Navigating Washington's Climate Commitment Act: A Guide to Compliance and Opportunity

NAVIGATING WASHINGTON’S CLIMATE COMMITMENT ACT A Guide to Compliance and Opportunity

By Joshua Cloud, DBIA, LEED AP, LFA, BCA and Amelia Zvaleuskas, LEED GA, CEM (pending)

Navigating Washington’s Climate Commitment Act: A Guide to Compliance and Opportunity

INTRODUCTION TO WASHINGTON’S CLIMATE COMMITMENT ACT Enacted by Governor Jay Inslee in 2021, Washington’s Climate Commitment Act (CCA) established the nation’s second market-based cap-and-invest program. The program caps greenhouse gas emissions (GHGe) from the state’s largest emitting sources and requires businesses to purchase allowances at state-run auctions or on secondary markets. The cap will be reduced over time to meet aggressive GHGe reduction targets: a 50% reduction by 2030 and a 95% reduction by 2050.

Following the November 2024 election, the CCA remains firmly intact as Washington voters rejected Initiative 2117, which aimed to repeal it. This decision reinforces the CCA’s critical role in meeting Washington’s GHGe reduction goals and the state’s commitment to decarbonization and clean energy. Since launching in 2023, the cap-and-invest program has generated over $2 billion for environmental investments statewide. The Washington State Legislature created seven accounts to manage these funds, which must be used for critical climate and air quality projects.

So, what does this mean for businesses, institutions, and building owners across Washington state? With the CCA securely in place, it is essential for businesses in Washington to understand how this will affect them in the near future. Understanding the requirements and developing strategies for compliance will be crucial moving forward to avoid costly penalties and improve operational efficiency.

CASE STUDY

BELLINGHAM PUBLIC SCHOOLS’ PATH TO SUSTAINABILITY AND COMPLIANCE

Bellingham Public Schools, encompassing 22 schools and 12,000 students, partnered with OAC to establish carbon and EUI benchmarks to advance its sustainability goals. In 2022, OAC facilitated the district’s first carbon report, engaging students in analyzing emissions data to foster hands-on learning about climate impact. To meet Washington’s HB 1257 requirements, OAC also helped the district with EUI benchmarking, tracking utility data across schools and creating a dashboard to monitor energy trends and compliance. An initial analysis of 2022 data revealed that out of the 22 schools assessed, 12 failed to meet the EUI targets.

However, after implementing facility and process improvements, only five schools did not meet EUI targets one year later. The District aims for all Bellingham Public School facilities to meet EUI targets by the start of phased compliance with HB 1257 in 2026.

With thorough benchmarking data and an established review process, this goal is now well within reach.

UNDERSTANDING THE CLEAN BUILDINGS ACT Integral to the CCA’s success is the Clean Buildings Act (House Bill 1257), which sets forth energy performance standards designed to curb emissions from the state’s buildings.

In May 2019, Washington State signed House Bill 1257 into law with the goal of reducing operational costs and pollution from fossil fuel use in existing buildings larger than 50,000 square feet.

Buildings are the fastest-growing emission source in Washington, accounting for 27% of the state’s total GHGe. This act enforces energy performance standards to reverse this trend, with compliance deadlines set depending on building size.

The policy takes a phased approach, and buildings must meet Energy Use Intensity (EUI)* targets by a certain date, depending on the building’s size and type:

TIER 1 COMPLIANCE DATES

27%

Buildings

44%

WA GREENHOUSE GAS EMISSIONS

3% 7% Agriculture

Waste

19%

Industrial

Transportation

Credit: WA State Department of Commerce

• June 1, 2026: Buildings 220,000 square feet and larger • June 1, 2027: Buildings 90,000 square feet and larger • June 1, 2028: Buildings 50,000 square feet and larger

TIER 2 COMPLIANCE DATES

*EUI, a key measure of energy efficiency, calculates a building’s annual energy consumption per square foot. A lower EUI signifies better energy performance, allowing owners to identify and prioritize facilities needing efficiency improvements.

• July 1, 2027: Buildings 20,000 square feet and larger but less

than 50,000 square feet and all multifamily residential buildings larger than 20,000 square feet

HB 1257 REPORTING REQUIREMENTS

Buildings are required to conduct energy management planning, operations and maintenance (O&M) planning, and energy use tracking over time for non-residential buildings larger than 50,000 square feet and multifamily buildings larger than 20,000 square feet.

Tier 1 buildings must complete the following reporting requirements:

• Benchmark by measuring and tracking energy use in a building over time.

• Implement an O&M program.

• Create an Energy Management Plan (EMP).

• Meet relevant energy performance metrics. (Meet an average EUI target or conduct an energy audit and pursue ‘investment criteria’ pathway.)

HB 1257 REPORTING REQUIREMENTS (CONT.) Tier 2 buildings must complete the following reporting requirements: • Benchmark by measuring and tracking energy use in a building over time.

• Implement an O&M program.

• Create an EMP.

• Note: Tier 2 buildings are NOT currently required to meet energy performance metrics.

HB 1257 VIOLATION & ENFORCEMENT

The Washington State Department of Commerce is authorized to impose administration penalties upon building owners who fail to submit documentation demonstrating compliance. Failure to submit appropriate documentation by the scheduled reporting date will result in progressive penalties by legal notice.

Rule of Thumb: Maximum fees over a five-year period include a $5,000 base fee plus $1.50 per square foot of building space. For example, a 100,000-square-foot building could incur up to $155,000 in fees over five years.

Navigating Washington’s Climate Commitment Act: A Guide to Compliance and Opportunity

ADVANCING STATE DECARBONIZATION WITH HB 1390 In May 2023, Governor Jay Inslee further advanced the state’s decarbonization efforts by signing House Bill 1390. This amendment to the Clean Buildings Act adds a new section for facilities connected to district energy systems, offering an alternative compliance pathway to the state energy performance standard outlined in HB 1257.

HB 1390 applies to campus energy systems, defined as a collection of buildings served by a district heating, cooling, water reuse, or power system. Under HB 1390, owners of a publicly owned district energy system must develop and submit decarbonization plans for up to 15 years. The plans must contain strategies to decarbonize the central plant and reduce energy use through conservation efforts at the central plant and the connected buildings. The bill aligns with the state’s Clean Buildings Performance Standard to reduce GHGe across Washington.

HB 1390 COMPLIANCE REQUIREMENTS • Mandatory: State-owned campus district energy systems with 5+ buildings, over 100,000 square feet combined. For these campuses, HB 1257 requirements no longer apply.

◦ Notify Washington State Department of Commerce intention to participate no later than June 30, 2025.

◦ Submit a final decarbonization plan to Commerce by June 30, 2025.

• Recommended: Campus district energy systems with 3+ buildings, over 100,000 square feet combined, owned by a private entity or public-private partnership. If these campuses do not comply with HB 1390, they must comply with HB 1257 for all relevant buildings.

HB 1390 VIOLATION & ENFORCEMENT

The Washington State Department of Commerce can impose penalties for non-compliance. Failure to submit appropriate documentation by the scheduled reporting deadlines will result in progressive penalties by legal notice.

Rule of Thumb: Maximum penalties over a one-year period include a $5,000 base fee plus $1.00 per square foot of building space. For instance, a 100,000-square-foot building could incur penalties of up to $105,000 annually.

CASE STUDY

TRANSFORMING CAMPUS HEATING AT WESTERN WASHINGTON UNIVERSITY

OAC has partnered with Western Washington University (WWU) on a transformative campus heating conversion project, aimed at achieving substantial reductions in GHGe. WWU’s roughly 215-acre campus currently relies on an aging gas-fired steam plant and distribution system to heat its campus. The campus heating system accounts for roughly 86% of WWU’s direct and indirect GHGe, emitting over 11,000 metric tons of carbon dioxide equivalent (CO2e) emissions annually. This is exacerbated by the fact that 15% of the energy going into the steam plant is lost in steam production, and an additional 30% of all heat generated by the steam plant is lost in distribution.

Outdated technology, operator staffing requirements, and volatile gas prices make maintaining and operating the system increasingly challenging. To address these issues, OAC and WWU are collaboratively developing a project implementation plan. This initiative will analyze system configurations, explore emerging technologies, identify project procurement methods, and examine opportunities for integration with a larger community district energy system currently in development.

The heating conversion project will meet requirements set forth in HB 1390 and the Washington State Clean Building Performance Standard. Funding for this project will be sourced from proceeds generated by the cap-and-invest program established under the recently reaffirmed Climate Commitment Act. Federal funding is also available due to project components being eligible for direct payment from the Inflation Reduction Act Clean Energy Tax Credit. The completion of this project is anticipated by 2030.

PATHWAYS TO COMPLIANCE UNDER THE CLIMATE COMMITMENT ACT SUPPORTING THE CLIMATE COMMITMENT ACT’S VISION

The CCA cap-and-invest program has generated over $2 billion in dedicated funds—resources that remain available following the 2024 election. These funds, stored across seven accounts, will support Washington’s path toward a low-carbon future, improve air quality, and expand access to clean energy.

One of these accounts, the Climate Commitment Account, specifically supports Washington’s transition to a low-carbon economy. This includes supporting the energy efficiency goals established by HB 1257, HB 1390, and the Clean Buildings Performance Standard. Its funds are intended to drive energy efficiency improvements, support electrification, and assist in reducing GHGe.

With the CCA firmly in place, now is the time to act. This funding provides the momentum needed to drive sustainable change across the state, moving Washington closer to its vision of a sustainable, low-carbon economy.

RECOMMENDATIONS & KEY STEPS FOR COMPLIANCE

OAC’s Recommendation: Engage Early!

With compliance deadlines for HB 1257 and HB 1390 approaching, ensuring that your facilities meet the compliance requirements should be a top priority. Compliance requires submitting a full year of data and an O&M plan to the state, so benchmarking should begin at least one year before the deadline. For example, owners of Tier 1 buildings with properties over 220,000 square feet should start EUI benchmarking by June 1, 2025, to meet the June 1, 2026, deadline. By early 2025, data collection, methodology establishment, and O&M planning should be in progress.

Getting Started To successfully meet the requirements of HB 1257 and HB 1390, building owners should take proactive steps to align with the state’s energy and emission standards. Here are key steps to get started: • Partner with a skilled project management team or owners representative to help navigate the process, and any necessary building modifications.

• Understand your building’s EUI and the associated compliance standards.

• Build an energy use tracking and benchmarking system.

Continuous monitoring will help you measure progress, identify areas for improvement, and ensure ongoing compliance.

• Make necessary building modifications to reduce energy consumption, and educate occupants on energy-efficient practices.

PRIORITIZE COMPLIANCE FOR A SUSTAINABLE FUTURE As Washington State advances its decarbonization efforts through the Climate Commitment Act and the Clean Buildings Act, businesses and building owners must proactively navigate these regulations. Understanding and acting on the requirements of HB 1257 and HB 1390 will enable organizations to meet compliance deadlines while also capitalizing on increased operational efficiency.

For those managing buildings over 20,000 square feet, now is the time to prepare for compliance. Taking early action can help avoid costly penalties, reduce GHGe, and maximize building efficiency. By prioritizing compliance and leveraging available resources, we can all contribute to a cleaner, more sustainable Washington.

OAC is here to help. Contact us at sustainability@oacsvcs.com today.

A BETTER OUTCOME IS ALWAYS POSSIBLE. OAC is actively assisting school districts, universities, municipalities, healthcare facilities, and commercial clients in navigating these requirements and enhancing their sustainability efforts. Learn how we can help with compliance, carbon and/or EUI benchmarking, and decarbonization strategies for your buildings and facilities.

INQUIRIES

CONNECT

sustainability@oacsvcs.com 206.285.4300

www.oacsvcs.com

RESOURCES

Climate Commitment Act (CCA) WA Largest Emitters CCA Cap-and-Invest Auction Revenue WA EUI Targets & Definitions

Navigating HB 1257 Navigating HB 1390

JOSHUA CLOUD

BCA, DBIA, LEED AP, LFA

Senior Director

With 25 years of industry experience, Joshua’s focus has been assisting school districts and higher education institutions in navigating the development, design, and construction landscape to build the heathiest, most environmentally-friendly, teaching and learning environments for our communities.

AMELIA ZVALEUSKAS

LEED GA, CEM (pending)

Assistant Project Manager

Amelia brings expertise in carbon accounting, data analysis, corporate sustainability action plan development, and project coordination. She has worked on several carbon accounting projects and sustainability action plans and supports clients with her sustainability program management expertise.