SECTION 1. Chapter 21N of the General Laws is hereby amended by striking out section 7 in its entirety and inserting in place thereof the following section:-

Section 7. (a) Not later than January 1, 2026, the secretary and the department shall adopt market-based compliance mechanisms for, or other fees and exactions on, the heating and cooling of commercial, institutional, and industrial buildings, which mechanisms shall further the achievement of the statewide greenhouse gas emissions limits and sublimits adopted pursuant to this chapter related to commercial and industrial heating and cooling.

(b) Not later than January 1, 2027, the secretary and the department shall adopt market-based compliance mechanisms for, or other fees and exactions on, industrial processes, which mechanisms shall further the achievement of the statewide greenhouse gas emissions limits and sublimits adopted pursuant to this chapter related to industrial processes.

(c) Not later than January 1, 2028, the secretary and the department shall adopt market-based compliance mechanisms for, or other fees and exactions on, the transportation sector, which mechanisms shall further the achievement of the statewide greenhouse gas emissions limits and sublimits adopted pursuant to this chapter related to transportation.

(d) Not later than January 1, 2029, the secretary and the department shall adopt market-based compliance mechanisms for, or other fees and exactions on, residential heating and cooling, which mechanisms shall further the achievement of the statewide greenhouse gas emissions limits and sublimits adopted pursuant to this chapter related to residential heating and cooling.

(e) The executive office and the department may work with participating regional greenhouse gas initiative states and other interested states and Canadian Provinces to develop or expand market-based compliance mechanisms or other fees and exactions to sources and sectors necessary or useful to achieving the greenhouse gas emissions limits and sublimits of the commonwealth.  

(f) The executive office and the department shall monitor compliance with any rule, regulation, order, emissions limit, emissions reduction measure, market-based compliance mechanism or other fees and exactions adopted by the secretary or the department pursuant to this chapter. The department may impose an administrative penalty pursuant to section 16 of chapter 21A for a violation of any rule, regulation, order, emissions limit, emissions reduction measure or other measure adopted by the secretary or department pursuant to this chapter.

(g) Market-based compliance mechanisms or other fees and exactions adopted pursuant to this section shall be designed to: (i) maximize the ability of the commonwealth to achieve the statewide greenhouse gas emissions limits and sublimits established pursuant to this chapter; provided, that any charges, exactions, allowances, or permits shall be set, imposed, allocated, auctioned, sold or authorized so as to maximize the likelihood that, beginning in the first year of implementation, said charges, exactions, allowances or permits shall result in a cost of emissions per metric ton of carbon dioxide equivalent of not less than 50 dollars; provided, further, that said charges, exactions, allowances, or permits shall be set, imposed, allocated, auctioned, sold or authorized so as to maximize the likelihood that the cost of emissions per metric ton of carbon dioxide equivalent will increase by ten dollars each year, up to a ceiling of 200 dollars per metric ton of carbon dioxide equivalent; (ii) ensure that the commonwealth achieves said limits and sublimits equitably and in a manner that protects and, where feasible, improves, the health and economic condition of low-income and moderate-income persons and communities; (iii) prevent increases in emissions of toxic air contaminants and criteria air pollutants, including, but not limited to, emissions of nitrous oxide, sulfur dioxide and mercury; (iv) identify manufacturing sectors, economic sectors, economic subsectors or individual employers at risk of significant adverse impacts due to emissions limits and sublimits, and mitigate such impacts; (v) take into account and address the distinctive vulnerabilities of rural, suburban and urban communities; and (vi) maximize environmental and economic benefits to the commonwealth.

(h) Proceeds realized by the adoption of market-based compliance mechanisms or other fees and exactions related to transportation shall be treated or disbursed in any proportion as follows: (i) as rebates or refunds to residents and employers of the commonwealth in proportion to the monies collected, respectively, from residents and employers; and (ii) as monies credited to the Commonwealth Transportation Fund established under section 2ZZZ of chapter 29, provided that such monies shall be used to further the achievement of the limits and sublimits adopted pursuant to this chapter related to transportation; provided further, that the secretary may allocate a reasonable amount of proceeds to reimburse the commonwealth for any direct costs incurred in the administration of activities authorized by this section; and provided, further, that there shall also be credited to the fund any appropriations made by the legislature and any investment income earned on assets of the fund.  Amounts remaining in the fund at the end of the fiscal year shall not revert to the General Fund and shall be available for expenditure in succeeding fiscal years.

(i) Proceeds realized by the adoption of market-based compliance mechanisms or other fees and exactions related to industrial processes and the heating and cooling of commercial, institutional, industrial and residential buildings shall be treated or disbursed in any proportion as follows: (i) as rebates or refunds to persons in proportion to the monies collected, respectively, from such persons; and (ii) as monies credited to the trust funds established in sections 2MMMMM, 2NNNNN, and 2OOOOO of chapter 29 of the General Laws, which monies shall be expended pursuant to said sections; provided, that the secretary may allocate a reasonable amount of proceeds to reimburse the commonwealth for any direct costs incurred in the administration of activities authorized by these sections of chapter 29.

(j) Annually, the secretary of administration and finance, in consultation with the secretary of energy and environmental affairs, shall file a report with the chairs of the senate committee on ways and means, the house committee on ways and means, and the joint committee on telecommunications, utilities and energy. The report shall include, but not be limited to, an analysis of the effectiveness of the market-based compliance mechanisms or other fees and exactions adopted or imposed pursuant to this chapter or maintained in connection with the initiative known as the regional greenhouse gas initiative.  Said analysis shall include calculations of the contributions of each compliance mechanism, fee or exaction, expressed in tons of carbon dioxide equivalent, to meeting the statewide greenhouse gas emissions limits and sublimits established pursuant to this chapter. 

(k) The secretary and the department may promulgate regulations governing market-based compliance mechanisms or other fees and exactions adopted or imposed to achieve greenhouse gas emissions from sources or categories of sources in order to achieve the statewide greenhouse gas emissions limits and sublimits required by this chapter.

SECTION 2.  Chapter 29 of the General Laws, as so appearing, is hereby amended by adding the following 3 sections:-

Section 2MMMMM. There shall be established and set up on the books of the commonwealth a separate fund, to be known as the Green Commercial Building Fund, to be operated by the Massachusetts Clean Energy Center. Monies generated by the adoption of market-based compliance mechanisms or other fees and exactions related to commercial and industrial heating and cooling shall be distributed to said Fund in an amount or proportion determined by the secretary of energy and environmental affairs and used to further the achievement of the limits and sublimits adopted pursuant to Chapter 21N of the General Laws related to commercial and industrial heating and cooling. There shall also be credited to the fund any appropriations made by the legislature and any investment income earned on assets of the fund. Amounts remaining in the fund at the end of the fiscal year shall not revert to the General Fund and shall be available for expenditure in succeeding fiscal years.

Section 2NNNNN.  There shall be established and set up on the books of the commonwealth a separate fund, to be known as the Green Industrial Fund, to be operated by the Massachusetts Clean Energy Center. Monies generated by the adoption of market-based compliance mechanisms or other fees and exactions related to industrial processes shall be distributed to said Fund in an amount or proportion determined by the secretary of energy and environmental affairs and used to further the achievement of the limits and sublimits adopted pursuant to Chapter 21N of the General Laws related to industrial processes. There shall also be credited to the fund any appropriations made by the legislature and any investment income earned on assets of the fund. Amounts remaining in the fund at the end of the fiscal year shall not revert to the General Fund and shall be available for expenditure in succeeding fiscal years.

Section 2OOOOO. There shall be established and set up on the books of the commonwealth a separate fund, to be known as the Green Residential Building Fund, to be operated by the Massachusetts Clean Energy Center. Monies generated by the adoption of market-based compliance mechanisms or other fees and exactions related to residential buildings shall be distributed to said Fund in an amount or proportion determined by the secretary of energy and environmental affairs and used to further the achievement of the limits and sublimits adopted pursuant to Chapter 21N of the General Laws related to residential heating and cooling. There shall also be credited to the fund any appropriations made by the legislature and any investment income earned on assets of the fund. Amounts remaining in the fund at the end of the fiscal year shall not revert to the General Fund and shall be available for expenditure in succeeding fiscal years.