This bill amends RCW 70A.65.110 and adds new sections to chapter 70A.65 RCW to establish procedures and schedules for allocating no-cost allowances under the climate commitment act to facilities classified as emissions‑intensive and trade‑exposed. It creates new allocation rules (a legal change to allocation procedures), requires the department to adopt objective criteria by rule for identifying emissions‑intensive, trade‑exposed facilities, and lists manufacturing sectors by NAICS code prefixes that are automatically eligible. Owners of unlisted manufacturing facilities may demonstrate they meet the criteria. The bill also creates procedural requirements for rulemaking, an advisory group, and reporting and assessment obligations for affected facility owners/operators. The bill specifies technical allocation methods and timing: for 2023–2026 annual allocations equal a facility’s baseline carbon intensity (or mass‑based baseline) multiplied by actual production; beginning with four‑year periods starting January 2027 allocations are adjusted by benchmark reduction schedules and multiplied by actual production. It allows a mass‑based baseline election where carbon intensity is infeasible, with set allocation percentages (100% for 2023–2026; 97% for 2027–2030; 94% for 2031–2034). Benchmarks reduce by 3% for 2027–2030 relative to the first period and another 3% for 2031–2034, subject to possible upward adjustments if additional reductions are technically or economically infeasible. The department must provide processes for upward adjustments based on specified factors, must avoid duplication with other no‑cost allowance transfers, and must limit offset credit use so no‑cost allowances plus offsets do not exceed 100% of a facility’s compliance obligation. The bill also addresses banking of unused allowances, transfer of allowances among multiple facilities of an owner, and rules for curtailed or closed facilities and transfer of withheld allowances to an emissions containment reserve. Reporting assessments required every four years must be certified by an independent licensed professional engineer, are exempt from public disclosure in their entirety under RCW 70A.65.100(9)(c), and failure to comply is subject to penalty under RCW 70A.65.200(5). The bill requires the department to submit recommendations to the legislature by December 1, 2026, on allowance schedules and design for January 1, 2035 through January 1, 2050 (including proposed annual reduction methods, adjustment criteria, and possible consignment to auction), and directs the Department of Ecology, consulting with Commerce, to contract for a study on leakage and employment impacts due December 1, 2028. Some provisions and a section expire July 1, 2029. The extracted text does not identify the specific agency named as “the department” in all places, omits the full text of the new section numbers added, and references subsection (9) and other subsections whose text is not included here, so some procedural and definitional details are incomplete or uncertain.

If enacted, manufacturers in the listed NAICS sectors would receive predictable free emissions allowances based on historical 2015–2019 baselines (either carbon intensity or mass-based) for 2023–2026 and then reduced on a scheduled basis in 2027–2030 and 2031–2034, with the department able to adjust allocations upward in limited cases. Facility owners/operators can bank unused allowances but face limits on using offsets so free allowances plus offsets cannot cover more than 100% of their obligation; they must submit a detailed, independently certified assessment of feasible emissions reductions by Dec. 1, 2028 and every four years thereafter, which creates new compliance and engineering review costs and the risk of having to purchase additional instruments if emissions exceed allocated allowances. Curtailed or closed facilities can lose trading rights or have unused allowances moved to an emissions containment reserve, and rules will govern new facilities and tribal consultations. The departments named in the bill (including the Department of Ecology contracting a leakage study due by Dec. 1, 2028) must adopt rules, form an advisory group, set objective criteria, review baselines, and make legislative recommendations for allowance schedules from 2035–2050 that could include consigning some free allowances to auction and investing proceeds back into decarbonization. The groups most affected are owners/operators of specified manufacturing facilities, who gain near‑term financial relief from free allowances but face ongoing reporting, assessment and compliance obligations, potential future reductions in free allocations, and some implementation details and the identity of “the department” remain unclear in the provided text.