SECTION 4 — EMISSIONS REDUCTION TARGETS AND COMPLIANCE FRAMEWORK

4.1 Mandatory Reduction Schedule

Each covered facility emitting more than 25,000 metric tons of carbon dioxide equivalent (CO2e) per year shall reduce gross greenhouse gas emissions in accordance with the following schedule: a minimum 15 percent reduction below the facility's 2019 baseline by December 31, 2027; a minimum 35 percent reduction by December 31, 2032; and a minimum 65 percent reduction by December 31, 2040. Facilities that fail to meet an interim target shall pay a compliance penalty of $85 per metric ton of CO2e for each ton by which actual emissions exceed the applicable target.

4.2 Allowance Trading Program

The Agency shall establish a cap-and-trade program under which covered facilities may purchase, sell, or bank compliance allowances. Each allowance represents the right to emit one metric ton of CO2e. The total number of allowances issued in any compliance year shall not exceed the aggregate target for all covered facilities in that year, calculated pursuant to Section 4.1. Facilities may satisfy up to 20 percent of their compliance obligation using offsets generated by approved carbon sequestration or avoidance projects, provided such projects are verified by an accredited third-party body and meet the permanence and additionality standards set forth in Appendix C.

4.3 Reporting and Verification

No later than March 31 of each year, every covered facility shall submit to the Agency a verified emissions report for the preceding calendar year. The report must be prepared by a qualified independent verifier holding current certification under the Agency's verification program. Any facility that submits a materially inaccurate report — defined as an error of more than 5 percent from the verified total — shall be subject to a civil penalty of up to $50,000 per day per violation, in addition to any compliance penalties assessed under Section 4.1.

4.4 Small Emitter Exemption

Facilities emitting fewer than 10,000 metric tons of CO2e per year are exempt from the requirements of Sections 4.1 through 4.3 but must register with the Agency and submit an annual self-certification form confirming that emissions remain below the exemption threshold. Any facility whose emissions exceed 10,000 metric tons in two consecutive calendar years shall automatically become a covered facility, effective January 1 of the following year, and shall be required to establish a 2019 baseline within 180 days of that date.
