Emissions/trade-exposed

AN ACT Relating to emissions from emissions-intensive, trade-1
exposed facilities under the climate commitment act; and amending RCW 2
70A.65.110. 3
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:4
Sec. 1. RCW 70A.65.110 and 2024 c 352 s 6 are each amended to 5
read as follows: 6
(1) Facilities owned or operated by a covered entity must receive 7
an allocation of allowances for the covered emissions at those 8
facilities under this subsection at no cost if the operations of the 9
facility are classified as emissions-intensive and trade-exposed, as 10
determined by being engaged in one or more of the processes described 11
by the following industry descriptions and codes in the North 12
American industry classification system as those classifications 13
existed on January 1, 2026: 14
(a) Metals manufacturing, including iron and steel making, 15
ferroalloy and primary metals manufacturing, secondary aluminum 16
smelting and alloying, aluminum sheet, plate, and foil manufacturing, 17
and smelting, refining, and alloying of other nonferrous metals, 18
North American industry classification system codes beginning with 19
331; 20
S-3970.1
SENATE BILL 6246
State of Washington 69th Legislature 2026 Regular Session
By Senators Slatter, Shewmake, and Saldaña
Read first time 01/20/26. Referred to Committee on Environment,
Energy & Technology.
p. 1 SB 6246
(b) Paper manufacturing, including pulp mills, paper mills, and 1
paperboard milling, North American industry classification system 2
codes beginning with 322; 3
(c) Aerospace product and parts manufacturing, North American 4
industry classification system codes beginning with 3364;5
(d) Wood products manufacturing, North American industry 6
classification system codes beginning with 321; 7
(e) Nonmetallic mineral manufacturing, including glass container 8
manufacturing, North American industry classification system codes 9
beginning with 327; 10
(f) Chemical manufacturing, North American industry 11
classification system codes beginning with 325; 12
(g) Computer and electronic product manufacturing, including 13
semiconductor and related device manufacturing, North American 14
industry classification system codes beginning with 334;15
(h) Food manufacturing, North American industry classification 16
system codes beginning with 311; 17
(i) Cement manufacturing, North American industry classification 18
system code 327310; 19
(j) Petroleum refining, North American industry classification 20
system code 324110; 21
(k) Asphalt paving mixtures and block manufacturing from refined 22
petroleum, North American industry classification system code 324121;23
(l) Asphalt shingle and coating manufacturing from refined 24
petroleum, North American industry classification system code 324122; 25
and 26
(m) All other petroleum and coal products manufacturing from 27
refined petroleum, North American industry classification system code 28
324199. 29
(2) By July 1, 2022, the department must adopt by rule objective 30
criteria for both emissions' intensity and trade exposure for the 31
purpose of identifying emissions-intensive, trade-exposed 32
((manufacturing businesses )) facilities during the second compliance 33
period of the program and subsequent compliance periods. A 34
manufacturing facility covered by subsection (1)(a) through (m) of 35
this section is considered an emissions-intensive, trade-exposed 36
facility and is eligible for allocation of no cost allowances as 37
described in this section. In addition, any covered party that ((is a 38
manufacturing business )) owns or operates a manufacturing facility 39
that can demonstrate to the department that it meets the objective 40
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criteria adopted by rule is also eligible for treatment as emissions-1
intensive, trade-exposed and is eligible for allocation of no cost 2
allowances as described in this section. In developing the objective 3
criteria under this subsection, the department must consider the 4
locations of facilities potentially identified as emissions-5
intensive, trade-exposed ((manufacturing businesses )) facilities 6
relative to overburdened communities. 7
(3)(a) For the years 2023 through 2026, the annual allocation of 8
no cost allowances for direct distribution to a facility identified 9
as emissions-intensive and trade-exposed must be equal to the 10
facility's baseline carbon intensity established using data from 2015 11
through 2019, or other data as allowed under this section, multiplied 12
by the facility's actual production for each calendar year during the 13
compliance period. For facilities using the mass-based approach, the 14
allocation of no cost allowances shall be equal to the facility's 15
mass-based baseline using data from 2015 through 2019, or other data 16
as allowed under this section. 17
(b) For the four years beginning January 2027 and in each 18
subsequent four-year period, the annual allocation of no cost 19
allowances established in (a) of this subsection shall be adjusted 20
according to the benchmark reduction schedules established in (b)(ii) 21
and (iii) and (e) of this subsection multiplied by the facility's 22
actual production during the period , except as provided in subsection 23
(9) of this section . The department shall adjust the no cost 24
allocation of allowances and credits to an emissions-intensive and 25
trade-exposed facility to avoid duplication with any no cost 26
allowances transferred pursuant to RCW 70A.65.120 and 70A.65.130, if 27
applicable. 28
(i) For the purpose of this section, "carbon intensity" means the 29
amount of carbon dioxide equivalent emissions from a facility in 30
metric tons divided by the facility specific measure of production 31
including, but not limited to, units of product manufactured or sold, 32
over the same time interval. 33
(ii) If an emissions-intensive and trade-exposed facility is not 34
able to feasibly determine a carbon intensity benchmark based on its 35
unique circumstances, the entity may elect to use a mass-based 36
baseline that does not vary based on changes in production volumes. 37
The mass-based baseline must be based upon data from 2015 through 38
2019, unless the emissions-intensive, trade-exposed facility can 39
demonstrate that there have been abnormal periods of operation that 40
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materially impacted the facility and the baseline period should be 1
expanded to include years prior to 2015. For the years 2023 through 2
2026, these facilities must be awarded no cost allowances equal to 3
100 percent of the facility's mass-based baseline. For each year 4
during the years 2027 through 2030, these facilities must be awarded 5
no cost allowances equal to 97 percent of the facility's mass-based 6
baseline, except as provided in subsection (9) of this section . For 7
each year during the years 2031 through 2034, these facilities must 8
be awarded no cost allowances equal to 94 percent of the facility's 9
mass-based baseline , except as provided in subsection (9) of this 10
section. Except as provided in (b)(iii) of this subsection, if a 11
facility elects to use a mass-based baseline, it may not later 12
convert to a carbon intensity benchmark during the years 2023 through 13
2034. 14
(iii) A facility with a North American industry classification 15
system code beginning with 3364 that is utilizing a mass-based 16
baseline in (b)(ii) of this subsection must receive an additional no 17
cost allowance allocation under this section in order to accommodate 18
an increase in production that increases its emissions above the 19
baseline on a basis equivalent in principle to those awarded to 20
entities utilizing a carbon intensity benchmark pursuant to this 21
subsection (3)(b). The department shall establish methods to award, 22
for any annual period, additional no cost allowance allocations under 23
this section and, if appropriate based on projected production, to 24
achieve a similar ongoing result through the adjustment of the 25
facility's mass-based baseline. An eligible facility under this 26
subsection that has elected to use a mass-based baseline may not 27
convert to a carbon intensity benchmark until the next compliance 28
period. 29
(c)(i) By September 15, 2022, each emissions-intensive, trade-30
exposed facility shall submit its carbon intensity baseline for the 31
first compliance period to the department. The carbon intensity 32
baseline for the first compliance period must use data from 33
2015-2019, unless the emissions-intensive, trade-exposed facility can 34
demonstrate that there have been abnormal periods of operation that 35
materially impacted the facility and the baseline period should be 36
expanded to include years prior to 2015. 37
(ii) By November 15, 2022, the department shall review and 38
approve each emissions-intensive, trade-exposed facility's baseline 39
carbon intensity for the years 2023 through 2026. 40
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(d) During the years 2023 through 2026, each emissions-intensive, 1
trade-exposed facility must record its facility-specific carbon 2
intensity baseline based on its actual production. 3
(e)(i) For the years 2027 through 2030, the second period 4
benchmark for each emissions-intensive, trade-exposed facility is 5
three percent below the first period baseline specified in (a), (b), 6
and (c) of this subsection. 7
(ii) For the years 2031 through 2034, the third period benchmark 8
for each emissions-intensive, trade-exposed facility is three percent 9
lower than the years 2027 through 2030. 10
(f) Prior to the beginning of 2027, 2031, or subsequent four-year 11
periods, the department may make an upward adjustment in the next 12
four-year period's benchmark for an emissions-intensive, trade-13
exposed facility based on the facility's demonstration to the 14
department that additional reductions in carbon intensity or mass 15
emissions are not technically or economically feasible. The 16
department may base the upward adjustment applicable to an emissions-17
intensive, trade-exposed facility in the next four-year period on the 18
facility's best available technology analysis , and may consider 19
information submitted to the department under subsection (9) of this 20
section. The department shall by rule provide for an emissions-21
intensive, trade-exposed ((facilities)) facility to apply to the 22
department for an upward adjustment to the allocation for direct 23
distribution of no cost allowances based on its facility-specific 24
carbon intensity benchmark or mass emissions baseline. The department 25
shall make adjustments based on: 26
(i) A significant change in the emissions use or emissions 27
attributable to the manufacture of an individual good or goods in 28
this state by an emissions-intensive, trade-exposed facility based on 29
a finding by the department that an adjustment is necessary to 30
accommodate for changes in the manufacturing process that have a 31
material impact on emissions; 32
(ii) Significant changes to an emissions-intensive, trade-exposed 33
facility's external competitive environment that result in a 34
significant increase in leakage risk; or 35
(iii) Abnormal operating periods when an emissions-intensive, 36
trade-exposed facility's carbon intensity has been materially 37
affected so that these abnormal operating periods are either excluded 38
or otherwise considered in the establishment of the carbon intensity 39
benchmarks. 40
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(4)(a) By December 1, 2026, the department shall provide ((a 1
report to the appropriate committees of the senate and house of 2
representatives that describes alternative methods for determining 3
the amount and a schedule of allowances to be provided to facilities 4
owned or operated by each covered entity designated as an emissions-5
intensive, trade-exposed facility from )) recommendations for the 6
consideration of the legislature regarding the schedule of allowances 7
to be provided to emissions-intensive, trade-exposed facilities from 8
January 1, 2035, through January 1, 2050. ((The report must include a 9
review of global best practices in ensuring against emissions leakage 10
and economic harm to businesses in carbon pricing programs and 11
describe alternative methods of emissions performance benchmarking 12
and mass-based allocation of no cost allowances. At a minimum, the 13
department must evaluate benchmarks based on both carbon intensity 14
and mass, as well as the use of best available technology as a method 15
for compliance. In developing the report, the department shall form 16
an advisory group that includes representatives of the manufacturers 17
listed in subsection (1) of this section.18
(b))) Recommendations in the report due December 1, 2026, must 19
identify:20
(i) A proposed method for making annual reductions to emissions-21
intensive, trade-exposed facility allowance allocation that would 22
ensure total no-cost allowances allocated to emissions-intensive, 23
trade-exposed facilities align with the annual allowance budgets 24
established by the department under RCW 70A.65.070 and are consistent 25
with the emissions limits established in RCW 70A.45.020, including 26
the percentage reductions in emissions-intensive, trade-exposed 27
facility allowance allocation that would be applied each year from 28
January 1, 2035, through January 1, 2050;29
(ii) Proposed criteria and methods for the department to make 30
adjustments to allowances allocated at no cost to emissions-31
intensive, trade-exposed facilities to address significant changes in 32
leakage risk and to achieve the purposes of the greenhouse gas 33
emissions cap and invest program established under this chapter 34
including, but not limited to, the achievement of emissions limits 35
established in RCW 70A.45.020;36
(iii) The proposed design of an allowance allocation policy or 37
method that would require a portion of the allowances provided at no 38
cost to emissions-intensive, trade-exposed facilities to be consigned 39
to auction and for the proceeds to be invested in projects or 40
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programs for reducing greenhouse gas emissions at emissions-1
intensive, trade-exposed facilities, including the percentage of 2
allowances to be consigned to auction and proposed criteria and 3
methods for the distribution and use of consigned funds at emissions-4
intensive, trade-exposed facilities; 5
(iv) Additional state policies or strategies that may be 6
necessary to support the reduction of emissions and decarbonization 7
of emissions-intensive, trade-exposed facilities in support of the 8
achievement of emissions limits established in RCW 70A.45.020;9
(v) Provisions of this chapter or other state laws that need to 10
be amended to implement the recommendations developed by the 11
department under this subsection (4)(a);12
(b) In developing these recommendations, the department must 13
consider input received from representatives of the facilities listed 14
in subsection (1) of this section, covered entities, environmental 15
advocates, overburdened communities, tribes, subject matter experts, 16
and the public, and should consider:17
(i) Anticipated demand for allowances from emissions-intensive, 18
trade-exposed facilities and other covered entities through 2050;19
(ii) Potential for deployment of technologies and strategies for 20
reducing emissions at emissions-intensive, trade-exposed facilities 21
through 2050 and other facility-specific or industry-specific 22
factors;23
(iii) Potential impacts of implementing the recommendations on 24
overburdened communities and vulnerable populations; and25
(iv) Interactions with other state policies and programs designed 26
to reduce greenhouse gas emissions and achieve statewide emissions 27
limits established in RCW 70A.45.020;28
(c) If the legislature does not adopt a ((compliance obligation 29
for)) schedule of allowances to be provided to facilities owned or 30
operated by each covered entity designated as emissions-intensive, 31
trade-exposed facilities from January 1, 2035, through January 1, 32
2050, by December 1, 2027, those facilities must continue to receive 33
allowances as provided in the years 2031 through 2034 until a 34
schedule is adopted. 35
(5) If the actual emissions of an emissions-intensive, trade- 36
exposed facility exceed the facility's no cost allowances assigned 37
for that compliance period, it must acquire additional compliance 38
instruments such that the total compliance instruments transferred to 39
its compliance account consistent with this chapter equals emissions 40
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during the compliance period. An emissions-intensive, trade-exposed 1
facility must be allowed to bank unused allowances, including for 2
future sale and investment in best available technology when 3
economically feasible. The department shall limit the use of offset 4
credits for compliance by an emissions-intensive, trade-exposed 5
facility, such that the quantity of no cost allowances plus the 6
provision of offset credits does not exceed 100 percent of the 7
facility's total compliance obligation over a compliance period.8
(6) The department must withhold or withdraw the relevant share 9
of allowances allocated to a covered entity under this section in the 10
event that the covered entity ceases production in the state and 11
becomes a closed facility. In the event an entity curtails all 12
production and becomes a curtailed facility, the allowances are 13
retained but cannot be traded, sold, or transferred and are still 14
subject to the emission reduction requirements specified in this 15
section. An owner or operator of a curtailed facility may transfer 16
the allowances to a new operator of the facility that will be 17
operated under the same North American industry classification system 18
codes. If the curtailed facility becomes a closed facility, then all 19
unused allowances will be transferred to the emissions containment 20
reserve. A curtailed facility is not eligible to receive free 21
allowances during a period of curtailment. Any allowances withheld or 22
withdrawn under this subsection must be transferred to the emissions 23
containment reserve. 24
(7) An owner or operator of more than one facility receiving no 25
cost allowances under this section may transfer allowances among the 26
eligible facilities. 27
(8) Rules adopted by the department under this section must 28
include protocols for allocating allowances at no cost to an eligible 29
facility built after July 25, 2021. The protocols must include 30
consideration of the products and criteria pollutants being produced 31
by the facility, as well as the local environmental and health 32
impacts associated with the facility. For a facility that is built on 33
tribal lands or is determined by the department to impact tribal 34
lands and resources, the protocols must be developed in consultation 35
with the affected tribal nations. 36
(9)(a) The purpose of the reporting and planning requirements of 37
this subsection (9) is to establish a framework under which 38
greenhouse gas emission reductions will begin to be achieved at each 39
emissions-intensive, trade-exposed facility. It is not, however, the 40
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intent of the legislature that the reporting and planning framework 1
established in this section necessarily be fully implemented as a 2
prerequisite to the legislature taking additional action addressing 3
the allocation of no-cost allowances to emissions-intensive, trade-4
exposed facilities. The legislature intends, using the provisions of 5
this subsection (9) as a starting point, to begin to establish a 6
framework that will: 7
(i) Achieve emission reductions by emissions-intensive, trade-8
exposed facilities in a manner compatible with the overall allowance 9
budgets established under this chapter and the statewide emission 10
limits of chapter 70A.45 RCW;11
(ii) Provide appropriate financial incentives for early actions 12
by owners and operators of emissions-intensive, trade-exposed 13
facilities; and14
(iii) Consider such actions when the department considers grant 15
applications or awards other funds deriving from revenues under this 16
chapter.17
(b) To receive no-cost allowances associated with greenhouse gas 18
emissions after January 1, 2027, the owner or operator of an 19
emissions-intensive, trade-exposed facility must be in compliance 20
with this subsection (9). The owner or operator of an emissions-21
intensive, trade-exposed facility must provide the following to the 22
department:23
(i) By March 31, 2028, and every two years thereafter, 24
information about the greenhouse gas emissions of each emissions-25
intensive facility and, to the extent determined to be feasible for 26
the facility by the department, each unit within each facility, 27
including:28
(A) The products, and volumes of such products, produced by the 29
facility;30
(B) A qualitative description of the sources of emissions from 31
the facility;32
(C) A detailed analysis, supported by data, of the portion and 33
percentage of the facility's emissions attributable to:34
(I) Emissions associated with fossil fuel combustion for purposes 35
of producing low-temperature heat;36
(II) Emissions associated with fossil fuel combustion for 37
purposes of producing medium-temperature heat;38
(III) Emissions associated with fossil fuel combustion for 39
purposes of producing high-temperature heat;40
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(IV) Emissions associated with industrial processes at the 1
facility involving chemical or physical transformations other than 2
fuel combustion;3
(V) Emissions associated with fossil fuel combustion for purposes 4
of on-site electrical generation;5
(VI) Emissions associated with the consumption of electricity at 6
the facility for electricity that was not generated on-site at the 7
facility; and8
(VII) Other information adopted by the department by rule, or 9
amended types of information specified in (b)(i)(C)(I) through (VI) 10
of this subsection;11
(ii) By March 31, 2028, and every four years thereafter, a plan, 12
following methods established by the department, that includes an 13
assessment of potentially technically feasible or emerging technology 14
options to reduce covered emissions from the facility. The plan must 15
include all greenhouse gas emission reduction measures that have the 16
potential to result in greater than de minimis greenhouse gas 17
emission reductions, be informed by a best available technology 18
assessment, consider the opportunities associated with different 19
temperature categories specified in (b)(i)(C) of this subsection (9), 20
and be verified by an independent third party, and, at a minimum, 21
include:22
(A) The technical aspects of each option, including whether 23
covered emission reductions or direct facility biomass emission 24
reductions from the option would result from an increase in energy 25
efficiency, the substitution of a fuel or energy source, or other 26
changes to facility processes, chemistries, or material inputs;27
(B) A description of the expected greenhouse gas emission 28
reductions that would be achieved by each option;29
(C) A budget and estimated timeline to implement each option, if 30
the owner or operator of the facility were to choose to move forward 31
with the option;32
(D) Identification of options that would be complementary with 33
other options included in the plan, and identification of options 34
that could not be carried out in conjunction with other options;35
(E) If applicable, a summary of any greenhouse gas emission 36
reductions or greenhouse gas emission intensity reductions achieved 37
through the implementation of options previously identified in a plan 38
submitted under this section; and39
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(F) A plain language summary of proposed greenhouse gas emission 1
reduction plans for the upcoming four-year period and to be achieved 2
by 2050, and how existing and emerging technologies and copollutants 3
were and will be considered in greenhouse gas emission reduction 4
planning;5
(iii) A description and data, submitted at the same time and 6
covering the same time period as the report specified in (b)(i) of 7
this subsection, documenting that the owner or operator of the 8
facility has achieved tangible progress towards implementing best 9
practices for energy efficiency, as determined by the department, at 10
the facility.11
(c) The provisions of RCW 70A.65.200(5) apply to the requirements 12
of this subsection (9).13
(d)(i) The owner or operator of an emissions-intensive, trade-14
exposed facility that submits information to the department under (b) 15
of this subsection must structure each submission to include two 16
self-contained parts:17
(A) A report that contains no information that the owner or 18
operator wishes to keep confidential; and19
(B) A report that contains information that the owner or operator 20
requests be made available only for the confidential use of the 21
department, the director of the department, or the appropriate 22
division of the department.23
(ii) The director shall give consideration to a request by the 24
owner or operator of an emissions-intensive, trade-exposed facility 25
under (d)(i)(B) of this subsection, and if this action is not 26
detrimental to the public interest and is otherwise within accord 27
with the policies and purposes of chapter 43.21A RCW, the director of 28
the department must grant the request for the information to remain 29
confidential as authorized in RCW 43.21A.160. Under the procedures 30
established under RCW 43.21A.160, the director of the department must 31
keep confidential any records furnished by a manufacturer under this 32
chapter that relate to proprietary manufacturing processes.33
(10) For purposes of subsection (9) of this section, the 34
following temperature ranges apply, unless alternative temperature 35
ranges are adopted by the department by rule:36
(a) "Low-temperature heat" means temperatures of up to 130 37
degrees celsius;38
(b) "Medium-temperature heat" means at least 130 degrees celsius 39
and up to 400 degrees celsius; and40
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(c) "High-temperature heat" means at least 400 degrees celsius or 1
greater.2
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