After nearly a decade of work, Oregon’s high-profile cap-and-invest bill appears to be poised for passage. Last week, lawmakers released what is looking to be the final, 181-page version of the highly anticipated legislation. The new bill includes 84 amendments and incorporates months of feedback from program experts, climate advocates, industry interests, and the general public.
Remind me — what’s Oregon cap-and-invest all about?
The cap-and-invest bill, known as Clean Energy Jobs (HB 2020), will follow California’s model in requiring the state’s largest polluters to purchase allowances for every ton of carbon they emit. The overall cap on greenhouse gas emissions will become more stringent each year, reducing emissions by 45% below 1990 levels by 2035 and by 80% below 1990 levels by 2050. In order to achieve these reductions, the number of allowances available to compliance entities will consistently decline.
Revenue generated by allowance purchases will be invested in a myriad of climate initiatives, such as renewable energy, energy efficiency, climate resilience, and climate adaptation measures. Targeted investments will be made to assist particularly vulnerable groups, such as rural and low-income communities, communities of color, Indian tribes, and displaced fossil fuel workers. The state is expected to bring in more than $550 million in 2021 through the sale of emission allowances, and economic analysts predict the program will create 50,000 jobs by 2050.
Clean Energy Jobs has been in the works for years now, and is endorsed by key Democratic officials like Gov. Kate Brown, Senate President Peter Courtney and House Speaker Tina Kotek. At the same time, Oregon Republicans have opposed its passage, voicing concerns about regulated industries potentially moving out of state in the face of tax hikes.
Renew Oregon — a clean energy coalition comprised hundreds of environmental, business, faith, healthcare, and community groups — is the main advocacy group behind the legislation, and has served a critical role in pushing the program forward.
So, what’s new this time around?
The cap-and-invest bill, initially introduced in February, has already been revised once this session. The first round of amendments, released in late March, unveiled key changes like rebates for rural Oregonians, less exemptions for polluters, and a more complex emission allocation scheme. Last week’s version revealed several more amendments that lawmakers hope will help propel the bill toward passage. These include:
1. New, Diverse Governance Bodies
The new legislation establishes the creation of three new oversight bodies: Oregon Climate Board, Just Transition Advisory Committee, and Citizens Advisory Committee. These committees will be responsible for program implementation and “must represent the geographic, socioeconomic, racial and cultural diversity” of Oregon.
The Oregon Climate Board must include:
- One tribal member
- Two energy-sector experts
- One environmentalist
- One economist or conservation finance expert
- One sustainable transportation expert
- Two at-large members
The Citizens’ Advisory Committee must be comprised of one member to represent each of the following:
- Urban environmental justice communities
- Rural environmental justice communities
- Indian tribes
- Agriculture or forestry
- Compliance entities
- Clean energy industry
- Local governments
- Environmental or conservation interests
- Oregon public university scientists
- Home weatherization interests
- Public health equity
2. Concessions for natural gas utilities
Natural gas utilities will be allocated emission allowances according to the following:
- 15% of their emission allowances will be provided for free by the government.
- 25% of allowances will be purchased in auctions, a figure that will rise annually as the cap decreases. Auction revenue will go toward the climate investment fund.
- 60% of allowances will be “consigned”, meaning that they will initially be given to utilities for free, but utilities won’t be able to keep them. Instead, they will have to sell them to the market, and use proceeds earned by these sales to directly benefit ratepayers, by doing things like making homes more energy efficient providing bill rebates.
Natural gas companies had lobbied for 100% free allowances in the program’s first year, but lawmakers wanted revenue from the sale of consigned allowances to help mitigate price impacts on consumers.
“In a perfect world, we wouldn’t need this consignment, but based on where the utilities were lobbying from, it’s a pretty good outcome,” said Brad Reed, the communications director for Renew Oregon.
Some utilities, such as NW Natural, largely accepted this amendment: “We appreciate the work that’s gone on to improve the bill,” said Bill Edmonds, NW Natural’s director of environmental policy and sustainability. “This is an improvement.”
Additionally, the methane gas burning power plant Hermiston Generating Project, which was previously exempt from regulation, will now be covered by the emissions cap.
3. Guaranteed investment in “natural and working” lands
The amended bill dedicates 20% of proceeds to be the agriculture and forest sectors, such as sustainable forest management to prevent wildfire, wetland restoration to prevent drought, improved agricultural practices to increase soil carbon sequestration, sea level rise preparation, and many more.
4. Improved process for “best available technology” benchmarks
Energy-intensive, trade exposed industries (EITEIs), like glass, steel, pulp and paper, and aluminum, are often seen as vulnerable to out-of-state competition. With this concern in mind, lawmakers added a provision that provides 95% free emission allowances for industrial companies that demonstrate they are using “best available technology” for emission reductions in their facilities. These best available technology benchmarks will be updated every 9 years, beginning in 2024, so that facilities can invest in updated equipment accordingly.
What happens next?
Over the past few months, the bill has undergone public hearings across the state, most recently being heard by the Joint Committee on Carbon Reduction on Monday, May 13th.
Republican lawmakers, holding a super-minority in both the state House and Senate, boycotted the Capitol for four days last week in protest of a $1-billion-a-year business tax package that will raise money for Oregon’s public schools. On Monday, Democrats agreed to squelch bills on gun control and vaccines in exchange for an end to the GOP walkout. The cap-and-invest legislation, however, remains untouched, despite Republicans initially including it in their priority list of bills to thwart.
Clean Energy Jobs still sits in the Joint Committee on Carbon Reduction, where it awaits a committee vote. It could move to the Ways and Means committee as early as today, and then on to floor votes in the House and Senate. The legislative session is set to adjourn on June 30th, so lawmakers have about six weeks to push forward the program.
Reed praised the current form of the legislation: “An economy-wide cap and price on fossil fuel pollution and hundreds of millions of dollars per year of transformational investments in a clean energy economy across sectors from electricity to buildings to transportation is a game changer for Oregon and for climate action on a national scale,” he wrote via email.