The Oregon Environmental Quality Commission approved a new Climate Protection Plan for the state Thursday. It targets a 90% reduction in greenhouse gas emissions from transportation fuels and natural gas by 2050.
The commission’s 3-1 vote of approval follows years of state lawmakers’ unsuccessful attempts to launch an economy-wide cap-and-trade program to reduce the carbon emissions that contribute to climate change.
“It has been an enormous lift to get this program to this point,” Commission Chair Kathleen George said after the vote. (Disclosure: George serves on the Oregon Public Broadcasting board of directors.) “Our fisheries, our farms, the snow in our mountains, our forests and vineyards, they all depend on a healthy climate.”
Last year, Gov. Kate Brown ordered the Oregon Department of Environmental Quality to develop a new set of administrative rules that would cap greenhouse gas emissions from fossil fuels and reduce them over time.
The resulting Climate Protection Program caps emissions from gasoline, diesel, propane, kerosene and natural gas and makes the cap more restrictive over time. The program, set to launch in January, will distribute a declining number of emission credits to fuel suppliers and allow them to buy and sell those credits as the cap comes down. It also creates a Community Climate Investment Fund that will allow companies to pay for emission reductions in communities that are most impacted by climate change.
The program will initially regulate 16 fuel suppliers and three natural gas utilities as well as 13 industrial facilities that would be regulated under a different system that creates individualized plans for each facility to reduce emissions using the best available technology. The rules include financial penalties for companies that can’t meet the emission reduction targets.
Companies that will be regulated under the program have protested the higher targets, arguing that they will result in even higher prices for gasoline, diesel and natural gas that will have ripple effects throughout the economy. They’ve also raised concerns that there may not be enough alternatives to fossil fuels such as biofuels and electric vehicles to meet the program goals.
Fuel suppliers will likely face higher costs over time that would be passed along to consumers. That will leave Oregonians and businesses in the state with two choices: reduce their use of fossil fuels or pay increasingly higher prices for them.
Industry groups did their own analysis of the program and found it would be more costly for consumers than what the DEQ is projecting, based on its economic analysis. The industry analysis found the new regulations could double the price of natural gas by 2050. It also would increase the price of gasoline by 36 cents per gallon and increase the price of diesel by 39 cents per gallon by 2035, according to the industry analysis.
“There’s a massive difference in the conclusions drawn by the economic analysis DEQ did and the one from the business community,” Commissioner Greg Addington said at the commission meeting. He cast the commission’s only no vote.
While DEQ’s economic analysis found the program would result in about 20,000 added jobs, the industry analysis found it would result in the loss of 120,000 jobs. The industry analysis found agriculture, wood products, manufacturing and food processing would be most affected by the higher fuel prices.
“Those are alarming things for me,” Addington said. “I’m trying to find a way to work through this. At the end of the day I don’t know that I’m going to get there on this. I do think there are things we can do to lessen the blow to rural Oregonians.”
Addington made the case for adding carbon sequestration to the options for companies looking to offset their emissions, so they might pay to sequester carbon in forests, for example. But other commissioners didn’t support his motion to add that option to the program.
“The reason we have so much carbon in the atmosphere is because we burn so much fossil fuel,” Commissioner Amy Schlusser said. “I don’t think under this program in particular it’s appropriate to enable us to continue emitting fossil fuels into the atmosphere. … We would be delaying reductions in fossil fuels.”
Mike Freese with the Oregon Fuels Association said the small, locally owned businesses he represents are worried that alternative transportation fuels won’t be available to meet people’s needs as the emissions cap becomes more restrictive for fossil-fuel users.
“In the end, the rule fails to provide any assurances that all Oregonians — regardless of their income level and where they live — will continue to have access to affordable fuels,” he said.
Nicole Singh, DEQ climate policy advisor responded to public comments about higher fuel prices. She said the agency will be tracking prices in Oregon and the neighboring states of Washington, Idaho and Nevada and looking for signs that prices are going up more than expected.
If prices in Oregon increase by more than 20% of the fuel prices in other states, she said, DEQ staff will do a review to determine whether the program needs to be changed.
“That’s on us at the agency at DEQ to take a look at that and find out why we’re seeing those changes,” Singh said. “Regardless of what’s causing those changes, is that something that means we should make changes to the program?”
Singh said the commission also has the power to make changes to the program as needed.
The program was initially set for a target of 80% emissions reductions by 2050. But DEQ increased that target to 90% after receiving thousands of public comments urging higher targets and seeing new recommendations from the International Panel on Climate Change. The approved program also set a higher interim target of cutting emissions 50% by 2035.
“We have a more aggressive trajectory on this that does go beyond what Gov. Brown asked us to do in her executive order,” DEQ Director Richard Whitman told Environmental Quality Commission members. “The fundamental reason for that is the science that’s coming out about moving faster. In order for us to achieve the goal of avoiding the worst effects of climate change, which requires us keeping the average temperature increase to 1.5 degrees Celsius, we need to be hitting net zero by 2050.”
Whitman said the Climate Protection Program is “a key glue” that binds together other existing carbon reduction programs such as clean fuel requirements, energy efficiency programs and electric vehicle incentives, all of which will help the state reach its emission reduction goals.
“All of these things work together,” he said. “They work on the supply side and on the demand side to create a less expensive energy future for Oregon.”
George, the commission chair, said six of the state’s eight major clean fuel producers are in rural areas.
“This will mean significant investments in new jobs and new opportunities for agricultural and rural areas of the state,” she said.
Commissioner Sam Baraso said the Community Climate Investment Fund could help electrify household systems and reduce expenses for people who are most impacted by higher energy prices.
“Investing directly in households, investing in energy systems that reduce our reliance on fossil fuels in a way that’s targeted does benefit us all and helps us absorb higher energy costs,” Baraso said.
Whitman said DEQ carefully designed the program to limit the percentage of emissions that companies can offset by paying into the CCI and to prioritize communities of color and low income neighborhoods as the funds are spent.
Initially, companies will only be able to reduce 10% of their emission reductions by paying into the CCI fund, and that percentage will increase to just 20% over time.
“It is important that we can assure the public and everybody that this program is going to achieve the fundamental effect that we are reducing greenhouse gas emissions,” Whitman said. “That for every credit we give out we are going to achieve those emissions reductions.”