Governors' Wind Energy Coalition

After toying with the idea for more than a decade, Oregon may finally be on the verge of putting in place a cap-and-trade system for carbon.

Last week, lawmakers unveiled a bill several years in the making that calls for cutting emissions 45 percent of 1990 levels by 2035 and 80 percent by 2050. The measure would cap emissions beginning in 2021 and give utilities a decade before they have to buy carbon credits. It would also provide a declining number of allowances to trade-exposed industries.

Most importantly, the bill would provide the framework for Oregon to become the first state to link with California’s cap-and-trade system.

“Overall this is extremely exciting. These are appropriately ambitious targets. It puts Oregon on track to be among the leading jurisdictions in the world on climate mitigation,” said Noah Long, who leads the Natural Resources Defense Council’s climate and clean energy program in the Northwest.

Oregon’s past cap-and-trade ambitions have been thwarted by the recession and by the election of President Obama and the resulting shift in greens’ attention toward Washington, D.C.

Advocates of cap and trade thought they had enough support to pass legislation last year. Ultimately, though, they were unable to get a bill across the finish line during the Legislature’s short off-year 30-day session (Climatewire, March 1, 2018).

This year, Gov. Kate Brown (D) and legislative leaders have signaled cap and trade is a priority for the session in Salem.

The new legislation arrives at a critical time on several fronts. Oregon’s emissions rose slightly in 2017 to roughly 65 million metric tons of carbon, according to a recent state report. The state is unlikely to meet its emissions targets for 2020, when carbon levels were supposed to fall to 51 million metric tons.

A legislative win also would breathe new wind into the sails of climate hawks nationwide after a series of high-profile defeats on carbon pricing. Several attempts at a carbon tax in neighboring Washington state have failed in recent years.

If Oregon is successful this year, a new crop of Democratic governors in Colorado, Nevada and New Mexico might take a closer look at cap and trade, said Angus Duncan, president of the Bonneville Environmental Foundation and the head of the Oregon Global Warming Commission.

Just last week, New Mexico Gov. Michelle Lujan Grisham (D) said her state would explore a market-based approach for reducing emissions (Climatewire, Jan. 30).

“We have to show them this is a real opportunity and we have a chance of getting some movement back toward us. We haven’t shown that up to now, but that’s why Oregon is of such strategic importance,” Duncan said. “By the time the 2020 election rolls around, we could have either have or have in training a Western movement that is multistate.”

The extra year may ultimately have been to Oregon’s benefit. The state’s utilities were wary of the 2018 bill. But a provision providing them free carbon allowances through 2030 appears to have softened the opposition.

The move recognizes Oregon’s existing efforts to green the power sector, said state Sen. Michael Dembrow (D), a leading proponent of the legislation. In 2016, Oregon passed a law requiring its utilities to phase out coal-fired power imported from outside the state and boosting its renewable portfolio standard to 50 percent by 2040.

“They are already passing decarbonization costs onto ratepayers, so we didn’t want to double price the ratepayer,” Dembrow said.

A spokesman for PacifiCorp said the Portland-based power company was reviewing the measure. Portland General Electric signaled its approval of the bill.

“It contains and complements existing policies that intend to both drive us and incent us toward carbon reductions while protecting our customers from significant rate impacts that we would expect to see if direct allocation was not included,” said Steve Corson, a Portland General Electric spokesman.

Some hurdles remain. Perhaps the biggest question is whether the proposal constitutes a tax. If it did, the bill would need three-fifths support in the Legislature to pass. Dembrow and others nevertheless expressed confidence that the legislation has been structured in such a way that it would overcome the tax concerns.

This much is clear: Oregon greens likely have never had such a good opportunity at putting a price on carbon. Now, they actually have to pass it.