Smarting From Defeat, Oregon Democrats Sketch Ideas for Cap-And-Trade 2.0

By Dirk VanderHart (OPB)
Nov. 15, 2019 8:43 p.m.

For the third year running, Oregon leaders say they’ll take a crack at regulating the state’s greenhouse gas emissions in 2020. But with the month-long legislative session set to begin Feb. 3, just what those regulations will look like is still anybody’s guess.

What does seem clear: Any proposal will be less strict than one that failed dramatically earlier this year.

Hundreds of people protest in favor of cap-and-trade legislation at the Oregon Capitol in Salem, Oregon, Wednesday, Feb. 6, 2019. The bill aims to limit carbon emissions.

Hundreds of people protest in favor of cap-and-trade legislation at the Oregon Capitol in Salem, Oregon, Wednesday, Feb. 6, 2019. The bill aims to limit carbon emissions.

Dirk VanderHart / OPB

Still smarting from the unexpected demise of their last attempt to enact a cap-and-trade policy in the state, Democrats have been mulling a wide array of changes that could more gradually phase in regulations and ease requirements for rural communities or industrial polluters.

Such concessions, the thinking goes, are possibly key for ensuring that Republicans in the Senate don't once again flee the Capitol to block legislation. But changes to the proposal also can't be so severe that they risk losing support in the more progressive House of Representatives, or making enemies out of environmental groups.

“What the ultimate bill looks like I think nobody has any idea yet, but there are lots of people talking,” said Doug Moore, executive director of the Oregon League of Conservation Voters, a central proponent of carbon regulation. “I’ve probably heard 40 or 50 ideas that people have come up with about tweaks they could make.”

The carbon bill that died this year, House Bill 2020, will serve as a starting point for new proposals.

Developed over a course of years, that bill would have regulated the state’s largest polluters — operations like fuel importers, manufacturers, and gas and electric utilities — forcing them to purchase credits for greenhouse gases they emit. An overall cap on total emissions from those sectors would be established, then lowered over time. Regulated companies could trade credits among one another.

The bill would have raised millions in grant money intended to help Oregonians transition to a lower-emission economy — even as it raised prices in such a way that, officials hoped, people would be coaxed to pollute less.

Related: Demonstrators Urge Republican Senators To Stay Away For Rural Oregon

But HB 2020 saw intense backlash from industry and groups that complained it would poison the business climate in rural Oregon. And the specter of gasoline prices rising by more than 20 cents a gallon because of the regulations was a central talking point for Republicans, who uniformly opposed the idea.

HB 2020 passed the House by a 36-24 vote, but Republicans left the state before it could be called up in the Senate. The bill wound up dying after key Democrats pulled support following the walkout. Lawmakers are now busy trying to find a compromise that avoids the same fate.

One possible replacement for HB 2020 would delay regulation on fuel importers — pushing off any increases to fuel prices from the program by years — and give the state less say in how communities spend money to reduce their emissions.

That proposal, drawn up by Reps. Karin Power, D-Milwaukie, and Pam Marsh, D-Ashland, has been circulated among lawmakers and advocacy groups in recent days. Power and Marsh call it the Oregon Resilient Communities Act, or ORCA.

The idea largely relies on the framework of HB 2020, keeping intact regulations on industry and utilities. But the policy wouldn’t force fuel importers to account for their emissions for two years after the program began.

Such a concession could give cap and trade an easier path to passage, but it would also delay money the state has planned on taking in to help communities reduce emissions and blunt the effects of climate change. Under HB 2020, nearly 75% of those revenues were expected to come from fuel regulation.

Marsh and Power are also proposing giving cities and counties a bigger stake in the program. Rather than the state distributing grant money to communities that make a case they have plans for it, 80% of the money generated by fuels regulation would automatically go to local communities.

“We want to empower cities and counties to see themselves as part of the solution,” said Power, who had a leading role in shaping HB 2020. “What that looks like county by county is going to be different. In concept, they’d still need to move and use these dollars in ways that align with the goal of the overall purpose.”

Power and Marsh are proposing using money generated from other industries on a variety of purposes, such as wildfire preparation, improving water systems, training workers for new industries, and assisting Oregon tribes. The proposal would keep in place the ambitious emissions reductions targets set by HB 2020: a 45% decrease below 1990 levels by 2035, and an 80% decrease by 2050.


Related: Oregon Joins Lawsuit Over Trump Administration Emissions Rollback

While Power said Thursday she’ll continue discussing her plan with lawmakers when they meet in Salem for committee hearings next week, hers aren’t the only ideas being floated. Lawmakers confirm that Gov. Kate Brown’s office has discussed a collection of changes that could result in more significant concessions to HB 2020.

Perhaps most significant is an idea to split the state into three geographic regions, which would see their fuel emissions regulated on a staggered timeline. Under that scheme, the Portland region would enter the program first, other urban and suburban areas would be brought in next, and rural Oregon would see regulation at an unspecified future point.

Such a roll out is similar to how Oregon raised the minimum wage in 2016. It also resembles a compromise struck earlier this year, when lawmakers scaled back a bill to regulate diesel engines so that it only applied to the Portland area.

Other ideas that have been raised: More lenient regulations on industry, which might see their costs under the program vastly diminished compared to HB 2020, and a requirement that lawmakers vote to re-up the cap-and-trade system after a set period of time.

Those changes would address many of the concerns that Republicans aired about HB 2020, and seem likely to win over opponents in the industrial sector. But they could also rankle some of cap-and-trade’s most vocal supporters, groups like the OLCV and Renew Oregon. And they would certainly draw criticism from a smaller contingent of environmental and community groups that already believed HB 2020 was too easy on polluters.

“The governor is very much focused on an economy-wide program that limits carbon emissions consistent with sound science,” said Nik Blosser, Brown’s chief of staff, who’s been meeting with cap-and-trade skeptics around the state since HB 2020 died. “We’re just very focused on passing significant legislation that achieves the governor’s goals.”

Beyond ideas from the House and governor's office, Sens. Arnie Roblan, D-Coos Bay, and Fred Girod, R-Stayton, are also said to be crafting a proposal.

For now, people involved in discussions stress that all ideas are preliminary.

“Where they are now is not a proposal, per se, but some elements,” state Sen. Michael Dembrow, D-Portland, one of several key lawmakers behind HB 2020. “Then the question becomes: Do those elements compromise the plan, and once you put all of them together what do you have? That is a conversation that is going to evolve over the next week or two.”

Whatever proposal does emerge, Dembrow added, will be partly aimed at avoiding another Senate walkout.

“We’re going to come up with a program that it’s going to be difficult for Republicans to refuse to come into the building for,” he said. If they do, “we’ll understand that their motivation is purely political.”

Related: Oregon Democrats: Republican State Senators Will Not Be Fined For Walkout

For their part, Republicans appear to be readying some familiar arguments.

"The short session was created to balance the budget and to do some fixes," said state Sen. Herman Baertschiger Jr., R-Grants Pass. "Cap and trade is an all-encompassing policy that dramatically affects how we will be conducting business. That simply should not happen during the short session."

GOP lawmakers made a similar case during the 2018 short session, and the issue was ultimately punted until the following  year.

Asked whether his caucus was willing to walk again over the issue, Baertschiger held the possibility open.

"I don't know," he said. "If we wind up with our base going ballistic over this kind of stuff again, it kind of leaves us in a tough spot."

If a bill does fail to pass, cap-and-trade proponents have other options. Brown said in July that she’s willing to use an executive order to implement a system, a move that her office said is still very much a possibility.

And in October, a coalition of environmental groups filed a series of initiative petitions that could lead to more severe regulations if approved by voters. Those measures are in part designed to put added pressure on lawmakers and industry to come to an agreement during next year's session.

“We’ll take everything as it comes during these conversations,” said Brad Reed, a spokesman for Renew Oregon, which is playing a lead role in the ballot measure campaigns. “We want to be a reasonable partner in this conversation, but overarching all of it is a real climate crisis that needs serious action soon.”