The “Washington Clean Air Rule” is coming

Washington State is about to become the latest state to take local action to address global climate change. Governor Jay Inslee recently directed the Washington Department of Ecology (“Ecology”) to make new rules aimed at reducing greenhouse gas (“GHG”) emissions in the state. The new rules are scheduled to be adopted in summer 2016 and to take effect shortly thereafter.[1] The result will be called the “Washington Clean Air Rule.”[2]

The Washington Clean Air Rule comes on the heels of the Obama Administration’s Clean Power Plan, which was unveiled in August. Under the Clean Power Plan, states across the nation are required to dramatically reduce GHG emissions to comply with standards set by the EPA. Washington is well positioned to comply with the Clean Power Plan. The State has passed legislation that will lead to GHG reductions, and Washington is expected to be able to meet the Plan’s requirements by following existing state laws and carrying out already-planned GHG reduction strategies.[3] Thus, the Washington Clean Air Rule is not a federal requirement and is being undertaken on Washington’s own initiative.

The Rule may look different than industry leaders expect. It will not be a cap-and-trade scheme—Governor Inslee attempted to pass state cap-and-trade legislation in Olympia this year, but the proposal failed to make it out of the Democratic-controlled House or the Republican-controlled Senate.[4] Ecology is now operating under the assumption that it does not have authority to enact a cap-and-trade scheme. The Rule is also unlikely to include a carbon tax—the Legislature passed a transportation measure this year with a “poison pill” that cuts money set aside for mass transit projects if state agencies try to impose a carbon tax without legislative consent.[5]

Instead, it is likely to be a “cap and reduce” program. The Rule will likely set an emissions limit for the state,[6] then require individual stationary emissions sources to reduce their emissions as they see fit. The Rule is unlikely to include permits, licenses, or allowances of any kind, and will probably not include the kind of centralized carbon market that is the hallmark of cap-and-trade programs in places like California. However, this approach may still be flexible enough to allow polluters to work together and “trade” resources to achieve emissions reductions on an industry-wide level. In any case, Washington’s rule is unlikely to look like California’s cap-and-trade program or like the programs currently operating in Europe. Of course, rulemaking began only this week, and it remains to be seen where Ecology’s process will ultimately lead.

We do know that the coming year will be a busy one for Ecology and other stakeholders. In the last week of September and throughout October, Ecology will be holding educational webinars and outreach meetings related to the rule.[7] In December, the public comment period will open.[8] Public hearings will follow in Winter and Spring, and the final rule is scheduled to arrive in Summer 2016.[9]

We also know roughly what industries will be affected. Ecology has released a list of all entities in the state that are currently emitting more than 100,000 metric tons of C02-equivalent per year (both on average and in occasional years), and is considering limiting GHG reduction obligations to those entities. This includes companies in the following sectors: Power Plants (9), Waste (6), Refineries and Petroleum Producers (5), Metals (5), Pulp and Paper (5), Natural Gas Distributors (3), Minerals (3), Petroleum and Natural Gas Systems (2), Food Production (1), Manufacturing (1), and Chemicals (1).[10] These industries are believed to be responsible for around 60% of the State’s GHG emissions[11] and may need to find ways to reduce their emissions when the rule takes effect.

According to Ecology, there will be flexibility for these industries as they seek to achieve compliance with the new rule: “Companies and organizations will have a variety of options to comply. They could reduce their carbon pollution on their own, obtain reductions from others or facilitate emission reduction projects from economic sectors or sources different than their own. We anticipate that the rule could provide opportunities for companies to generate credits or to trade credits with other regulated companies and organizations.”[12]

We will continue to monitor and report on developments in this important rulemaking process.


Footnotes:

[1] Washington Department of Ecology, Clean Air Rule Timeline, http://www.ecy.wa.gov/programs/air/rules/wac173442/1510time.html.
[2] The rulemaking will result in a new Chapter in the Washington Administrative Code (“WAC”), Chapter 173-442 WAC, and will amend two existing chapters, Chapters 173-400, 441 WAC. Department of Ecology, Overview of Rulemaking, http://www.ecy.wa.gov/programs/air/rules/wac173442/1510ov.html.
[3] Ecology still must create and submit an emissions reduction plan to the federal government, a task which will require a substantial amount of effort.
[4] The Spokesman-Review, Washington state rules target greenhouse gases, September 22, 2015, http://www.spokesman.com/stories/2015/sep/22/washington-state-rules-target-greenhouse-gases/.
[5] Id.
[6] It is unknown at this time what that limit will be, but it may be loosely based on a 2008 law in which the Legislature required reductions in GHG emissions to 1990 levels by 2020, a further 25% reduction by 2035, and a 50% reduction by 2050. See id. This law has been the subject of recent legal debate, with the Attorney General of Washington concluding on September 1, 2015, that the law does not require the Legislature to enact a GHG reduction program. http://dougericksen.src.wastateleg.org/wp-content/uploads/sites/23/2015/09/150901AGinformalopinionGreenhouseGases.pdf. This issue may later become relevant to the question of whether Ecology has authority to enact a hard cap on emissions.
[7] Washington Department of Ecology, Clean Air Rule Timeline, http://www.ecy.wa.gov/programs/air/rules/wac173442/1510time.html.
[8] Id.
[9] Id.
[10] List of Entities with Greenhouse Gas Emissions Above 100,000 MT C02e in Washington State, http://www.ecy.wa.gov/programs/air/rules/wac173442/ComplianceObligationList092115.pdf.[11] For a breakdown of the end-user sources of GHG emissions in Washington, see http://www.ecy.wa.gov/climatechange/CarbonRuleFAQ.html.
[12] Department of Ecology, Frequently Asked Questions, How can companies and organizations comply?, http://www.ecy.wa.gov/climatechange/CarbonRuleFAQ.html.

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