On 21 November 2024, Oregon’s Environmental Quality Commission (EQC) reinstated and updated the Climate Protection Program (CPP), the State’s emissions trading system, after a court ruling struck it down last December. The revised program is set to launch in January 2025.
The CPP was originally launched in 2022. It set a declining cap on regulated emissions to align with Oregon’s long-term GHG reduction targets: 50% by 2035 and 90% by 2050. In December 2023, the Oregon Court of Appeals ruled that the CPP was invalid, after determining that the regulatory process failed to comply with disclosure obligations under Oregon law. Following the ruling, the Department of Environmental Quality (DEQ), responsible for administering the CPP, embarked on a year of public engagement and rulemaking. The process resulted in the adoption of the updated 2024 rules for the new program in November 2024.
The new rules expand the ETS scope to cover emission-intensive trade-exposed (EITE) stationary sources emitting more than 15,000 MTCO2e, as well as local distribution companies and liquid fuel suppliers that were covered under the previous rules. The first compliance period, lasting until the end of 2026, begins in January 2025, with subsequent compliance periods lasting two years.
To smooth the transition, EITE sources and direct natural gas sources will be exempt from compliance obligations during the first compliance period. These entities will initially receive free allowances based on historical emissions. From the second period onward, allowances will be allocated based on a declining emissions intensity benchmark tied to production levels.
Covered entities can meet their compliance obligations by utilizing Community Climate Investment Credits (CCIs). Each CCI represents the reduction of one metric ton of CO₂ equivalent (tCO₂e). These credits are issued by Oregon's Department of Environmental Quality (DEQ) once the necessary payment is made by the covered entities. The funds collected are then directed to approved non-profit organizations to implement community-based projects designed to reduce emissions within Oregon. Notably, CCIs are non-tradable and are both issued and retired by the DEQ.
During the first compliance period, entities can fulfil up to 15% of their obligations using CCIs, with the limit increasing to 20% for subsequent periods. In 2025, the CCIs will be priced at USD 129, including a new 4.5% fee to fund program oversight and transparency.
To address potential cost impacts to consumers, the CPP rules include new provisions for program review if carbon prices significantly affect consumer bills. The DEQ will work with the Public Utilities Commission to review natural gas rates and consumer bills to determine whether the CPP is significantly affecting rates.
For more details, visit the official CPP DEQ website.
