The Clean Fuels bill mandates that fuels sold for transportation must have reduced carbon intensity, so that when the fuels are burned they create less GHG emissions. It follows similar laws already in place in California (since 2011), Oregon (2016) and British Columbia (2010), which call for the carbon intensity of fuels to be decreased slowly over time. If vendors don't procure enough low-carbon fuels to sell, then they must purchase allowances for the resulting pollution in a Cap and Trade market. The government derives revenue from selling the allowances and uses it to fund greenhouse gas reductions.
The Clean Fuels bill was originally proposed by Governor Inslee, and it has passed the Washington House of Representatives, but has not managed to get through the Senate due to opposition from Senators concerned about the potential for an increase in gasoline prices. The arguments in favor are that it will: (1) help Washington meet its climate goals; (2) create a market in the state for bio-fuels, which currently are shipped to Oregon or California where there is a market. Further, some clean fuels will be necessary in 2030 and later even if we able to rapidly switch to electric vehicles for transportation; in a rapid adoption scenario, 73% of vehicles on the road in 2030 will be internal combustion (Washington Clean Energy Strategy, p.33). The argument against clean fuels is that it will raise the price the price of gasoline without accruing any discernible benefit, unlike a gas tax which which generates revenue for the state transportation budget for roads, bridges and ferries. There is a lot of debate over what the effect has been on prices in Oregon and California so far, and what it will be over time as the standard ramps up. So far the impact on prices in Oregon and California has been small , because the price of gasoline is determined by many more factors than just the cost to the producers. According to the Governor's office, a Clean Fuels bill could reduce the state's greenhouse gas emissions by 3.4 million metric tons per year by 2035, which is the equivalent of taking roughly one in five vehicles off the road.
The Puget Sound Air Quality Council held hearings in Jan. 2020 on the possibility of a Puget Sound regional Clean Fuels standard, but declined to take action.