under paragraphs (1) through (4) of this subsection, and (b) delivered
to opt-in entities; or

���� (6) owns or operates a
railroad company that is regulated by the Board of Public Utilities and has
annual greenhouse gas emissions of at least 25,000 metric tons of carbon
dioxide equivalent.

���� b.� When a major emitter
reports emissions below the threshold established in subsection a. of this
section for each year during an entire four-year compliance period, it shall no
longer be considered a major emitter as of the beginning of the subsequent
compliance period, unless the department provides notice to the major emitter at
least 12 months before the end of the compliance period that the facility's
emissions were within 10 percent of the threshold and that the person will
continue to be designated as a major emitter for one additional compliance
period, in order to ensure equity among all major emitters. �Whenever a major
emitter ceases to be a major emitter, the department shall notify the Senate
Environment and Energy Committee and the Assembly Environment, Natural
Resources, and Solid Waste Committee, or their successors, of the name of the major
emitter and the reason why it is no longer a major emitter.

���� c.� The following emissions
are exempt from the provisions of this act:

���� (1) emissions from the
combustion of aviation fuels;

���� (2) emissions from watercraft
fuels supplied in the State that are combusted outside of the State;

���� (3) carbon dioxide emissions
from the combustion of biomass or biofuels;

���� (4) emissions from motor
vehicle fuel or special fuel that is used exclusively for agricultural purposes
by a farm fuel user. This exemption shall be available only if the end
purchaser of motor vehicle fuel or special fuel provides the seller with an
exemption certificate, in a form and manner prescribed by the department, at
the point of sale;

���� (5) emissions from facilities
with North American industry classification system code 92811 (national
security); and

���� (6) emissions from facilities
that participate in the greenhouse gas emissions allowance trading program
established pursuant to section 3 of P.L.2007, c.340 (C.26:2C-47).

���� d.� The department shall not
require multiple major emitters to have a compliance obligation for the same
emissions. �

���� e.� A group of refineries,
fuel suppliers, facilities using natural gas, and natural gas utilities may
provide, by mutual agreement, for the assumption of the compliance obligation
for fuel or natural gas supplied and combusted in the State by the entities,
provided that they notify the department such an agreement at least 12 months
prior to the compliance obligation period for which the agreement is
applicable.

���� 5.� (New section)� a.� Each
major emitter shall register to participate in the program, following procedures
adopted by the department, no later than six months after the department adopts
rules and regulations to establish the program.� An entity registering to
participate in the program shall describe, as part of the information provided
to the department during the registration process, any direct or indirect
affiliation with other registered entities.

���� b.� A person responsible for
greenhouse gas emissions that is not a major emitter may voluntarily
participate in the program by registering as an opt-in entity. An opt-in entity
shall satisfy the same registration requirements as a major emitter. �Once
registered, an opt-in entity shall be allowed to participate as a major emitter
in auctions and shall assume the same compliance obligation to transfer
compliance instruments equal to their emissions at the appointed transfer
dates. �An opt-in entity may opt out of the program at the end of any four-year
compliance period by providing written notice to the department at least six
months prior to the end of the compliance period. �The opt-in entity shall
continue to have a compliance obligation through the entire compliance period. �An
opt-in entity shall not be eligible to receive allowances directly distributed pursuant
to sections 7 or 8 of this act.

���� c.� A person that is not
covered by the program and is not a major emitter or opt-in entity may
voluntarily participate in the program as a general market participant. �A
general market participant shall meet all applicable registration requirements.�
A federally recognized tribe or federal agency may elect to participate in the
program as an opt-in entity or general market participant.

���� d.� (1) The department shall establish
and use a secure, online, electronic tracking system to: (a) register entities
in the program; (b) issue compliance instruments; (c) track ownership of
compliance instruments; (d) enable and record compliance instrument transfers;
(e) facilitate program compliance; and (f) support market oversight.

���� (2)� The electronic tracking
system shall assign two distinct accounts to each major emitter and opt-in
entity, as follows:

���� (a)� a compliance account
where the compliance instruments are transferred to the department for
retirement. �Compliance instruments in compliance accounts shall not be sold,
traded, or otherwise provided to another account or person; and

���� (b) a holding account that shall
be used for the purpose of trading allowances. �Allowances in holding accounts
may be bought, sold, transferred to another registered entity, or traded. �The
amount of allowances a registered entity may have in its holding account may be
constrained by the department. �Information about the contents of each holding
account, including, but not limited to, the name of the registered entity and
the number of allowances in the account, shall be displayed on a regularly
maintained and searchable public website established and updated by the
department.

���� (3) Each registered general
market participant shall be assigned a holding account on the system.

���� (4) The department shall
maintain an account on the system for the purpose of retiring allowances
transferred by registered entities and from the voluntary renewable reserve
account.

���� 6.� (New section)� a.� The
department shall hold a maximum of four auctions annually for the distribution
of greenhouse gas emissions allowances, plus any necessary reserve auctions. �Each
allowance shall be equivalent to one metric ton of greenhouse gas emissions,
measured as a carbon dioxide equivalent.� The department shall offer only such
number of allowances at each auction as will enhance the likelihood of
achieving the State's greenhouse gas emissions reduction goals. The department
shall engage a qualified, independent contractor to run the auctions. �The
department shall also engage a qualified financial services administrator to
hold the bid guarantees, evaluate bid guarantees, and inform the department of
the value of bid guarantees once the bids are accepted.� Auction proceeds shall
be deposited in the "Global Warming Solutions Fund" established
pursuant to section 6 of P.L.2007, c.340 (C.26:2C-50) and shall be used for the
purposes delineated for that fund in section 7 of P.L.2007, c.340 (C.26:2C-51).

���� b.� Auctions shall be open to major
emitters, opt-in entities, and general market participants that are registered
entities in good standing. �Registered entities intending to participate in an
auction shall submit an application to participate at least 30 days prior to
the auction. �The application shall include the documentation required for
review and approval by the department. �A registered entity shall be eligible
to participate only after receiving a notice of approval by the department. �Each
registered entity that elects to participate in the auction shall have a
different representative. �Only a representative with an approved auction
account shall be authorized to access the auction platform to submit an
application or confirm the intent to bid for the registered entity, submit bids
on behalf of the registered entity during the bidding window, or to download
reports specific to the auction. The department may develop additional
requirements for a registered entity to register and participate in a given
auction.

���� c.� The department shall
establish minimum and maximum prices for a greenhouse gas emissions allowance
for each auction.� For the first year in which an auction is held, the minimum
price for an allowance shall be $50.� The department shall annually increase
the minimum price using an annual adjustment factor that is determined by
adding five percent of the value of an allowance plus the rate of inflation as
measured by the most recently available 12 months of the consumer price index
for all urban consumers (CPI-U).

���� d.� The department shall
require a bid guarantee, payable to the financial services administrator, in an
amount greater than or equal to the sum of the maximum value of the bids to be
submitted by the registered entity.� To protect the integrity of the auctions,
a registered entity or group of registered entities with a direct corporate
association shall subject to auction purchase and holding limits, to be
determined by the department. �The department may impose additional limits if
it deems necessary to protect the integrity and functioning of the auctions.

���� e.� A major emitter or an
opt-in entity shall not purchase more than 10 percent of the allowances offered
during a single auction. �A general market participant shall not purchase more
than four percent of the allowances offered during a single auction, and shall
not own, in aggregate, more than 10 percent of total allowances to be issued in
a calendar year.� No registered entity shall purchase more than the entity's
bid guarantee. �

���� f.� An auction may include
allowances from the annual allowance budget of the current year, allowances
from the annual allowance budgets for upcoming years, and allowances from the
annual allowance budgets from prior years that remain to be distributed.

���� g.� The department shall implement
measures to guard against bidder collusion and minimize the potential for
market manipulation. �A registered entity may not release or disclose any
bidding information, including the entity's intent to participate or refrain
from participating in an auction, the entity's auction approval status; the
entity's bidding strategy, bid price, or bid quantity, or information on the
bid guarantee provided to the financial services administrator. �The department
may cancel or restrict a previously approved auction participation application
or reject a new application if the department determines that a registered
entity has:

���� (1) provided false or
misleading facts;

���� (2) withheld material
information that could influence a decision by the department;

���� (3) violated any part of the
auction rules; or

���� (4) violated registration
requirements.

���� h.� Any cancellation or
restriction approved by the department pursuant to subsection f. of this
section may be permanent or for a specified number of auctions and the
cancellation or restriction imposed shall be in addition to any remedies that
may be available pursuant to other State or federal laws.

���� i.� The department, auction
operator, and financial services administrator shall keep records related to
the auction confidential and such records shall be exempt from public
disclosure in their entirety.� These records shall include:

���� (1) bidding information,
including bid prices, bid quantities, and bid guarantees provided to the
financial services administrator;

���� (2) information contained in
the secure, online electronic tracking system established by the department
pursuant to section 5 of this act; and

���� (3) financial, proprietary,
and other market-sensitive information, as determined by the department.

���� j.� The department shall
design allowance auctions so as to allow, to the maximum extent practicable,
linking with external greenhouse gas emissions trading programs in other
jurisdictions and to facilitate the transfer of allowances when the State's
program has entered into a linkage agreement with other external greenhouse gas
emissions trading programs. �The department may conduct auctions jointly with
linked jurisdictions.

���� 7.� (New section) a.� The
department shall distribute an allocation of allowances to major emitters at no
cost if the operations of the emitter are classified as emissions-intensive and
trade-exposed, as determined by being engaged in one or more of the processes
described by the following industry descriptions and codes in the North
American industry classification system:

���� (1) metals manufacturing,
including iron and steel making, ferroalloy and primary metals manufacturing,
secondary aluminum smelting and alloying, aluminum sheet, plate, and foil
manufacturing, and smelting, refining, and alloying of other nonferrous metals,
North American industry classification system codes beginning with 331;

���� (2) paper manufacturing,
including pulp mills, paper mills, and paperboard milling, North American
industry classification system codes beginning with 322;

���� (3) aerospace product and
parts manufacturing, North American industry classification system codes
beginning with 3364;

���� (4) wood products
manufacturing, North American industry classification system codes beginning
with 321;

���� (5) nonmetallic mineral
manufacturing, including glass container manufacturing, North American industry
classification system codes beginning with 327;

���� (6) chemical manufacturing,
North American industry classification system codes beginning with 325;

���� (7) computer and electronic
product manufacturing, including semiconductor and related device
manufacturing, North American industry classification system codes beginning
with 334;

���� (8) food manufacturing, North
American industry classification system codes beginning with 311;

���� (9) cement manufacturing,
North American industry classification system code 327310;

���� (10) petroleum refining, North
American industry classification system code 324110;

���� (11) asphalt paving mixtures
and block manufacturing from refined petroleum, North American industry
classification system code 324121;

���� (12) asphalt shingle and
coating manufacturing from refined petroleum, North American industry
classification system code 324122; and

���� (13) all other petroleum and
coal products manufacturing from refined petroleum, North American industry
classification system code 324199.

���� b.� The department shall
develop objective criteria for both emissions intensity and trade exposure for
the purpose of identifying emissions-intensive, trade-exposed manufacturing
businesses that would qualify for no-cost emissions allowances pursuant to
subsection a. of this section.

���� c.� For each year during the
first four-year compliance period of the program, a major emitter that is
determined by the department to be emissions-intensive and trade-exposed shall
be awarded no-cost allowances equal to 100 percent of the baseline greenhouse
gas emissions of each of the emitter's emissions-intensive, trade exposed
facilities, as determined pursuant to section 3 of this act. For each year
during the second four-year compliance period, the major emitter shall be
awarded no-cost allowances equal to 97 percent of the baseline greenhouse gas
emissions of the emissions-intensive, trade exposed facilities. �For each year
during the third compliance period, the major emitter shall be awarded no-cost
allowances equal to 94 percent of the baseline greenhouse gas emissions of the
emissions-intensive, trade exposed facilities.� For subsequent compliance
periods, the department shall determine an appropriate level for the
distribution of no-cost allowances, which shall balance economic and
environmental considerations.

���� d.� If the actual emissions of
an emissions-intensive, trade- exposed major emitter exceeds the no-cost
allowances assigned for that compliance period, the emitter shall acquire
additional allowances or offset credits such that the total quantity of its
emissions are covered by allowances or offset credits. �The department shall
limit the use of offset credits for compliance by an emissions-intensive,
trade-exposed facility, such that the quantity of no-cost allowances plus the
provision of offset credits does not exceed 100 percent of the facility's total
compliance obligation over a compliance period.

���� e.� A no-cost allowance
distributed pursuant to this section shall not be traded or sold.

���� f.� The department shall
withhold or withdraw the relevant share of no-cost allowances allocated to a major
emitter pursuant to this section in the event that a facility owned or operated
by the major emitter ceases production in the State. �In the event that a major
emitter curtails all production in the State, the no-cost allowances distributed
to the major emitter shall be retained but shall not be traded, sold, or
transferred. �A facility that temporarily ceases operations shall not be eligible
to receive no-cost allowances during the period of curtailment.

���� 8.� (New section)� a.� In
order to mitigate the cost burden of the program on electricity and natural gas
ratepayers in the State, the department shall distribute an allocation of
allowances to major emitters that are electric public utilities or gas public
utilities at no cost.

���� b.� For each year during the
first four-year compliance period of the program, a major emitter that is an
electric public utility or gas public utility shall be awarded no-cost
allowances equal to 100 percent of the baseline greenhouse gas emissions of the
major emitter, as determined pursuant to section 3 of this act. �For each year
during the second four-year compliance period, the major emitter shall be
awarded no-cost allowances equal to 97 percent of the major emitter's baseline
greenhouse gas emissions.� For each year during the third compliance period,
the major emitter shall be awarded no-cost allowances equal to 94 percent of
the major emitter's baseline greenhouse gas emissions.� For subsequent
compliance periods, the department shall determine an appropriate level for the
distribution of no-cost allowances, which shall balance the costs to ratepayers
and environmental considerations.

���� c.� If the actual emissions of
a covered electric or gas public utility exceed the no-cost allowances assigned
for that compliance period, the utility shall acquire additional allowances or
offset credits such that the total quantity of the utility's emissions are
covered by allowances or offset credits. �The department shall limit the use of
offset credits for compliance by a utility, such that the quantity of no-cost
allowances plus the provision of offset credits does not exceed 100 percent of
the facility's total compliance obligation over a compliance period.

���� d.� A no-cost allowance
distributed pursuant to this section shall not be traded or sold.

���� 9.� (New section)� a.� As part
of the program established pursuant to this act, the department shall develop
protocols for approving and retiring offset credits, which may be used to meet
a portion of a major emitter or an opt-in entity's compliance obligation pursuant
to this act.� An offset credit shall be registered and tracked as a compliance
instrument pursuant to section 5 of this act.� In order to qualify, an offset
credit shall:

���� (1) be associated with a
project that provides direct environmental benefits to the State or is located
in a jurisdiction with which New Jersey has entered into a linkage agreement;

���� (2) be certified by a
recognized registry; and

���� (3) represent greenhouse gas emissions
reductions or removals that are:

���� (a) real, permanent,
quantifiable, verifiable, and enforceable; and

���� (b) in addition to greenhouse
gas emission reductions or removals otherwise required by law and other
greenhouse gas emissions reductions or removals that would otherwise occur.

���� b.� No more than five percent
of a major emitter's or opt-in entity's compliance obligation during the first
compliance period may be met by retiring offset credits. �At least 50 percent
of a major emitter's or opt-in entity's compliance obligation in the first
compliance period shall satisfied by offset credits that are associated with
projects that provide direct environmental benefits to the State.

���� c.� No more than four percent
of a major emitter's or opt-in entity's compliance obligation during the second
compliance period may be met by retiring offset credits. �At least 75 percent
of a major emitter's or opt-in entity's compliance obligation in the second
compliance period shall be satisfied by offset credits that are associated with
projects that provide direct environmental benefits to the State.

���� d.� The limits in subsections
b. and c. of this section may be reduced for a specific major emitter if the
department determines that the emitter:

���� (1) contributes substantively
to cumulative air pollution burden in an overburdened community; or

���� (2) violates any permits
required by any federal or State air pollution control laws where the violation
may result in an increase in emissions.

���� e.� In developing protocols
governing offset projects and covered and opt-in entities' use of offset
credits, the department shall:

���� (1) take into consideration
standards, rules, or protocols for offset projects and offset credits
established by other states, provinces, and countries with programs comparable
to the program established in this act;

���� (2) encourage opportunities
for the development of offset projects in this State by adopting offset
protocols that may include, but need not be limited to, protocols that make use
of aggregation or other mechanisms to reduce transaction costs related to the
development of offset projects and that support the development of carbon
dioxide removal projects;

���� (3) adopt a process for
monitoring and invalidating offset credits as necessary to ensure the credit
reflects emission reductions or removals that continue to meet the standards
required by this section. �If an offset credit is invalidated, the major
emitter shall, within six months of the invalidation, transfer replacement
credits or allowances to meet its compliance obligation. �Failure to transfer
the required credits or allowances shall be considered a violation subject to
penalties as provided in section 11 of this act; and

���� (4) make use of aggregation or
other mechanisms, including cost-effective inventory and monitoring provisions,
to increase the development of offset and carbon removal projects by landowners
across the broadest possible variety of types and sizes of lands, including small
parcels of forested land.

���� 10.� (New section)� a.� The
department shall establish a task force to produce information about fuel
pricing, profit margins, and transaction data in the State.� The task force
shall include representatives from fuel suppliers, oil refineries, and others
in the fuel supply chain.

���� b.� The task force shall
review issues including, but not limited to:

���� (1) previous studies and
evaluations of fuel pricing in New Jersey;

���� (2) trends in fuel pricing in
New Jersey;

���� (3) factors causing fuel
prices in New Jersey to be higher than the national average and how these
factors have changed over time;

���� (4) margins and profits at the
fuel production, distribution, and retail levels;

���� (5) State tax policies,
environmental protections, and regulatory factors that may impact fuel pricing
and make the State's fuel marketplace more or less competitive;

���� (6) supply dynamics affecting
the fuel markets in New Jersey; and

���� (7) potential reporting and
auditing requirements that would make fuel pricing more transparent to New
Jersey consumers.

���� c.� Information gathered by
the task force shall be kept confidential and shall not be made available to
the general public pursuant to P.L.1963, c.73 (C.47:1A-1 et seq.), commonly
known as the open public records act.� However, the information may be
aggregated to ensure confidentiality and utilized in summarized form as part of
the task force's process and in the final report of the task force.

���� d.� No later than two years
after the date of enactment of this act, the task force shall submit a final
report to the Governor, and to the Legislature, pursuant to section 2 of
P.L.1991, c.164 (C.52:14-19.1), after which the task force shall dissolve.

���� 11.� (New section) a.�
Whenever the Commissioner of Environmental Protection finds that a person has
violated any provision of this act, or any rule or regulation adopted pursuant
thereto, the commissioner may:

���� (1)� issue an order requiring
the person found to be in violation to comply in accordance with subsection b.
of this section;

���� (2)� bring a civil action in
accordance with subsection c. of this section;

���� (3)� levy a civil
administrative penalty in accordance with subsection d. of this section; or

���� (4)� bring an action for a
civil penalty in accordance with subsection e. of this section.

���� b.��� Whenever the
commissioner finds that a person has violated this act, or any rule or
regulation adopted pursuant thereto, the commissioner may issue an
administrative enforcement order specifying the provision or provisions of this
act, or the rule or regulation adopted pursuant thereto, of which the person is
in violation, citing the action that constituted the violation, requiring
compliance with the provision violated, and giving notice to the person of the
person's right to a hearing on the matters contained in the administrative
enforcement order.� The ordered person shall have 20 calendar days from receipt
of the order within which to deliver to the commissioner a written request for
a hearing.� After the hearing and upon finding that a violation has occurred,
the commissioner may issue a final order.� If no hearing is requested, the
order shall become final after the expiration of the 20-day period.� A request
for a hearing shall not automatically stay the effect of the order.

���� c.��� The commissioner is
authorized to institute a civil action in Superior Court for appropriate relief
from any violation of the provisions of this act, or any rule or regulation
adopted pursuant thereto.� This relief may include an assessment against the violator
for the costs of any investigation, inspection, or audit that led to the
discovery and establishment of the violation, and for the reasonable costs of
preparing and litigating the case under this subsection.

���� d.� The commissioner is
authorized to impose a civil administrative penalty of up to $50,000 for each
violation, provided that each day during which the violation continues shall
constitute an additional, separate, and distinct offense.� In assessing a civil
administrative penalty, the commissioner shall consider the severity of the
violation, the measures taken to prevent further violations, and whether the
penalty will maintain an appropriate deterrent.� Prior to the assessment of a
civil administrative penalty, the person committing the violation shall be
notified by certified mail or personal service that the penalty is being
assessed.� The notice shall identify the section of the statute, rule,
regulation, or order violated; recite the facts alleged to constitute a
violation; state the basis for the amount of the civil administrative penalties
to be assessed; and affirm the rights of the alleged violator to a hearing.�
The ordered party shall have 35 days from receipt of the notice within which to
deliver to the commissioner a written request for a hearing.� After the hearing
and upon finding that a violation has occurred, the commissioner may issue a
final order after assessing the amount of the fine specified in the notice.� If
no hearing is requested, the notice shall become a final order after the
expiration of the 35-day period.� Payment of the assessment is due when a final
order is issued or the notice becomes a final order.� The authority to levy an
administrative order is in addition to all other enforcement provisions in this
act, and the payment of any assessment shall not be deemed to affect the
availability of any other enforcement provisions in connection with the
violation for which the assessment is levied.� The department may compromise any
civil administrative penalty assessed under this section in an amount and with
conditions the department determines appropriate.

���� e.� A person who violates any
provision of this act, or any rule or regulation adopted pursuant thereto, or
an administrative order issued pursuant to subsection b. of this section, or a
court order issued pursuant to subsection c. of this section, or who fails to
pay a civil administrative penalty in full pursuant to subsection d. of this
section, or who knowingly makes any false or misleading statement on any
application, record, report, or other document required to be submitted to the
department, shall be subject, upon order of a court, to a civil penalty not to
exceed $50,000 per day of the violation, and each day during which the
violation continues shall constitute an additional, separate, and distinct
offense.� Any civil penalty imposed pursuant to this subsection may be
collected with costs in a summary proceeding pursuant to the "Penalty
Enforcement Law of 1999," P.L.1999, c.274 (C.2A:58-10 et seq.), or may be
collected in a civil action commenced by the commissioner.� In addition to any
penalties, costs or interest charges, the Superior Court, or the municipal
court as the case may be, may assess against the violator the amount of
economic benefit accruing to the violator from the violation.

���� f.� The exercise of any of the
remedies provided in this section shall not preclude the seeking of any other
remedy specified.

���� 12.� Section 7 of P.L.2007,
c.340 (C.26:2C-51) is amended to read as follows:

���� 7.� a.� The agencies
administering programs established pursuant to this section shall maximize
coordination in the administration of the programs to avoid overlap between the
uses of the fund prescribed in this section.

���� b.��� Moneys in the fund,
after appropriation annually for payment of administrative costs authorized
pursuant to subsection c. of this section, shall be annually appropriated and
used for the following purposes:

���� (1)� Sixty percent shall be
allocated to the New Jersey Economic Development Authority to provide grants
and other forms of financial assistance to commercial, institutional, and
industrial entities to support end-use energy efficiency projects and new,
efficient electric generation facilities that are state of the art, as
determined by the department, including but not limited to energy efficiency
and renewable energy applications, to develop combined heat and power
production and other high efficiency electric generation facilities, to
stimulate or reward investment in the development of innovative carbon
emissions abatement technologies with significant carbon emissions reduction or
avoidance potential, to develop qualified offshore wind projects pursuant to
section 3 of P.L.2010, c.57 (C.48:3-87.1), and to provide financial assistance
to manufacturers of equipment associated with qualified offshore wind
projects.� The authority, in consultation with the board and the department,
shall determine:� (a) the appropriate level of grants or other forms of
financial assistance to be awarded to individual commercial, institutional, and
industrial sectors and to individual projects within each of these sectors; (b)
the evaluation criteria for selecting projects to be awarded grants or other
forms of financial assistance, which criteria shall include the ability of the
project to result in a measurable reduction of the emission of greenhouse gases
or a measurable reduction in energy demand, provided, however, that neither the
development of a new combined heat and power production facility, nor an
increase in the electrical and thermal output of an existing combined heat and
power production facility, shall be subject to the requirement to demonstrate
such a measurable reduction; and (c) the process by which grants or other forms
of financial assistance can be applied for and awarded including, if
applicable, the payment terms and conditions for authority investments in
certain projects with commercial viability;

���� (2)� Twenty percent shall be
allocated to the board to support programs that are designed to reduce
electricity demand or costs to electricity customers in the low-income and
moderate-income residential sector with a focus on urban areas, including
efforts to address heat island effect and reduce impacts on ratepayers
attributable to the implementation of P.L.2007, c.340 (C.26:2C-45 et al.) or to
support the light duty plug-in electric vehicle incentive program and the
incentive program for in-home electric vehicle service equipment established
pursuant to sections 4 and 6 of P.L.2019, c.362 (C.48:25-4 and C.48:25-6).� For
the purposes of this paragraph, the board, in consultation with the authority
and the department, shall determine the types of programs to be supported and
the mechanism by which to quantify benefits to ensure that the supported
programs result in a measurable reduction in energy demand or accomplishment of
the plug-in electric vehicle goals established pursuant to section 3 of
P.L.2019, c.362 (C.48:25-3);

���� (3)� Ten percent shall be
allocated to the department to support programs designed to promote local
government efforts to plan, develop and implement measures to reduce greenhouse
gas emissions, including but not limited to technical assistance to local governments,
and the awarding of grants and other forms of assistance to local governments
to conduct and implement energy efficiency, renewable energy, and distributed
energy programs and land use planning where the grant or assistance results in
a measurable reduction of the emission of greenhouse gases or a measurable
reduction in energy demand. For the purpose of conducting any program pursuant
to this paragraph, the department, in consultation with the authority and the
board, shall determine:� (a) the appropriate level of grants or other forms of
financial assistance to be awarded to local governments; (b) the evaluation
criteria for selecting projects to be awarded grants or other forms of
financial assistance; (c) the process by which grants or other forms of
financial assistance can be applied for and awarded; and (d) a mechanism by
which to quantify benefits; and

���� (4)� Ten percent shall be
allocated to the department to support programs that enhance the stewardship
and restoration of the State's forests and tidal marshes that provide important
opportunities to sequester or reduce greenhouse gases.

���� �c.� (1) The department may
use up to four percent of the total amount in the fund each year to pay for
administrative costs justifiable and approved in the annual budget process,
incurred by the department in administering the provisions of P.L.2007, c.340
(C.26:2C-45 et al.)
, the provisions of P.L. ,
c.
(C. ) (pending
before the Legislature as this bill,
and in administering programs to
reduce the emissions of greenhouse gases including any obligations that may
arise under subsection a. of section 11 of P.L.2007, c.340 (C.26:2C-55).

���� (2)� The board may use up to
two percent of the total amount in the fund each year to pay for administrative
costs justifiable and approved in the annual budget process, incurred by the
board in administering the provisions of P.L.2007, c.340 (C.26:2C-45 et al.)
and in administering programs to reduce the emissions of greenhouse gases
including any obligations that may arise under subsection a. of section 11 of
P.L.2007, c.340 (C.26:2C-55).

���� (3)� The New Jersey Economic
Development Authority may use up to two percent of the total amount in the fund
each year to pay for administrative costs justifiable and approved in the
annual budget process, incurred by the authority in administering the provisions
of P.L.2007, c.340 (C.26:2C-45 et al.) and in administering programs to reduce
the emissions of greenhouse gases.

���� d.��� The State Comptroller
shall conduct or supervise independent audit and fiscal oversight functions of
the fund and its uses.

(cf: P.L.2019, c.362, s.12)

���� 13.� The Department of
Environmental Protection shall, in accordance with the "Administrative
Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), adopt rules and
regulations as necessary to implement this act.

���� 14.� This act shall take
effect immediately.

STATEMENT

���� This bill would require the
Department of Environmental Protection (DEP) to establish a Statewide cap on
greenhouse gas emissions from certain major emitters of greenhouse gases in the
State, and to hold auctions to sell greenhouse gas emissions allowances, which
major emitters would be required to purchase and retire in order to emit
greenhouse gases.

���� As provided in section 4 of
the bill, "major emitters" would consist of certain entities that
emit at least 25,000 metric tons of greenhouse gases annually, including
persons who own and operate any facility with that level of emissions, electric
public utilities, electric power generators, gas public utilities and other
fossil fuel suppliers, and railroad companies.� Subsection c. of section 4 of
the bill would exempt certain greenhouse gas emissions from the 25,000 metric
ton threshold, including emissions from facilities that participate in the
greenhouse gas emissions allowance trading program established pursuant to
section 3 of P.L.2007, c.340 (C.26:2C-47), i.e., the Regional Greenhouse Gas
Initiative (RGGI).

���� Under the bill, the DEP would
be required to establish an emissions baseline, which establishes the
proportionate share that the total greenhouse gas emissions of major emitters
bears to the total anthropogenic greenhouse gas emissions in the State, based
on data reported to the department under section 5 of P.L.2007, c.112
(C.26:2C-42) or provided as required by this act, as well as other relevant
data.� Within two years after the bill is enacted, and periodically thereafter,
the DEP would be required to adopt annual allowance budgets � the amount of
allowable greenhouse gas emissions from major emitters in the State � for the
first four-year compliance period of the program.� The budgets would be based
on the greenhouse gas emissions reduction goals established in the "Global
Warming Response Act," P.L.2007, c.112 (C.26:2C-37 et al.).

���� The bill would also require
the DEP to hold up to four auctions annually for the distribution of greenhouse
gas emissions allowances, which would permit the holder to emit one metric ton
of greenhouse gases.� The bill would require the DEP to establish minimum and
maximum prices for a greenhouse gas emissions allowance for each auction. For
the first year in which an auction is held, the minimum price for an allowance would
be $50, and the DEP would be required to increase the price by five percent
plus the rate of inflation each year thereafter.� Proceeds from the auction
would be deposited in the "Global Warming Solutions Fund" established
pursuant to section 6 of P.L.2007, c.340 (C.26:2C-50) and would be used for the
purposes delineated for that fund in section 7 of P.L.2007, c.340 (C.26:2C-51).�
The bill would amend the latter section of law to authorize the DEP to utilize
up to four percent of deposits in the "Global Warming Solutions Fund"
to administer the program established by the bill.

���� Under sections 7 and 8 of the
bill, the DEP would be required to distribute an allocation of allowances, at
no cost, to certain emissions-intensive, trade exposed industries, in order to
mitigate the economic burden on those industries.� Similarly, the DEP would
distribute allowances at no cost to electric public utilities and gas public
utilities, in order to mitigate costs to utility ratepayers.� For the first
four years of the program, the no-cost allowance allocation would be 100
percent of entity's baseline greenhouse gas emissions, and would decrease by
three percent each four years thereafter, after which the bill would direct the
DEP to establish an appropriate allocation.

���� Section 9 of the bill would
direct the DEP to develop protocols for approving and retiring offset credits,
which could also be used to authorize a major emitter to emit one metric ton of
greenhouse gases.� The bill would establish certain minimum requirements for an
offset credit, including that it be associated with a project that provides
direct environmental benefits to the State or is located in a jurisdiction with
which New Jersey has entered into a linkage agreement.� Section 10 of the bill
would direct the DEP to establish a temporary stakeholder task force to produce
information about fuel pricing, profit margins, and transaction data in the
State.� The task force would submit a report to the Governor and the
Legislature, after which it would dissolve.

���� A person who violates the
bill's provisions could be liable for a civil penalty or civil administrative
penalty of up to $50,000 per violation.� The bill would provide that each day during
which a violation continues would constitute an additional, separate, and
distinct offense.