If Oregon lawmakers are going to pass legislation to address climate change, 2019 could very well be their year.
Such legislation has been floating around the capitol in one form or another for a decade. But it remains deeply controversial because of its complexity, its potential cost to consumers and businesses, and ongoing questions over what works.
Contrary to past efforts, however, most of the forces in Salem are now pulling in the same direction. Consider:
- Gov. Kate Brown, Senate President Peter Courtney and House Speaker Tina Kotek are all committed to passing a climate bill. The Legislature created a Carbon Policy Office early this year and Brown has made climate change policy a centerpiece of her post-election agenda. Courtney and Kotek, meanwhile, took the unprecedented step of co-leading the Joint Interim Committee on Carbon Reduction.
- While the legislation doesn’t require a supermajority vote, Democrats’ expanded majorities in both chambers could help proponents find enough votes to pass it. Several newly elected Democrats actively campaigned on climate change and endorsed the bill.
- A statewide business group, Oregon Business for Climate, was formed late last year to back the legislation, and now counts 100 members, including prominent companies such as Nike and Adidas. Meanwhile the traditional business lobby, which has opposed past versions of the legislation, is in disarray and going into the 2019 session flat footed.
- Lawmakers have signaled their willingness to meet one of Portland General Electric and PacifiCorp’s key demands on the bill, a move designed to win their support for the legislation and remove a powerful barrier.
- Successive reports are painting an increasingly dire picture of the effects and pace of climate change, backing the case for immediate action. The most recent came in this week’s biennial report to the Legislature by the state Global Warming Commission. It suggests that Oregon’s emissions are on the rise again, and that the state is unlikely to meet its emission-reduction goals. Meanwhile, the effects of climate change are already being felt regionally and will intensify.
None of this is to say that passage of the Clean Energy Jobs bill is a lock. It is still a highly complex piece of legislation, one that is effectively a new tax on businesses and consumers and could easily get entangled in the end-of-session logjam with other revenue measures.
While backers claim their polling shows strong support of climate legislation, voters in Washington have twice rejected a carbon tax, most recently last month. Though the policy differs from the cap-and-trade system Oregon is considering, the outcome reflects deep-seated opposition in some corners of the business community and the voting public.
For Brown, the climate change legislation could define both her legacy and her future. She admits as much: “This is absolutely a legacy issue,” she said. “Future generations will judge us not on the fact of global climate change, but what we’ve done to tackle it.”
For a governor who is staunchly pro-environment but regularly criticized for her failure to lead on big issues, enacting the nation’s second economy-wide cap on greenhouse gas emissions would be signature legislation – no matter what happens on the perennial question of taxes and education funding.
“People have been waiting for her to use her political capital to publicly lead the charge on a big issue, not just negotiate behind the scenes,” said Jim Moore, a political scientist at Pacific University. “This is something you can nail to the wall and say, ‘I did this, and the world is a better place for it.'”
Dave Robertson, PGE’s vice president of public policy, says it’s hard to overstate the importance of the governor’s role. Her championing the work of the Carbon Policy Office, and coordinating with lawmakers to head off any problems is a prime example, he said.
“This is such a complicated and time-intensive legislative lift,” he said. “If you don’t have someone like the governor making it a priority, without that bully pulpit push, it’s easy to say, ‘That’s too complicated. Let’s do it later.'”
For her part, Brown says her role “is to set the broader principles and, behind the scenes, to do the arm-twisting, the carrot, and the kick in the rear to get this done.”
The legacy question may be an important one for Courtney as well. The often-cantankerous 75-year-old, who has been the upper chamber’s presiding officer for the last 15 years, openly mulled retirement after the 2017 Legislative session. In 34 years in the Legislature, he has shepherded countless pieces of legislation to passage. But more recently, he has been criticized from within his own party for failing to move bills that don’t have at least some bipartisan support.
Courtney says that criticism stings. And while he claims not to believe in legacies, success on the climate bill would give him another significant victory, even amid a potential brawl over new taxes. After this year’s short legislative session ended, he told fellow lawmakers that if they weren’t willing to pass a carbon cap, they shouldn’t bother showing up in 2019. And he says he doesn’t intend to shelve the bill if it doesn’t find any Republican support.
“This is an incredibly important piece of legislation,” he said. “I don’t want to do it just with D votes, but if we have to do it, we will go that way.”
Sen. Cliff Bentz, R-Ontario and co-vice chair of the Joint Interim Committee on Carbon Reduction, says he won’t be that bipartisan vote, even if the Legislature was willing to do away with the Clean Fuels Program, long a target of his ire. Bentz says it’s a waste of time to argue about the existence of climate change. The planet is warming, he said, and we need to adapt. His worry is that a cap-and-trade system won’t work.
“There is going to be a cap and trade bill,” he said. “I can’t stop it. I’m at the table trying to make the package less damaging to Oregon.”
Though the Clean Energy Jobs bill has already been through three sessions, the highly complicated policy has lots of potential sticking points. Even the fundamentals – what will the state’s carbon caps be – are subject to debate. The eventual goal is for Oregon to slash greenhouse gas emissions 80 percent below 1990 levels by 2050. But there is debate about how quickly the emissions cap should decline between now and 2035, as the scientific consensus is that early actions are becoming more crucial.
The governor and other sponsors are ready to make at least one big concession to win over the electric utilities. The previous version of the legislation would have required the companies to buy allowances and offsets to cover their emissions, just like industrial companies and fuels providers. The utilities have argued, however, that they already are subject to mandates forcing them to stop using coal-fired power and meet half their customer demand with renewable energy by 2040 – laws that will push them into compliance with the greenhouse gas targets.
Rather than asking ratepayers to pay twice for the same emissions reductions, they maintain, the state should provide the utilities with free allowances and let them go about their business. The governor’s climate agenda proposes to do exactly that.
“We’re cautiously optimistic,” Robertson said. “As far as the principles we’ve been working on — customers not paying twice, maintaining affordability — she’s hitting on those notes so we were fairly pleased. It’s a good start. Now we need to get into the workgroups.”
Environmental advocates say much of the utilities’ emissions reductions are more than a decade away as they accelerate the closure of coal plants after 2030. They don’t oppose some level of free allowances for utilities but don’t want to see the state let the sector entirely off the hook between now and 2030.
The utilities may get much of what they want. Big timber and agriculture also have been exempted from regulation. That leaves manufacturing and industrial companies, particularly those that are “emissions-intensive-trade-exposed” – companies that have high emissions per unit of production, limited opportunities for emissions reductions, and an inability to pass a carbon cost through to customers without losing market share.
From a policy standpoint, the concern here is “leakage” — that Oregon’s carbon pricing will push companies to shift production and employment elsewhere, harming the economy without generating any climate benefit. Bentz points to Ore-Ida Foods in Ontario. “I do not want to drive it 150 yards away into Idaho,” he said. “It will be devastating.”
Crafting a policy that prevents leakage while preserving the integrity of the carbon caps is the toughest piece of this policy puzzle, Brown said. She says her policy adviser Kristen Sheeran has met with every entity whose emissions would be regulated under the law. The Carbon Policy Office also hired a consultant to identify which businesses are truly vulnerable.
That report was delivered this week and found that all Oregon manufacturing and industrial sectors to be regulated under a carbon cap are at risk for leakage. The report’s authors, Vivid Economics, recommended providing free allowances to all of them.
That’s not a welcome proposal among environmental advocates, who say their top priority is enacting a meaningful carbon emissions cap, with hard interim targets, that will achieve real reductions in greenhouse gas. It would also eliminate a big chunk of allowance revenue the groups are expecting to reinvest in carbon reduction and climate change adaptation programs.
Tera Hurst, executive director of the Renew Oregon coalition, said the last Senate version of the legislation singled out too many industries for free allowances. Though utilities should receive some consideration for the investments they’re already making to cut emissions, she said, “you need to have stringent sideboards for other sectors.”
“We want the strongest bill possible,” she said. “Some of these companies have valid concerns. But let’s not just do a bunch of free giveaways.”
Car and trucks are Oregon’s largest source of greenhouse gas emissions and are seen as the toughest nut to crack in terms of reducing emissions. No one is talking about free allowances for transportation fuel suppliers, but there is deep concern, particularly among rural legislators, about the impact carbon pricing will have at the fuel pump.
Lawmakers also face legal questions about how the state could use the revenue generated by selling emissions allowances to fuel suppliers. Backers aim to use them exclusively for programs that decarbonize transportation, such as charging stations for electric vehicles. But the Oregon Constitution mandates that the funds go into the state’s highway trust fund. It’s an open question whether they would be available for any highway project, such as adding lanes on Interstate 5.
“We are planning to put a provision in the bill for a direct route to the Supreme Court if suits are brought, and we fully expect that to happen,” said Sen. Michael Dembrow, D-Portland, who helped sponsor the legislation last year and is co-vice chair of the Joint Committee on Carbon Reduction.
Governance is still an issue as well. In her budget, Brown proposed creating a new agency – the Oregon Climate Authority – to replace the Department of Energy and run the state’s climate programs. She would appoint a director and an advisory board, which would take over the role of the state’s Global Warming Commission.
A similar plan was considered two years ago when the Legislature was looking to restructure or even shutter the dysfunctional Energy Department. But lawmakers and other stakeholders ultimately rejected the idea of expanding the Energy Department’s mandate. Brown insists her plan is different and that some energy programs would migrate to other agencies.
The bill’s backers also are looking to link Oregon’s program to other jurisdictions, such as California, through the Western Climate Initiative. That would entail joint auctions of allowances and the ability to trade them between participating jurisdictions. But Bentz said he’s worried Oregon will be the tail to California’s dog and shunt its authority over the program to Sacramento.
Angus Duncan, head of Oregon’s Global Warming Commission, says he hopes the legislation moves early and avoids the contentious, end–of-session debate over new taxes. What’s important is actually passing a cap, he said, and the environmental community “can afford to give a little here and there.”
Brown already has proposed raising $2 billion in new revenue for education, plus enacting a package of tax and fee increases to raise $700 million for the state’s Medicaid program, also known as the Oregon Health Plan, as the federal government dials back the share it pays for.
Many observers view the proposed carbon policy as yet another tax, even if a ruling by the legislature’s chief lawyer doesn’t call it one.
Brown chuckles at the notion of early passage. She says lawmakers and stakeholders need a few months to get the policy right. Still, she’s intent on “passing this in the 2019 session.”
Courtney expressed a similar sentiment Thursday during the final meeting of the Joint Interim Committee on Carbon Reduction.
“As a 75-year older person – you know I’m going to go to the children and grandchildren – I cannot think of a more serious issue,” he said. “I look forward to the piece of the legislation you come up with together, together, together, together, together. And I look forward to us feeling that the one thing we did that was extraordinary for mother nature and human nature at the end of the 2019 legislative session was to deal very aggressively, very fairly, with the issue that is before us.”
– Ted Sickinger