Will Washington State Adopt a Clean Fuel Standard?

Electric BMW’s Charging Up

Washington has an opportunity during the current legislative session to establish a clean fuel standard and join California, Oregon, and British Columbia with this important policy designed to align the transportation sector with climate goals, incentivize the growth of a clean fuels industry, and reduce air pollution.

Detailed in HB 1091, the Clean Fuels Program would require life cycle greenhouse gas (GHG) emissions per unit of transportation fuel to be reduced to 10% below 2017 levels by 2028 and 20% below 2017 levels by 2035. The law would then require updated carbon intensity rules for fuels no later than 2032 to be consistent with the state achieving its economy-wide target of net-zero emissions by 2050. Figure 1 depicts the required trajectory for Washington to meet its statutory GHG emission limits.

Figure 1.

The Washington 2021 State Energy Strategy and the deep decarbonization modeling that underpins the strategy, released in January, demonstrate that achieving the state’s emission limits will require targeted policy to accelerate decarbonization within each sector of the economy. A clean fuel standard would build on major policies put in place recently to address the top sources of emissions in Washington.

First, the Clean Energy Transformation Act passed in 2019 established a comprehensive decarbonization framework for the electricity sector. In 2020, policymakers shifted their focus to transportation, the state’s largest source of GHG emissions, which comprise approximately 45% of total emissions in the state’s 2018 inventory.

In 2020, Washington adopted California’s vehicle emission standards, requiring a shift to sales of zero-emissions vehicles (ZEVs) over time. The Clean Fuels Program would complement that commitment by incentivizing the fueling infrastructure and expanded clean fuels production needed to support increasing use of ZEVs in the state.

How the Clean Fuels Program Would Work

Under the proposed Clean Fuels Program, producers and importers of transportation fuel would either have to reduce their fuel’s lifecycle carbon intensity or purchase credits from clean fuels suppliers. Lifecycle emissions would account for any emissions associated with the production, storage, transportation, and combustion of fuels.

The policy is designed to be technology-neutral, allowing any fuel with verified emissions reductions to qualify and earn credits, including many non-fossil fuels, such as biofuels, clean electricity, hydrogen, and synthetic fuels.

Credits can also be generated by other activities that support GHG emissions reductions in Washington’s transportation sector, including carbon capture and sequestration projects, electric vehicle (EV) charging provided with zero-emissions electricity, and smart charging that shifts EV charging to times when the carbon intensity of electricity is lower.

Fuel suppliers would have the flexibility to trade credits with other program participants or to bank credits for future years. Exported fuels and fuels used for aircraft, marine vessels, trains, military vehicles, and some off-road vehicles would be exempt from the program. However, exempt fuels with reduced carbon intensity could optionally participate in the program and earn credits. New incentives for clean aviation and marine fuels are especially important, as electrification may not be technically feasible in many cases.

Oregon’s clean fuels program generated credit revenues for clean fuels suppliers worth nearly $100M in 2019, while only increasing the average price of a gallon of gas by less than 3 cents according to regulators’ most recent estimates. If needed, HB 1091 gives Washington’s Department of Ecology the authority to mitigate potential fuel price impacts of the Clean Fuels Program through various cost containment mechanisms.

The Lowest Cost Path to Decarbonization Prioritizes Vehicle Electrification

Modeling conducted for the 2021 State Energy Strategy found that vehicle electrification is one of the lowest cost ways to directly reduce GHG emissions and is essential for minimizing the overall cost of deep decarbonization. EVs use energy more efficiently than internal combustion engine vehicles and are already cost competitive over their lifetimes. With Washington’s relatively low-cost electricity, fueling an EV currently costs less than half the price of fueling a gasoline vehicle.

The up-front costs of EVs continue to drop and are forecast to be the same or less than internal combustion engine vehicles as soon as 2023. As EVs become more affordable, charging will become the biggest obstacle to widespread adoption.

Washington’s proposed clean fuels policy is designed to directly promote charging infrastructure deployment by requiring 50% of credit revenue earned by electric utilities from supplying electricity to vehicle charging to be invested back into transportation electrification projects, with at least 60% of the investment benefiting communities that have higher levels of air pollution. Expanded charging infrastructure will make EVs increasingly accessible, bringing their savings within reach for more Washingtonians.

Incentives to Grow the Clean Fuels Industry in Washington

Even if EV adoption increases rapidly, existing internal combustion engine vehicles will continue to be on the road for decades, and some long-haul trucking cannot easily be electrified. Fully decarbonizing the transportation sector will require a large supply of clean liquid and gaseous fuels.

Led by the biorefinery in Grays Harbor, Washington has the largest biodiesel production capacity on the West Coast and the sixth largest nationwide.[1] Driving new investment into the industry with a clean fuel standard could help Washington build on its existing strength as a major producer of biodiesel and take advantage of local feedstock supplies, including agricultural and forest residues.

A clean fuel standard could also create new incentives for renewable natural gas (RNG) production and use in Washington, which is limited today. Much of Washington’s RNG is sold to California because it generates valuable credits under the state’s low-carbon fuel standard. A 2018 Washington State Department of Commerce study identified hundreds of landfills, wastewater treatment plants, livestock farms, and other locations that could produce and sell RNG if the demand for clean fuels were to grow.

The Clean Fuels Program could play an important role in expanding the supply of low-carbon fuels and creating new employment opportunities in a growing industry. In 2019, Washington already had over 1,800 jobs in clean fuels, accounting for nearly 20% of all jobs in the state’s fuels industry.[2]

Reducing Vehicle-related Air Pollution in Washington

Internal combustion engine vehicles are the largest source of air pollution in Washington. Exposure to pollutants from vehicle exhaust causes cancer and exacerbates respiratory conditions such as asthma, heart disease, and lung disease. Electric and hydrogen vehicles, which produce no harmful exhaust, have substantial air quality benefits.

The exact impact of the Clean Fuels Program on air quality will depend on the mix of fuels used for compliance. However, required reinvestment of credit revenues in transportation electrification projects in pollution-burdened communities will help enable clean vehicle use where it is needed most.

Mirroring national patterns, exposure to harmful air pollution in Washington is highest for communities of color. Health risks are especially acute with exposure to diesel emissions, which are concentrated around ports, near construction sites, or along major trucking and bus routes. Vehicle electrification will result in the greatest reductions in local air pollution, but switching to clean fuels can also improve air quality, especially when replacing conventional diesel with biodiesel.

A Key Policy for Decarbonizing the Transportation Sector

Washington’s HB 1091 is part of a growing push to establish clean fuel standards in numerous states and at the national level. These policies are critical to spurring greater investment in solutions for transportation decarbonization.

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[1] The U.S. Energy Information Administration reports that Washington’s biodiesel capacity equaled 114 Mmgal/yr in January, 2020, ranking sixth nationally behind Iowa, Texas, Missouri, Illinois, and Arkansas (for data, visit https://www.eia.gov/biofuels/biodiesel/capacity/).

[2] The 2019 U.S. Energy Employment Report identified 9,778 fuels jobs in Washington (for data, visit https://www.usenergyjobs.org/research).

David Paolella

Research and Policy Analyst

David Paolella is a Research and Policy Analyst at the Clean Energy Transition Institute. He focuses on bringing together science, technology, and economics to advance practical climate solutions that promote economic opportunity and environmental justice. As a Yakima, Washington native, David is passionate about helping the Northwest forge a path to deep decarbonization that the rest of the country can follow.

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