Following a legislative session where the Washington Business Alliance stood front and center in debates over carbon policy, we continue to collaborate with stakeholders in charting a productive course on this challenging issue for business.

In recent months the Business Alliance worked with some of the state’s largest industries and leading scientists to facilitate input for comments regarding the Governor’s Clean Air Rule. We’re leading the charge for a better understanding of the role that different industries and technologies play in carbon emissions and sequestration.

Below are the comments that we submitted to the Washington State Department of Ecology on July 22nd, 2016.

To: Washington State Department of Ecology
RE: Comments on Clean Air Rule Language and Implementation

We appreciate receiving feedback on June 13th from the Department of Ecology team regarding our initial inquiry on the treatment of sequestration, advanced wood products, and standards for Emission Reduction Unit (ERU) generating activities under the Draft Clean Air Rule. After careful review of this correspondence (Addendum 1), along with the draft rule language, we submit the following comments.

The Washington Business Alliance is a statewide business organization with a forward-leaning and issue-focused approach to solving our state’s most critical problems. Our Low Carbon Prosperity project has brought together business and environmental stakeholders to propose balanced and effective policy solutions. Most recently, we led the discussion on an alternative to Initiative 732 during the 2016 Legislative Session. More information on our work is available online at planwashington.org.

Comments & Recommendations

  1. Leverage forestry assets to generate ERUs. Washington State can leverage its substantial forestry assets to sequester carbon through enhanced forest management practices and advanced wood products. From the standpoint of both carbon reduction and economic vitality establishing a new carbon credit market that does not recognize this potential is a missed opportunity. This is particularly true for rural natural resource based economies. U.S. forestry activities that result in improved forest management are eligible to generate credits under the California Cap-and-Trade Compliance Offset Program. A more robust approach designed to the specific conditions and realities of Washington State would recognize the benefit of maintaining working forests as a reasonable market driven approach to carbon mitigation. The previously introduced “Carbon Pollution Accountability Act” more closely aligned with these principles and strategies. Sections 9 (Offset Credits) and 16 (Economic Opportunities for Washington Forestry and Rural Communities) are of particular relevance and are reproduced in full at the end of Addendum 2.
  2. Consistency across ERU compliance categories. The types of activities that are eligible to generate ERUs should be made as consistent as possible across the three compliance categories: allowances, in-state ERU generating activities, and on-site projects. For example, while out-of state sequestration projects recognized by California's AB32 can generate ERU credits as an allowance, in-state sequestration projects are not considered an ERU generating activity. Further, while on-site projects related to carbon-capture-and-storage (CCS) can generate ERU credit, based on our interpretation an off-site CCS project cannot generate the same ERU credit. If post-combustion removal is eligible under one of the three categories it should be extended to other categories as well.
  3. Inclusion of upstream and downstream benefits. Reasonably ascertained and substantial upstream or downstream benefits should be accounted for. RCW 70-235-20 (3) states “Except for purposes of reporting, emissions of carbon dioxide from industrial combustion of biomass in the form of fuel wood, wood waste, wood by-products, and wood residuals shall not be considered a greenhouse gas as long as the region's silvicultural sequestration capacity is maintained or increased.” In our view this assumption is based on an implicit and logical life-cycle basis that does not require a rigorous life-cycle analysis. Likewise other technologies can show similar upstream or downstream benefits. A corollary benefit of including enhanced forest management and advanced wood product use as an ERU is maintaining or increasing silvicultural sequestration capacity.
  4. Inclusion of displacement benefits. Categorically ruling out upstream or downstream benefits (e.g., advanced wood products) is not consistent with the protocols referenced in the rule. Displacement benefits are allowed to generate ERUs in some circumstances. For example, the Improved Efficiency of Vehicle Fleets protocol from the American Carbon Registry listed in WAC 173-442-160 (3)(a)(i), calculates credit based on the displacement benefit of one type of technology (a more efficient vehicle) over another (less efficient vehicle that is no longer in use).
  5. Establish a concrete, measurable, and defensible threshold for permanence. An arbitrary permanence standard of “irrevocable and nonreversible” as cited in WAC 173-442-150 is not a realistic measurement for compliance or enforcement. Adopting a standard shared among jurisdictions (i.e., 100 years in California) will better integrate Washington's system with the broader marketplace. Sustainable forestry practices create an ever increasing pool of wood products that store carbon for many decades, if not centuries, without limiting permanent forest carbon storage. These long-lived wood products also provide permanent and renewable displacement benefits of more fossil-intensive products.
  6. Technology neutral credit marketplace that adapts. Ecology should establish a process to identify and certify new protocols as ERU generating activities. We recommend Ecology articulate a more detailed criteria for “Ecology approved emission reductions” referenced in WAC 173-442-160. Additionally, we recommend Ecology define criteria for any “established multi-sector GHG emissions reduction program” that would qualify under WAC 173-442-170 to create allowances.
  7. Treatment of Energy-Intensive Trade-Exposed Industries. We urge Ecology to ensure that the new benchmarking approach does not inadvertently create a more onerous compliance pathway for any individual EITE than is required for any non-EITE. The revised treatment of EITE entities is consistent with the PLAN Washington goal to become a top 5 performing state in carbon competitiveness a measure of the carbon intensity of Washington’s economy. Focusing on carbon intensity helps ensure jobs and production do not shift out-of-state to regions that do not possess our clean electricity system.

Attached to this letter is a collection of issues, evidence and questions we’d like you to consider along with our above comments. We believe these changes can incentivize more robust investment in our communities, bolster struggling rural natural resource-based economies, and reduce costs by providing more compliance options.  We look forward to continuing this discussion with the Department of Ecology.

Sincerely,

  • Colleen McAleer, President, Washington Business Alliance
  • Kevin Tempest, Low Carbon Prosperity Analyst, Washington Business Alliance
  • Isaac Kastama, Director of Government Affairs, Washington Business Alliance
  • Dr. Bruce Lippke, Professor Emeritus, University of Washington, and Past President of CORRIM (Consortium for Research on Renewable Industrial Materials)
  • Jim Hargrove, Washington State Senator

CC:

  • Mr. Chris Davis, Senior Advisor to the Governor's, Energy & Carbon Markets
  • Mr. David Giuliani, Co-founder and Board Member, Washington Business Alliance
  • Mr. Alan Crain, Board Chair, Washington Business Alliance

Addendum 1: Email correspondence (June 13, 2016)

You recently asked for some background on the Clean Air Rule that might assist you and your organization in preparing comments on the potential inclusion of carbon sequestration into the rule. We welcome your comments on this issue, and any other topics related to the rule. In response to your request you might want to keep the following in mind when preparing your comments:

1)      The Clean Air Rule is being proposed under the authority of the Washington Clean Air Act (RCW 70.94). The Act is a focused on direct emissions of pollutants into the atmosphere. By definition, sequestration is not an emission reduction. It is the temporary removal of a pollutant (CO2) from the atmosphere. Given this, sequestration projects are not eligible to generate Emission Reduction Units under the current draft of the rule.

 

2)      The proposed Clean Air Rule does not utilize a life-cycle emissions framework. It is focused on the direct emission of a pollutant, at the moment in time when that pollutant is emitted. Upstream and downstream emissions are not part of determining the direct emissions. Therefore, projects that would displace other products – e.g., advanced wood products displacing steel/concrete – would not be eligible to generate Emission Reduction Units.

 

3)      Emission reductions under the Clean Air Rule must be permanent. That is, there must be a guarantee that under no conditions, for all of time, will the reduction in emissions be reversed (i.e., emitted to the atmosphere after all). This could potentially raise some issues for sequestration.

I hope these points about the proposed rule are helpful as you contemplate your comments. Again, this is a proposed rule and we welcome comments on these and other points. We appreciate your input into our process.

Thank you,

Bill Drumheller

Climate & Energy Specialist, Air Quality Program

Washington Department of Ecology

Addendum 2: Additional Evidence & Questions

SEQUESTRATION

Issue 

To establish a new carbon credit market that does not recognize sequestration is a missed opportunity and out of step with other jurisdictions and certain compliance options under the draft rule.

Evidence
  1. WAC 173-442-110 (1) concerns the on-site reductions in GHG emissions for covered parties generating ERUs. It does not appear to disqualify on-site capture and storage of GHGs.
  2. WAC 173-442-110 (3) and 173-442-170 concerns allowances from external emission markets. It appears to allow for GHG removal focused offsets if they are recognized by an external “established multi-sector GHG emissions reduction programs.” Within these external markets it is typical for some form of sequestration to qualify. For example, U.S. Forestry activities that result in Improved Forest Management are eligible under the California Cap-and-Trade Compliance Offset Program to generate credits. Improved forest management is “designed to increase removals of CO2 from the atmosphere”, which includes both the standing carbon stock in that stretch of forest and the carbon likely to be maintained for at least 100 years in products produced from forest stock on that sight (2015 Compliance Offset Protocol U.S. Forest Projects). We have highlighted the California approach and its’ corresponding protocol, but believe a stronger approach will be to design a system specific to the conditions and realities of our state.
Questions
  1. Will on-site capture and storage by a covered or voluntary party be eligible to produce ERUs? If so, why aren’t similar projects or programs off-site likewise eligible under WAC 173-442-160?
    1. What are the criteria that will be considered for “ecology approved emissions reductions” under WAC 173-442-160 (1), and will there be language clearly defining this criteria?
  2. If this type of carbon capture would be allowed to generate ERUs, why would other types, such as net GHG removal enhancements in forests and wood products be materially different?
  3. If allowances from external markets can generate ERUs through GHG removal projects, why is it not also acceptable to generate ERUs from Washington projects and programs without the added step of offset compliance under an out of jurisdiction regime?
  4. What are the criteria (or full list of) the “established multi-sector GHG emissions reduction program” offset categories?

LIFE CYCLE EMISSIONS

Issue

While burning biomass justifiably counts as zero-carbon, other uses of biomass do not receive credit for its carbon reduction benefits. Enhanced forest management and advanced wood product use as an ERU on a lifecycle basis, can help to maintain or increase silvicultural sequestration capacity.

Evidence
  1. The decision to count as zero-emissions “CO2 from industrial combustion of biomass in the form of fuel wood, wood waste, wood by-products, and wood residuals, as provided in RCW 70.235.020(3)” combines removals and releases of GHGs to arrive at a carbon-free benchmarked definition.
  2. The calculation in RCW 70.235.020 indicates that biomass will only qualify as zero-carbon “as long as the regions silvicultural sequestration capacity is maintained or increased.”
  3. Burning wood for fuel has only a fraction of the potential carbon emissions reduction as it does with targeted displacement of steel or concrete in buildings (CORRIM Fact Sheet).
Questions
  1. Why not extend an exception beyond direct combustion emissions to other reasonable applications with high GHG reduction potential, using well-defined criteria to decide what can be included?
  2. Is there a safeguard to ensure that the “silvicultural sequestration capacity” requirement is being met or, better yet, actively incentivized as an ERU generating activity?
  3. Why choose to exclude the most optimal potential uses of biomass when other uses are already incentivized?

DISPLACEMENT OF HIGHER CARBON INTENSITY MATERIALS

Issue

Certain protocols necessarily incorporate the displacement of a baseline technology by a more efficient or fuel-switching technology. This precedent should be applied in other applications to allow opportunities for displacement of one building product by a lower carbon choice or other similar, proven GHG reducing displacement action.

 

Evidence
  1. The concern is that the rules have the unintended impact of restricting opportunities for carbon reduction. To better understand these opportunities we use well researched examples from the forest and wood products sector demonstrating how some wood uses are far more efficient than others in reducing fossil emissions. The substitution of biofuel (e.g. woody biomass combustion) for fossil fuel can displace on average 0.4 (in the case of wood-derived ethanol) to 1.0 (in the extreme case for coal heating and power, less in the case of natural gas displacement) unit of carbon per unit of carbon in the wood used (CORRIM Fact Sheet). If the wood feedstock is processed into composite products, the displacement would likely be greater than 2 units of fossil carbon displaced for every unit in the wood use. Although the level of detail and range of different substitutional options and impacts carry uncertainty, even using average measures of many different substitution situations is a step better than not acknowledging the importance of substitution.
  2. Cited protocols for ERU generating activities, including the Improved Efficiency of Vehicle Fleets protocol from the American Carbon Registry listed in WAC 173-442-160 (3)(a)(i), calculate credit based on the displacement benefit of one type of technology. The emissions associated with a more efficient vehicle are compared to the baseline emissions of the less efficient vehicle that would no longer be in use. Displacement of one type of technology for another seems to be a core approach for calculating Emission Reduction Units.

Questions
  1. Given that displacement calculations are a standard component of determining emissions reductions, why not include the option for a basic life-cycle analysis treatment?

PERMANENCE

Issue 

The current standard for permanence under the draft rule is boundless, making both compliance and enforcement highly uncertain and deviating from established precedent. A more realistic and concrete permanence standard would be a more realistic mechanism. Furthermore, ignoring GHG removals a priori due to permanence concerns is not a technology-neutral approach. Investments in more efficient equipment and technologies can simply shift consumption to another location or be reversed by the subsequent investment, raising potentially greater (yet resolvable) permanence issues than many carbon removal and displacement projects.

Evidence
  1. Established protocols give a permanence benchmark that should inform the permanence standard of the Clean Air Rule. One example is the aforementioned protocol for U.S. Forests Offsets under the California Cap-and-Trade program: “For purposes of this protocol, 100 years is considered permanent.” A permanence standard as written (“irrevocable and nonreversible”) is not consistent with (and more onerous to comply with and enforce) that and other precedents from other programs.
  2. Avoided fossil fuel use, such as a more efficient vehicle or appliance, does not guarantee that the fossil fuel will not still be consumed either in some other location instead and/or by the subsequent vehicle or appliance purchase. In other words, this may represent a shift in location or time of that fossil fuel usage and those associated emissions. This is hardly permanent, or even more permanent, than other approaches to GHG reduction that are being excluded.
Questions
  1. Why would a short-term investment decision in an efficient technology with a limited lifetime (e.g. 10-15 years for a vehicle) likely be more permanent than the removal of carbon from the atmosphere?
  2. Given the precedence of a concrete and finite criteria for permanence, what grounds are there for establishing an “irrevocable and nonreversible” for all of time standard? In addition, how will the permanence standard, especially one as rigorous as currently written, be enforced?

CARBON POLLUTION ACCOUNTABILITY ACT

Issue

Certain key sections contained in the Carbon Pollution Accountability Act are not included in the draft Clean Air Rule. A more robust approach designed to the specific conditions and realities of Washington State would recognize the benefit of maintaining working forests as a reasonable market driven approach to carbon mitigation, in the spirit of Section 9 and Section 16 of the Carbon Pollution Accountability Act.

Evidence
  1. Sec. 9. OFFSET CREDITS.
    (1) The department shall adopt by rule the protocols for establishing offset projects and securing offset credits that can be used to meet a portion of a covered entity's or opt-in entity's compliance obligation under section 10 of this act.
    ...
    (4) Until January 1, 2021, an offset credit may only be created for the following offset types and only if offset protocols have been adopted by rule by the department: (a) Projects that prevent greenhouse gas emissions through anaerobic digestion of organic wastes; (b) Projects that reduce emissions of ozone depleting substances; (c) Projects that capture methane from mining and other resource extraction and transmission projects; and (d) Projects that sequester biogenic or atmospheric carbon through forestry and agricultural practices.
  2. Sec. 16. ECONOMIC OPPORTUNITIES FOR WASHINGTON FORESTRY AND RURAL COMMUNITIES.
    (1) Recognizing that Washington's uniquely abundant forests are a significant factor in the state's carbon cycle, that they sequester carbon, and that forest management can be part of the solution to solving climate change, the department shall seek opportunities to further reduce and remove carbon emissions and to support the forestry sector through the management of forest carbon.
    (2) The department of commerce, working with the departments of agriculture and natural resources, shall identify existing programs or develop new programs to: (a) Provide financial assistance to assist in creating or expanding new market opportunities for Washington forest products; (b) Help mitigate the impacts of the program on transporters of wood and food products due to potential increased fuel costs; and (c) Otherwise assist businesses in rural communities with any potential disproportionate economic impacts of the program.
    (3) The department shall work with the department of natural resources in the development of offset protocols as called for in section 9 (1) and (2) of this act that consider opportunities including but not limited to: (a) Reducing emissions through the additional use of wood products in construction and expanded wood substitution opportunities; (b) Incentives for forest health treatments that reduce deforestation risks; (c) Programs to maintain or increase forest carbon stocks; (d) Improving technical understanding of sequestration; (e) Developing the requirements and exploring the opportunities to develop offset projects that are recognized in other external greenhouse gas emissions trading programs; (f) Expanding transfer of development rights programs to reduce conversion risk; and (g) Supporting ecosystem service payment programs.