Oregon’s proposed cap and trade system will change the state’s economy, providing lucrative opportunities to some industries and potentially putting others out of business.
Those concerns were laid out in hours of testimony before legislators in Salem over the past week.
But, so far, little has been said about the impact on Oregonians who don’t work in an industry that would face tightening emission restrictions.
Stakeholders had their say Feb. 11 as 19 people from the natural resources, manufacturing and transportation sectors told the Joint Committee on Carbon Reduction how they expect House Bill 2020 to impact them.
Over the next two weeks, the committee will also take to the road to receive testimony from Oregonians outside the Willamette Valley. There will also be video conference hearing in Baker City. It will be a virtual hearing Feb. 25 in Oregon Trail Electric Cooperative’s public meeting room, hosted by OTEC and the Baker County Chamber of Commerce. The time is still being worked out.
The cap and trade program would regulate how much certain industries can pollute by charging them for their emissions. The goal is to push industry to find a cleaner way to do business. The money raised by charging for allowances to pollute would pay for transportation and climate projects of all sizes.
California passed similar legislation 10 years ago. Oregon has been working on it for a while, with legislation in 2018 and 2017 stalling out. This year it is expected to pass.
If passed, the cap would go into effect in 2021, and cover 52 million metric tons of greenhouse gas emissions, according to the most recent estimates from the office of Gov. Kate Brown. Polluters in certain industries emitting at least 25,000 metric tons per year would be newly regulated. That would include industrial manufacturers, oil companies, the forest products industry and utilities.
For 2021, the state would auction off 52 million “allowances” with each allowance permitting one ton of emissions. Companies uninterested in changing their practices could buy allowances instead of reducing emissions.
But available allowances would decline in coming years until 2050. Some industries would be eased in, getting a certain amount of free allowances for a number of years, determined by the economic impact of the new limits. The goal is to clean up Oregon’s air by reducing greenhouse gas emissions to about 11 million metric tons by 2050. In 1990, Oregon emitted 56 million metric tons of greenhouse gasses.
The most direct impacts for Oregonians are expected to be in gasoline and natural gas prices. Northwest Natural estimated its rates could increase by 54 percent, while estimates show gasoline prices could go up by 16 cents per gallon when the program would start in 2021. Several industry leaders testified their costs would go up, but because they work in agriculture or production and compete with companies in other states or countries, they couldn’t pass costs on to consumers.
Those in favor of the regulation say Oregonians stand to reap huge benefits if cap and trade is passed.
David Roland-Holst, director of Berkeley Economic Advising and Research, on Friday presented research showing such a state policy would directly benefit Oregonians in multiple ways.
In total, the cap and trade program would increase Oregon’s gross domestic product by 2.5 percent, bring in 50,000 jobs and reduce emissions by 82 percent by 2050, he said.
Last week a Seattle-based environmental think tank, Sightline, released estimates finding that for every $1 million in cap and trade revenue that might be spent on bike infrastructure, Oregonians would save $2.8 million in healthcare costs, 12 jobs would be added to the economy and emissions equivalent to 665 cars would be cut.
Every $1 million invested in solar energy would power 1,667 homes. It would cut 4,392 tons of carbon emissions and add 19 jobs.
Industry leaders are less keen on the idea.
Peter Saba, vice president of Schnitzer Steel Industries, testified that the company’s McMinnville steel mill would be forced to cut emissions in half over the next 13 years. There is no technology to allow them to do that, Saba said, so they would have to buy more allowances or limit production.
Saba said the company has already reduced emissions by 650,000 metric tons of carbon dioxide. Saba said if Schnitzer is forced to curtail production, competitors elsewhere not subject to such emission limits would step in, causing a net gain in global emissions.
“Talk about carbon leakage,” Saba said.
Curtis Lesslie, vice president of environmental affairs for Ash Grove Cement Company, said his company operates Oregon’s only cement plant in Durkee in Eastern Oregon. Releasing carbon dioxide from limestone – part of the cement-making process – accounts for 65 to 80 percent of the plant’s emissions.
There is nothing they can do about that, Lesslie said. So the company would be forced to buy more allowances, which would reduce the distance it can competitively ship the cement.
Lesslie said Chinese cement makers, who already are able to produce cement more cheaply, would step in and take Ash Grove’s market share.
Ralph Poole is the CEO of Campo & Poole Distributing of Ontario, which distributes fuel around Oregon, Nevada and Idaho. He said Oregon’s clean fuel standards already require him to mix biodiesel in for a cleaner fuel. This adds 5 to 8 cents per gallon to the price, making it undesirable in states like Idaho. A 16-cent a gallon increase in fuel prices would deeply cut into his profits because truckers would fuel up in Idaho instead.
Jana Jarvis, president of the Oregon Trucking Associations, said the goal to reduce emissions is laudable, but could be a death knell for her industry, which ships 80 percent of Oregon’s freight. With high registration and fuel costs already, Oregon trucking companies are at a disadvantage. There has not been significant leap in electric trucks. The increased fuel prices would put Oregon truckers at a disadvantage, allowing larger national companies to move in and ship only what is most lucrative.
Chris Edwards, a former state senator, also testified on the bill. Edwards introduced a cap and trade bill in the 2016 session. But now he’s a lobbyist for the timber industry and was arguing for more special protection for the industry. He said replanting trees in logged areas provides more trees to pull carbon from the air, lowering greenhouse gasses.
He said the timber industry would be hit by transportation costs. Edwards said he was surprised to find out the timber industry wasn’t exempt from the bill, and wanted to be involved in amending it to be more favorable to timber companies. Industry isn’t united against the proposal, though.
Les Perkins, Hood River County commissioner and manager of the Farmers Irrigation District, said summers are getting hotter and farms need more water. He said money from selling allowances could be used to improve water storage for farmers and combat wildfires on county lands.
Several others testified that their industries could thrive in the carbon capped world.
Andrew Beyer, president of EC Electric, said his company could profit as the renewable energy sector would grow under the proposal. He urged lawmakers to pass the bill this session, saying we can no longer worry about ourselves and our bottom line – it’s time to consider future generations.
Beyer was echoed by Steve Clem of Swedish construction giant Skanska and Allan Sprott of Vigor Industrial, a ship building company.
Clem said Skanska works in carbon-capped countries all over the world and the regulation has not hurt industry in those places.
Sprott said Oregon could emerge as a hub for environmentally friendly innovations and that some of the revenue brought in by the program should be used to help fund companies implementing these new ideas.