Cap-and-invest

Carbon Emission Bill on Center Stage in February Session

Oregon lawmakers will debate a cap-and-invest program at the short legislative session beginning in February that could generate as much as $700 million in new annual revenue to invest in projects statewide to reduce carbon emissions, but opponents warn also could drive up fuel prices, hurt family farmers and disproportionately harm rural residents.

Oregon lawmakers will debate a cap-and-invest program at the short legislative session beginning in February that could generate as much as $700 million in new annual revenue to invest in projects statewide to reduce carbon emissions, but opponents warn also could drive up fuel prices, hurt family farmers and disproportionately harm rural residents.

As Oregonians ponder how to vote on Measure 101 by January 23, Oregon lawmakers are sharpening their arguments for and against legislation in the 2018 session to cap industrial carbon emissions.

Defeat of Measure 101, which contains $320 million in fees on hospitals and health insurers to sustain Oregon’s Medicaid program, could throw a wrench into the short, six-week legislative session that starts in February. However, regardless of the Measure 101 vote, what supporters call the Clean Energy Jobs Act is likely to be a center-stage issue.

The Oregon proposal, developed through a work group and championed by Senator Michael Dembrow of Portland and Ken Helm of Beaverton, both Democrats, is modeled after an existing cap-and-invest program in California.

If enacted into law here, Oregon businesses would be given a limit for their carbon emissions. The estimated 100 Oregon businesses that are likely to exceed the proposed limit would be required to buy market-priced allowances. The allowances would be sold at a North American auction and the revenue generated would be invested in Oregon projects intended to slow climate change.

Backers of the idea say it could generate as much as $700 million annually, providing funding for electric vehicles, residential solar panels, improved bike lanes and utility bill assistance for low-income and elderly Oregonians.

Leading Oregon business and farm groups aren’t so enthusiastic. They warn cap-and-invest will result in higher energy bills, discourage business growth in Oregon, hurt family farm owners and disproportionately harm rural residents. Mark Johnson, a former GOP legislator who now heads Oregon Business & Industry, worries there isn’t enough time in a short session to negotiate an acceptable compromise on such a complex issue.

Similar legislation has been debated in Oregon in previous sessions. This time there seems to be stronger, more unified political support, including from Governor Brown, that might push it through in the 2018 short session in which Democrats control both the House and Senate.

The final version of the legislation is still in flux and isn’t scheduled for public release until next week. Dembrow and Helm are working on ways to mitigate concerns, such as earmarking 20 percent of cap-and-invest proceeds for projects in rural Oregon.

There are strong coalitions working both for and against the proposed legislation. Renew Oregon touts the legislation’s ability to drive clean energy job growth in Oregon. The legislation is also supported by the Oregon Business Alliance for Climate. The campaign against the legislation is organized under the banner of Oregonians for Balanced Climate Policy, which has been around since at least the 2009 session opposing what was then called the Green Jobs Act.

Lawmakers Divide Up Work on Cap-and-Invest Legislation

Majority Democrats have set up work groups with the ambitious aim of bringing a cap-and-invest program to the short 2018 Oregon legislative session that starts in February.

Majority Democrats have set up work groups with the ambitious aim of bringing a cap-and-invest program to the short 2018 Oregon legislative session that starts in February.

Oregon legislative Democrats announced this week formation of a series of work groups tasked with creating a cap-and-invest program in Oregon. The work groups stem from a series of hearings near the end of the 2017 legislative session when Senate Bill 1070 was unveiled. While the bill didn’t receive a committee vote, it laid the groundwork for what is expected to be the front-and-center issue of the 2018 session.

At a joint hearing of the Senate Environment and Natural Resources Committee and the House Energy and Environment Committee, chairs Senator Michael Dembrow and Rep. Ken Helm announced four subcommittees that will hold hearings around the state this fall:

  • Agriculture, Forest, Fisheries, Rural Communities and Tribes (chaired by Helm);
  • Utilities and Transportation (chaired by Senator Lee Beyer);
  • Regulated Entities (chaired by Dembrow); and
  • Environmental Justice and Just Transition (co-chaired by Reps. Diego Hernandez and Pam Marsh).

The stated goal of these subcommittees is to redraft SB 1070 for the 2018 session.

A cap-and-invest program is an evolution of a cap-and-trade system, which sets a hard cap on greenhouse gas (GHG) emissions. The regulating entity then sells permits that companies can purchase, allowing them to emit a certain amount of GHG. For example, if a state allows 10 million tons of greenhouse gas emissions annually, the state would sell 10 million one-ton permits, which companies could buy in a marketplace.

Cap-and-invest takes process a step forward, requiring the state to use the funds generated by the sale of permits to fund certain programs. These programs are usually dedicated to reducing GHG emissions.

Both cap-and-invest and a carbon tax set a price that companies pay for GHG emissions. While cap-and-invest sets an emissions limit and allows the market to set the price for the credits, a carbon tax simply sets a price for GHG emissions while neglecting to cap emissions. The cap-and-invest model has several advantages, incuding emission reduction certainty, and revenue to invest in new programs.

Dembrow and Helm are modeling their legislation after a similar program in California. The program was renewed with a bipartisan vote and recently endorsed by the California Chamber of Commerce. According to Dembrow, the program would allow the state to meet its emission reductions goal by 2050.

The work groups – consisting of legislators, advocates and industry representatives – met for the first time last Thursday, with each group meeting for two hours.

In what figures to be a knock-down, drag-out fight during the upcoming session, majority Democrats are driving the process with Republicans in both chambers participating in the opening round of work group meetings. They may have an incentive to participate in crafting of the legislation given that many observers expect Democrats to pick up a seat in both the Senate and House in the 2018 elections, giving them a supermajority in the 2019 session. That would allow Democrats to pass a carbon tax, for example, in the 2019 legislative session without Republican votes.

Democrats are mimicking the process used to sculpt the successful 2017 transportation package – gathering a large group of stakeholders, divide into work groups tackling certain topic areas and crafting legislation that hopefully is bipartisan enough to move through the Capitol and avoid a referral. The inclusion of Republican support, and Republican votes, is key.

However, the transportation package took several years, dozens of statewide meetings and vocal commentary from both parties on the need for investments in Oregon's aging infrastructure prior to a long legislative session where final passage was never guaranteed. The process for cap-and-invest faces a much harder path. A short, one-month legislative session does not provide much room to negotiate or cut deals.

It remains to be seen whether this bill will result in the creation of a large new program in the state, or whether it is simply the start of a longer conversation, but it is one to pay attention to as we move closer to the 2018 short legislative session.

Further information about Dembrow and Helm’s effort can be found here.