Oregon presents revised cap-and-trade bill

On 13 January 2020, Democrats in the Oregon legislature presented a revised cap-and-trade bill ahead of the upcoming state legislative session.

LC-19, announced at a meeting of the Oregon Senate’s Interim Committee on Environment and Natural Resources, follows an unsuccessful attempt in the 2019 legislative session to pass House Bill 2020 (HB-2020). The 2020 legislative session begins 3 February.

With regards to the structure of the proposed cap-and-trade market, LC-19 largely mirrors HB-2020. The program would cover entities emitting more than 25,000 tCO2e in the power and industry sectors as well as transportation fuels, using a mix of free allocation and auctions to allocate permits. However, there are some notable changes. The legislation contains language that enables the Oregon Greenhouse Gas regulator to retire allowances if a particular entity is below the specified coverage threshold, or if the emissions of a particular entity are emitted outside of the Oregon state lines.

Industrial sectors would only be responsible for their direct emissions from production rather than total GHG output, as LC-19 excludes their indirect emissions from natural gas consumption and distribution. This would lead to fewer industrial entities included in the system because fewer would cross the emissions threshold. Thus, because LC-19 does not cover indirect emissions from natural gas, fewer industrial entities would hit the 25,000 tCO2e threshold, meaning fewer industrial entities would be included in the system.

LC-19 also includes a regional phase-in for the fuel sector. Covered entities would include Oregon producers and importers of liquid or gaseous fuel sold and distributed for use in the state. Emissions from fuel combustion used for aviation, watercraft, and railroad locomotives will not be covered. The phase-in mechanism would regulate the Portland metropolitan area through 2022-2025 then expand to all other municipalities, counties, and rural communities from 2025-2051. The phased approach is an attempt to balance the differing transit needs of rural and urban communities. The law also provides for entities that may produce transportation emissions outside of the areas identified above, such as fuel producers that export their fuel for use outside of Oregon. This is done through a provision in which the state retires allowances proportional to all fuels that would be used outside of the established boundaries for each period.

Though the program is expected to operate independently of Western Climate Initiative (WCI) schemes, Oregon has retained similar design elements as California and Québec in the revised draft, including floor and ceiling prices as well as an allowance price containment mechanism.