Author: Kristin Eberhard
(@KristinEberhard) on February 16, 2016 at 6:30 am
In the short 2016 legislative session, Oregon lawmakers have a chance to pass the Healthy Climate Act, a bill that would enforce the climate pollution reduction goals Oregon legislators passed nearly a decade ago. By enforcing limits on pollution and “cashing in our carbon,” as we like to think of it, Oregon can seize the opportunity to transition oﬀ outdated fuels, build a thriving clean energy economy, and generate broadly shared prosperity and local jobs while protecting our families and safeguarding our climate.
A little background…
Why does Oregon need to limit greenhouse gas pollution?
Pollution imposes major costs on Oregonians, from hospital expenses that lung diseases like asthma foist on families and the healthcare system to the losses in life and property that drought and wildﬁre inﬂict on farmers and communities. Burning fossil fuels spews pollutants that form a heat-trapping blanket in our atmosphere, warming the planet. A modest rise in global temperatures could lead to a 54 percent increase in area burned by wildﬁre in Western states by 2050. The pollution also seeps into our oceans, causing acidiﬁcation—a sort of “osteoporosis of the sea”—that is already harming Oregon’s shellﬁsh industry. If we don’t act now, climate pollution will cost Oregonians billions of dollars in healthcare outlays, vanished salmon and seafood, and recreation industry losses.
Where does Oregon’s greenhouse gas pollution come from?
Cars and trucks churn out the biggest chunk of Oregon’s climate pollution, followed by electricity and natural gas utilities and industrial facilities. Together, those sectors account for about 85 percent of Oregon’s emissions— around 52 million metric tons of carbon dioxide equivalent (MMT CO2e), out of a statewide total of 61 MMT.
So, what would the Healthy Climate Act do?
The Healthy Climate Act would put an enforceable cap on carbon pollution from the approximately 70 largest polluters in the transportation, electricity, natural gas, and industrial sectors. The state would enforce the cap by issuing a limited number of allowances—one allowance per ton of emissions allowed under the cap. Then, the state would cash in for us! Speciﬁcally, it would invest in our families and communities by funding road maintenance, electricity bill assistance for low-income households and small business, and climate-smart projects like eﬃciency and solar in the most disadvantaged and economically-distressed communities. More detail on that in a bit.
1. It would enforce a cap and collect some dough.
Periodically, large businesses will have to verify to the state that they hold enough allowances to match their emissions. Each year, as the cap tightens, the state issues fewer allowances.
Most regulated businesses—fuel reﬁners, power plants, utilities, and large industrial facilities—will buy their allowances in a state-run auction. To prevent emissions and jobs from “leaking” out of Oregon, the state will give some allowances for free to factories that could be undercut by out-of-state competitors that still pollute for free (these entities are known as “energy-intensive, trade- exposed,” or “EITE,” for those who love jargon). Rather than continuing to emit the same amount and pay for the same amount of allowances each year, businesses will seek the lowest-cost ways of reducing pollution from their operations.
The hard cap requires slow and steady emissions reductions: 20 percent below 1990 levels by 2025, 45 percent by 2035, and 75 percent by 2050. The declining cap walks pollution down the stairs, gradually ushering the economy away from fossil fuels and towards clean energy.
2. It would incentivize clean energy investments and infrastructure in Oregon
Without pollution limits, Oregon ratepayer dollars might ﬂow to propping up old coal plants. A price on pollution would instead make new solar and wind facilities, energy eﬃciency investments, improved grid management, demand response, and electric vehicles more enticing to utility planners.
Similarly, without pollution limits and with low prices at the pump, Oregon cities, counties, and businesses might continue to support infrastructure for gas-powered cars. As the supply of allowances slowly decreases, though, the price of each allowance will rise, and Oregonians will invest in eﬃciency, clean energy, and climate-friendly transportation options.
In addition to diverting existing investments, an Oregon pollution price will also attract new investments from private, clean-tech, venture capitalists who see the state as a welcoming place. California has the strongest pollution price in the United States, and in 2014, it attracted the majority of all US clean-tech venture capital—$5.7 billion (up from $2 billion in 2005, the year before the California legislature passed the state’s climate action law, AB 32).
3. It would spend that carbon cash on a climate-smart
Fuel reﬁneries, power plants, and factories would all pay for an allowance for every ton they emit. Assuming the auction price for allowances in 2020—the ﬁrst year of the Oregon program—is $18 (a bit higher than the current Western Climate Initiative auction price of $13 per ton), Oregon’s 51 million allowances would be worth around $900 million in 2020.
The Department of Environmental Quality still needs to do more analysis to calculate exact numbers, for example DEQ must identify how much assistance industrial facilities need to prevent them from moving out of state, but the bill assigns the allowance value roughly as follows:
- Approximately $430 million in revenue from allowances auctioned to the transportation sector will be deposited into the Climate Investments subaccount in the State Highway Trust Fund, to be invested in projects that help reduce climate emissions (local road maintenance can cut pollution). At least 20 percent of this money must be used for projects that are geographically located in disadvantaged communities, and an additional 20 percent for projects that beneﬁt those communities.
- More than $100 million in revenue from auctioned allowances will be deposited in the Oregon Climate Investments Fund to be invested in projects that contribute to the reduction of greenhouse gas pollution and the transition to a clean-energy economy. At least 40 percent of the money must be invested in projects that are geographically located in disadvantaged communities, and at least 40 percent must be invested in projects geographically located in economically distressed areas, particularly for job training.
- Around $20 million in revenue from auctioned allowances will be deposited in a Just Transition Fund to provide job training and other beneﬁts to workers who are adversely aﬀected by climate change or climate policies.
- A little over $300 million worth of allowances will be given to electricity and natural gas utilities, with the requirement that the utilities sell the allowances back into the state auction and use the revenue to help their customers—especially low- income households and small businesses— through bill assistance and climate credits. Climate credits would be like a tiny dividend—a ﬂat amount that each household would receive on its bill a few times a year. Because low-income households tend to spend less on energy than higher-income households, but they would both get the same climate credit, the credit is progressive.
- Around $60 million worth of allowances might be given to Oregon industries that are both energy-intensive and trade- exposed to ensure they remain competitive with out-of-state competitors that are not paying a pollution price.
- Around $10 million from auctioned allowances will be used to create a reserve of allowances to prevent price volatility and to provide funds to encourage voluntary investments in renewable energy.
Okay, but how much will this cost Oregon?
By holding polluters accountable, Oregon would not spend any more money than it does now; it would just spend the money on investments—low-cost clean energy, job training, assistance for low-income families and communities, road maintenance—that are more valuable and more productive than fossil fuels. Nothing against 20th-century fossil fuels (they got our civilization to where it is today, and we are grateful), but it’s the 21st century, and there are better options.
Oregonians will continue to pay for energy one way or the other, but the Beaver State has a choice about where its energy dollars should go. The money Oregonians currently spend on out-of-state fossil fuels could instead go toward clean energy, more local jobs, and improved public health. At last count, Oregonians already spend twice as much of their hard-earned money on fossil fuels as they do on K-12 education.
In short, consider the options. Oregonians can:
- Continue to pay directly for out-of-state fossil fuels and also pay indirectly for the hospital bills, ﬁreﬁghters, lost ﬁshing jobs, and lost snowpack that pollution causes, or
- Exchange slightly higher prices for polluting fuels like oil and coal for local investments that are better for Oregon’s families and communities. We hold the biggest polluters accountable, we keep more energy dollars in the state, and we transition to abundant, local, clean resources that create more local jobs, fund better maintained roads, and deliver higher quality of
Oregon buys most of its coal and oil from out of state. Boardman, the only in-state coal plant, is shutting down in 2020, and Oregon has no oil reﬁneries. So every time an Oregonian buys a gallon of gas, an out-of-state oil company proﬁts.
Meanwhile, each dollar invested in clean energy creates two to seven times as many jobs as spending that dollar on fossil fuels, and what’s more, Oregon reaps a double- beneﬁt from transitioning to more eﬃcient buildings powered by solar delivered over a smart grid because clean energy jobs are more likely to be local. By shifting to low-cost cleaner resources, Oregon keeps more hard- earned dollars at home creating local jobs.
Portland State University’s modeling shows that charging a price for pollution and re-investing the revenue in Oregon will create jobs and increase wages across the state. So making fossil fuel prices honestly reﬂect their full costs won’t damage the economy; it will be good for Oregon.
Is this really a good idea? Who says?
Ten American states and three Canadian provinces have already been holding polluters accountable with similar pricing systems for years, and two more provinces will soon join them. Pollution pricing programs have helped states and provinces not only de-board from the fossil fuel rollercoaster, but also attract clean energy investments, create local jobs and beneﬁts, and grow their economies. For example, the nine northeast “RGGI” states spent most of their allowance revenue on energy eﬃciency, creating 16,000 jobs in the program’s ﬁrst few years.
In 2015, 39 countries and 23 cities, states, and provinces were already using pricing mechanisms to limit greenhouse gas pollution. And by the end of 2016, nearly one-quarter of all climate pollution in the world will have a price tag attached. That’s a club we want to join. The Oregon Healthy Climate Act helps us get there.
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