Environmental activists are hoping Oregon lawmakers will act this session to put the third and what could be the most important plank of the state's climate change action plan in place: hard limits on greenhouse emissions and a market-based price to enforce them.
Legislators passed the contentious low-carbon fuel standard in 2015, which aims to reduce emissions from transportation fuels over time. Last year, they muscled through the Oregon Clean Electricity Plan, which will prohibit electricity from coal-fired plants and require utilities to meet half their customer demand with renewable energy by 2040.
Backers see the so-called carbon cap and invest program as a means to backstop those bills and apply the emissions caps to a broader set of companies and industrial facilities.
"These work as a suite of policies, but cap and trade is the rubber band," said Sheldon Zakreski, director of carbon compliance at the Climate Trust.
Sen. Lee Beyer, D-Springfield, has introduced a new version of carbon cap bill championed last year by former Sen. Chris Edwards. That legislation never got a vote, but Sen. Michael Dembrow, D-Portland and chair of the Senate Environment and Natural Resources Committee, says he's very supportive.
"We will definitely be working on it this session," he said. "I know that there will be other proposals out there related to carbon pricing, and elements of them may end up incorporated into this one."
Last year, the legislature asked the Department of Environmental Quality to study whether Oregon should take a market-based approach to reducing greenhouse gas emissions. The agency recently released a draft of that study, which found that a carbon cap and trade system would offer a flexible, cost effective mechanism for assuring greenhouse gas reductions and that the effects on the state economy would likely be small.
It's a complicated and controversial concept, however, and is landing at a time when lawmakers are trying to pass an expensive transportation package and backfill a $1.7 billion budget deficit. It is likely to face heavy pushback from utilities and manufacturers who say it will put Oregon at an economic disadvantage.
But advocates insist there's no time to waste. Oregon already is falling behind on the carbon reduction goals the legislature set in 2007. Projections show it's unlikely to meet its 2020 goal, and at the current trajectory, will fall well short of long-term goals.
Meanwhile, they see the incoming Trump administration preparing to reverse federal climate policies and contend it's imperative for states to act.
"What we've seen in the last 10 years is a verbal commitment without enforceable limits. It's time to get serious about this," said Andrea Durbin, executive director of the Oregon Environmental Council. "Doubling down on renewables was an important part of the state's strategy on climate change but doesn't replace the need for enforceable limits."
Senate Bill 557 would repeal the state's existing emissions goals, replacing them with a new goal for 2025 and hard caps for 2035 and 2050. In 2050, emissions of carbon dioxide would be capped at least 75 percent below 1990 levels.
To force compliance, each facility or company emitting more than 25,000 metric tons of carbon dioxide a year would be required to buy allowances from the state to cover each metric ton of emissions, starting in 2021. The state would set a floor price for the allowances, and gradually ratchet down the number auctioned each year - reducing supply and increasing cost.
As the price of allowances increase, so would incentive to reduce emissions. Companies that didn't comply would be penalized.
Those are the basics. But it gets a lot more complicated. The state would issue some quantity of free allowances to electric utilities and "trade exposed" industries. Proceeds from the sale of those allowances would go toward reducing rate impacts for utilities' low-income or industrial customers, or protecting heavy energy users from costs that might force them to move to another state - called leakage.
According to the Department of Environmental Quality, the program could affect about 100 companies or facilities in the state, ranging from fuel suppliers and electric utilities to high-tech manufacturers and paper mills.
Based on the state's current emissions levels and the price of allowances in California's cap and trade system, Oregon's allowance auctions could generate in excess of $300 million annually, the majority of it from transportation fuels.
That's where the "invest" part comes in.
The bill would set up several funds to recycle allowance proceeds into carbon reduction efforts. Money generated from the transportation sector would have to fund transportation-related projects, so it would go into a climate investments account within the state highway fund. Money from other industries would go into two other accounts and be distributed in grants for climate resilience measures, disadvantaged communities and renewable energy projects.
The bill establishes a slew of committees, including a new greenhouse gas cap oversight committee, a 25-member state commission on climate change, a climate change research institute at Oregon State University, and an advisory committee on climate investments in disadvantaged communities.
If the bill makes it out of committee, it is likely to face heavy opposition from big energy producers and users. The state's largest electric utilities, for instance, backed last year's "coal to clean bill," which provides the opportunity for them to make big new investments in renewable energy. But they do not support more carbon legislation.
"We don't think we should layer on more regulations that stand to increase costs without actually resulting in any further carbon reductions from what we've committed to do," said Steve Corson, a spokesman for PGE.
But last year's coal-to-clean bill didn't actually commit electric utilities to specific greenhouse gas reductions, and environmental groups are worried they will replace the coal plants they plan to shutter with new natural gas-fired plants. PGE, for instance, is contemplating building two new gas plants at the site of its coal plant in Boardman, which will close in 2020.
"You need a wraparound carbon cap or carbon tax to make these decisions more consistently," said Angus Duncan, chair of Oregon's Global Warming Commission. The clean electricity plan passed "left open the whole question of whether they'd be replacing Boardman with a baseload gas plant."
Gov. Kate Brown was a supporter of both the coal to clean bill and the low carbon fuels standard. She said at her swearing-in this week that Oregon would continue to move forward with actions on climate change under her leadership. She wasn't specific, however, and her office declined to say whether she supported a carbon cap or a carbon tax.
Beyer said Friday he hadn't spoken in depth with legislative leaders about the bill but planned to be a strong advocate on the topic this session.
"I think it is one of the most pressing problems facing society and Oregon's economy long-term," he said. "Probably more important now since it appears the Federal Government won't be doing much."
- Ted Sickinger
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