This bill amends RCW 70A.65.110 to set a detailed allocation and compliance framework for emissions‑intensive, trade‑exposed (EITE) facilities under the state’s allowance program. It treats facilities in specified NAICS sectors (as of January 1, 2026) as eligible for no‑cost allowances and defines two allocation methods: a carbon‑intensity baseline (facility‑specific emissions per unit of production) or a mass‑based baseline (fixed emissions baseline, generally using 2015–2019 data). The amendment prescribes that 2023–2026 allocations use baseline carbon intensity or mass‑based baselines, and that beginning January 2027 allocations are adjusted in four‑year periods according to benchmark reduction schedules, with mass‑based facilities receiving 97% of baseline for 2027–2030 and 94% for 2031–2034 (subject to exceptions referenced elsewhere). The department must avoid duplicating any no‑cost allowances transferred under RCW 70A.65.120 and 70A.65.130, may make upward benchmark adjustments where reductions are not technically or economically feasible, and includes a special provision to accommodate production increases for NAICS 3364 (aerospace) facilities when using a mass‑based baseline. The amendment imposes procedural and reporting requirements and adds program design changes. The department must adopt objective criteria by rule and review facility baselines (with specified submission and review dates cited for initial compliance periods). To continue receiving no‑cost allowances after January 1, 2027, EITE facility owners/operators must satisfy reporting and planning requirements in subsection (9): biennial emissions reporting (first due March 31, 2028), and facility plans every four years assessing feasible mitigation technologies that must be third‑party verified. The department must deliver a December 1, 2026 report proposing annual reduction methods for 2035–2050 (including percentage schedules), criteria to adjust allowances for leakage risk, and a design to consign a portion of no‑cost allowances to auction with proceeds invested in GHG reductions at EITE facilities. If the legislature does not adopt a 2035–2050 schedule by December 1, 2027, pre‑2035 allocations continue. The amendment also limits the use of offset credits so that no‑cost allowances plus offsets do not exceed 100% of a facility’s compliance obligation, allows banking of unused allowances, governs transfers among owner/operator facilities, and requires withholding/withdrawal and transfer of unused allowances to the emissions containment reserve when facilities curtail or close production; rules for new facilities and tribal consultation are required. The amendment adds confidentiality and technical definitions. The director must keep proprietary manufacturing records confidential under RCW 43.21A.160 and grant confidentiality requests when not contrary to the public interest. The department may adopt alternative temperature range definitions by rule; otherwise low‑temperature heat is up to 130°C, medium is 130°C to 400°C, and high is 400°C or greater. Important context is missing from the provided text: subsection (9) is referenced repeatedly but its full text and certain exceptions are not included, some parts of subsection (4)(a) are incomplete, the identity of “the department” is not specified in these extracts, and statutory definitions of terms such as “covered emissions,” “covered entity,” and the full procedures in RCW 70A.65.120 and .130 are not provided.

Manufacturing facilities in the listed industries (steel and other metals, paper, aerospace, wood products, cement and other nonmetallic minerals, chemicals, semiconductors/electronics, food, petroleum refining and related petroleum product plants, and certain asphalt and petroleum products) will receive free emissions allowances based on either a carbon‑intensity or a mass‑based baseline for 2023–2026 and then see those free allocations decline on a four‑year schedule starting in 2027 (with specified percentage steps for mass‑based baselines for 2027–2034). To keep getting free allowances after January 1, 2027, facility owners must meet new reporting and planning requirements (regular emissions reporting and verified decarbonization plans), and if a facility emits more than its free allowances it will need to buy additional compliance instruments. Facilities can bank unused allowances but offset use will be limited so that free allowances plus offsets do not cover more than 100% of a compliance obligation; curtailed facilities cannot trade their allowances and closed facilities lose unused allowances to an emissions reserve. The proposal also contemplates consigning some free allowances to auction with proceeds targeted to projects at these facilities, and gives the department flexibility to adjust benchmarks when firms show further reductions are not feasible and to give extra treatment for aerospace production. The department will need to write rules, review and approve baselines, withhold or withdraw allowances for closures, and produce a December 1, 2026 report proposing the 2035–2050 allowance schedule, criteria for adjusting allocations for leakage risk, and how much of the free allocation should be auctioned and invested. Practical uncertainty remains because the department’s exact identity is not specified in the provided text, the detailed requirements and exceptions in subsection (9) are missing, and the final percentages and methods for 2035–2050 and for some exceptions are not yet defined, so affected companies and communities will face implementation and financial uncertainty until those details are adopted.