Oregon’s new carbon cap program takes shape,
but much debate remains
farmers and others protest in front of the Oregon Capitol on
June 26, 2019, to oppose a greenhouse gas reduction plan they
say would cripple the economy and way of life for rural
Oregonians. Plans to implement Gov. Kate Brown’s executive order
for state agencies to regulate greenhouse gas emissions now are
taking shape during the 2021 Legislature.
SALEM — After Republicans bolted from the 2020 legislative
session and once again killed Oregon’s controversial bill to
regulate greenhouse gas emissions, a frustrated Gov. Kate
Brown issued an executive order for state agencies to draft
carbon reduction rules that would achieve the same goals.
Namely, to reduce Oregon’s greenhouse
gas emissions by 45% below 1990 levels by 2035 and 80% below
those levels by 2050.
Those plans are now taking shape, and
the heavy lifting will come from the Department of
Environmental Quality, which has the authority to regulate
emissions from transportation fuels, industry, and electric
and natural gas utilities. The Environmental Quality
Commission appointed a 34-member advisory committee to help
hash out the rules with a goal to have a program up and
running by the beginning of next year.
It’s a potentially unwieldy panel with
representation from environmental and community groups,
affected industries and companies, tribes and local
government. Regulated businesses are already raising
concerns about the costs of complying with the program.
Environmental groups, meanwhile, point to the industry-heavy
makeup of the advisory council. They’re concerned that
electric utilities and some transportation fuel providers
will escape any regulation under the program, and that it
could allow industry to pollute at higher levels for longer.
“The hope is that DEQ will be able to
course correct and get this plan on track to be consistent
with best available science,” said Zach Baker, Oregon
program manager for Climate Solutions, one of the
environmental groups represented on the panel. The advisory
group “has through June to hammer out the details and land
the plane, and the more exemptions we need to talk about, it
starts to raise concerns about where this plane will
It’s early days yet, but it’s clear
this will be a simpler, stripped-down version of the program
that ultimately blew up two sessions of the Legislature.
Gone are the state auctions of emissions allowances to
polluters, and the hundreds of millions of dollars they
would have generated to reinvest in carbon reduction,
adaptation and social justice programs.
In this program, DEQ would annually
issue pollution permits to entities whose carbon emissions
exceed an established threshold, then gradually ratchet down
those annual allowances to force businesses to clean up
their act. Some trading of those permits will be allowed,
and it’s likely that companies will be able to meet some
portion of their obligation by investing in projects that
reduce emissions, say electric buses, as an alternative
reducing their own.
Richard Whitman, DEQ’s director, says
that in many ways, it’s a cleaner approach, not subject to
the same kind of lobbying and horse trading that repeatedly
watered down lawmakers’ proposal. He says the Environmental
Quality Commission, a five-member citizen’s panel, has the
ultimate authority to set the rules.
“We’re doing this much more
intentionally than the Legislature was able to do,” he said.
“This is not a vote. We are not looking for a decision from
the (advisory committee). They’re on there to give us their
expertise and opinions.”
But this process will hardly be
divorced from politics. Business groups are already suing
the state to overturn the governor’s executive order, which
may provide them with negotiating leverage. All sides will
be lobbying the Environmental Quality Commission on numerous
issues, including who gets to fill open positions on the
Whitman acknowledges that the process
makes some groups uncomfortable. “There’s going to be more
noise going forward.”
A big gap in this program, one that
DEQ acknowledges up front, is that greenhouse emissions from
electric utilities would not be regulated. It’s a big hole,
as emissions of carbon dioxide and equivalents from burning
natural gas for electricity accounts for about half of
emissions from stationary sources statewide — most of it
from plants owned by Portland General Electric.
The problem is that a big chunk of
Oregon’s electricity supply still comes from out of state
sources, much of it from coal plants, and DEQ only has the
authority to regulate in-state emissions. If it were to
impose emission limits on in-state gas plants, utilities
might simply import more power from out of state, much of it
dirtier coal, a problem referred to as leakage.
There are bills in the Legislature,
such as House Bill 2995, that would force electric utilities
to supply customers with 100% clean electricity by 2035 and
accelerate the existing deadline to transition off coal from
2030 to 2025. That’s an aggressive goal, and may be
particularly onerous for PacifiCorp, which still gets a
significant chunk of its electricity supply from coal, and
is a co-owner of a gas fired power plant in Oregon.
PGE, meanwhile has an existing “net
zero” plan that pledges to reduce its greenhouse emissions
by 80% by 2030, and an aspirational goal for zero greenhouse
gas emissions by 2040. That glidepath is more aggressive
than the statewide carbon reduction goals, though it remains
to be seen if its achievable. The company still has an
ownership stake in a Montana coal plant and operates four of
the seven big gas fired power plants in the state.
It’s not clear if any of the proposed
legislation will pass, which would leave both imported and
in-state electricity exempt from emission limits.
“Ideally all electricity emissions
would be covered,” Baker said, but the plan should at least
cover new plants in Oregon, making it harder to site them
here. “We know from the climate math and science that we
can’t be building news gas plants.”
Whitman agrees that deep
decarbonization of the electrical grid is necessary for the
state to hits its targets. But “it’s not something we can do
without legislation. We have to work within our existing
Natural gas and petroleum
For natural gas companies in
particular, the program may pose an existential threat to
their business model as it incentivizes commercial and
residential customers to move away from gas heating and
cooking, and pushes gas utilities and suppliers to
transition faster to so-called renewable natural gas and
Nels Johnson, government affairs
manager for NW Natural, says the company has a plan to do
just that by 2050. It was on board with the last version of
the cap and invest legislation, and felt the Legislature was
the appropriate venue to work out the details of the
The utility’s chief concern with the
new program is the cost of complying, in part because
Oregon’s program won’t be linked to California’s, as it
would have been under the cap and invest program. It also
won’t be generating huge sums of money every year to invest
in carbon reduction projects within Oregon’s borders. Both
would have generated a larger supply of alternative projects
to invest in, and cheaper carbon offsets that could be used
to satisfy the state’s emission reduction targets while it
makes that transition.
The DEQ is considering scenarios that
would allow companies to meet up to a quarter of their
pollution reduction obligations by investing in such
projects. But DEQ wants them to deliver benefits on the
ground in Oregon, such as electric car charging
infrastructure, electric buses, or high efficiency heat
pumps for low-income residents. Johnson said the supply of
such projects is likely to be far more limited in Oregon,
and the offsets more expensive.
“Do we want to do it the expensive way
or cost-effective way,” Johnson asked. “Our hope is that the
EQC will says let’s do this in a cost-effective way, and
that’s the lens they’ll look at these rules through.”
Brad Reed, a spokesman for Renew
Oregon, says using offsets from alternative projects should
be strictly limited unless companies can prove the projects
are really eliminating greenhouse emissions.
“That’s the point of the whole
program,” he said. “The fear is that companies are allowed
to continue business as usual by trading things around.
Overall, the future has to be primarily gas free to have any
shot at meeting these goals.”
The majority of Oregon’s greenhouse
emissions come from the transportation sector. Fuel
suppliers and truckers are among those suing the state to
overturn the governor’s executive order as unconstitutional.
They are also members of the rulemaking advisory committee.
One open question is how high the
minimum emission threshold will be set for regulating fuel
companies. Under the cap and invest legislation, it was all
fuel suppliers with annual emissions of carbon dioxide
equivalents greater than 25,000 metric tons.
Under one scenario the DEQ is
considering, the level could be as high as 300,000 metric
tons. That would capture large fuel suppliers, and 86% of
related emissions, and make the program easier to
administer. But environmental groups say that would still
let some 80 companies and 14% of the emissions off the hook,
and would open up the possibility of oil companies gaming
the system by rejiggering their distribution.
Whitman insists that won’t be the
case, though he says the agency needs to be mindful about
the equity issues of possible fuel price increases and how
quickly Oregonians will adopt electric cars.
“What we’re likely to propose to the
(Environmental Quality Commission) will cover almost all
transportation fuels,” he said. “There’s no plan to have any
big exemption for fuel suppliers.”
far, how fast
Another area of contention is where
the commission will set the overall and interim emission
reduction targets; in effect, how fast and how far it lowers
the boom on greenhouse pollution. The science is clear:
Reductions need to come quickly to avoid the worst impacts
of global warming.
The DEQ is modeling three different
scenarios, one that matches the targets in the governor’s
executive order, one more aggressive and one less. But each
of those scenarios also tweaks which sectors would be
regulated or exempted, whether entities could trade their
emission permits, and how much of their compliance
obligation could be satisfied by investing in alternative
Environmental groups are adamant: The
caps should be as aggressive as possible, but clearly no
weaker than the goals the governor has already laid out.
Kristen Sheeran, the governor’s
climate and energy carbon policy adviser, says the goals in
the governor’s executive order were just that, goalposts for
emission reductions across Oregon’s economy. No one program,
she said, was intended to carry the whole load.
State agencies and commissions are
working on rules to achieve those targets. The state’s
renewable portfolio standard is pushing utilities to
transition to wind and solar. Its clean fuels program is
generating emission reductions in the transportation sector.
She said all those measures will act in tandem with DEQ’s
carbon reduction plan.
“It’s a toolbox approach,” she said.
“DEQ is working on one of those tools.”
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