Oregon’s Carbon-Reduction Plan Might Include Hefty Fuel Rebates

If lawmakers pass a sweeping carbon-reduction proposal this year, nearly a quarter of the money raised under the program could flow back to motorists, farmers and loggers — not to helping the state lower its emissions.

Under a bill that passed legislative committee after a single hearing Friday, agricultural and forestry operations could apply for refunds that would compensate them for an expected increase in fuel prices under the cap and trade plan. Much more money might go to lower-income drivers, who could apply for tax credits that ease prices at the pump.

The concepts housed in Senate Bill 1051 are designed to help settle Oregonians into a carbon-reduction system that's central to the state's plans for battling climate change, but which could raise gasoline prices by more than 16 cents a gallon if it takes effect in 2021.

The bill’s aid for logging and farm interests won over even some dedicated opponents to a cap-and-trade system, who say the policy will raise the cost of doing business. But the bill has also generated skepticism from those who worry it pours money into maintaining the status quo even as the state emphasizes the need for change.

The idea of helping some drivers and industries with fuel costs isn’t new. Lawmakers had already shown support for the concept in House Bill 2020, the bill that would implement cap and trade in Oregon. SB 1051 puts hard details and numbers behind those concepts.

Taken together, projections released Friday suggest that the refunds and tax credits would eat meaningfully into revenue the state expects under cap and trade. That money is otherwise earmarked for initiatives that would help Oregon lower emissions and mitigate the impacts of climate change.

“We’re directing this at lower income people” state Sen. Michael Dembrow, D-Portland, said of the proposal to help drivers. “That’s part of our commitment to at least initially keep the burden as light as possible on lower income individuals.”

The cap-and-trade bill is currently before the Legislature’s budget committee, and is expected to get a hearing this week. It is the largest policy priority remaining for Democrats before the end of this year’s legislative session later this month.

The proposal would cap Oregon’s greenhouse gas emissions, lowering allowable emissions over time. The state’s largest polluters would be forced to purchase credits for every ton of greenhouse gas they emit, creating incentives for them to find cleaner ways to operate.

The law is expected to generate more than a billion dollars for state coffers each budget cycle. But under SB 1051, nearly a quarter of that could instead go to help loggers, farmers and drivers continue operating as usual.

The bill's largest element is a tax credit available to motorists with an income no greater than 250% of the federal poverty level — roughly $64,375 for a family of four in Oregon. It would be relatively simple to get, proponents say, with qualifying individuals perhaps checking a box on their tax returns.

The credit would be calculated in part on how much cap and trade has raised gas prices. Since people living in rural and urban parts of the state tend to drive different amounts, it would be different depending on which county a taxpayer lived in.

The proposal has generated mild concern from environmental groups, who agree with the notion of assisting low-income citizens, but worry about incentivizing people to drive even as the state is seeking to dramatically curtail auto emissions. According to the Oregon Global Warming Commission, transportation accounted for nearly 40% of the state's greenhouse gas emissions in 2016.

But the idea has already found some approval. The concept was cribbed from another bill the Joint Carbon Reduction Committee considered earlier in the session.

SB 1051 also creates a policy that allows agricultural and forestry operations to apply for refunds that would account for the added cost attributable to cap and trade for every gallon of fuel they use. Applications for those refunds would be filed with the Oregon Department of Transportation, and the state would have the ability to investigate whether companies were giving a truthful accounting of their fuel usage. Costs for the program have not been announced.

Taken together, an estimate from the Legislative Revenue Office suggests the bill could cut revenues the state would generate under cap and trade by almost 25%.

For instance, the state's Legislative Revenue Office estimates the program would generate $1.3 billion for the 2021-23 biennium, according to Mazen Malik, a senior economist with the office. The fuel credits and refunds could send almost $302 million of that back to motorists, loggers, and farmers, the LRO says. Most of that money, $282.1 million, would be in the form to tax credits to motorists.

Cap and trade’s supporters suggest the LRO estimates might overstate how much money Oregon actually winds up giving back. Brad Reed, a spokesman for the coalition Renew Oregon, said Friday the numbers could anticipate fuel price increases from cap and trade that don’t come to pass.

“That all seems really high to me,” Reed said.

But Reed added that his coalition believes money raised under cap and trade should be spent to help Oregon reduce its emissions.

“We have always said that as much of the investment proceeds that can go to solve this problem, that’s what this bill was designed to do,” Reed said.

Renew Oregon supports providing relief to low-income Oregonians, but Reed said it would be more supportive of subsidies for farmers and loggers that helped them swap out existing machinery for cleaner alternatives.

Reed declined to characterize Renew Oregon’s overall position on SB 1051. Others have a more defined viewpoint.

“Paying people for status-quo logging is about the worst thing we can do,” said Steve Pedery, conservation director for the group Oregon Wild.

Pedery’s organization has largely sat on the margins as the cap-and-trade bill has been discussed. While he says he understands the push to help low-income motorists bear the cost of the policy, defraying costs for loggers troubles him.

“We’re at a point now where we kind of feel less comfortable sitting on the sideline when we have politicians saying, ‘We just want to give them more money,’” said Pedery, who suggests the proposal amounts to favoritism for timber interests that are generous campaign contributors.

Meanwhile, some of cap and trade’s most dedicated opponents have cheered the new bill.

“We strongly appreciate the refund program established under SB 1051 to offset some of the cost increases that are anticipated under the cap-and-trade program,” a joint letter from the Oregon Farm Bureau and Associated Oregon Loggers said.

State Rep. Shelly Boshart Davis, R-Albany, has been an outspoken critic of the cap-and-trade proposal. But while votes in the Joint Carbon Reduction Committee have often been along party lines, Boshart Davis and several other Republicans voted Friday to pass SB 1051.

“I’m very encouraged that we listened to rural people,” she said.

State Sen. Cliff Bentz, R-Ontario, another frequent critic, didn't end up voting for SB 1051, but he did concede: “I’m happy for this recognition for the challenges that the [agriculture] community faces … I’m all in favor of it.”

Other foes of cap and trade are unlikely to be impressed — even if they would benefit.

The same day lawmakers took up SB 1051 last week, Oregon-based Stimson Lumber announced it planned to eliminate more than 60 jobs from a sawmill in Forest Grove, citing existing laws and bills the Legislature is currently taking up.

As part of his rationale, Stimson CEO Andrew Miller cited the cap-and-trade proposal, which he said “threatens to put more pressure on businesses, driving fuel prices up $.22/gallon in just the first year.”

“It breaks my heart that due to the rising cost of doing business in Oregon, our company is forced to shift operations to states like Idaho and Montana, where the cost to produce lumber products is 5 to 7% less than in Oregon,” Stimson said in the statement. “This percentage is not wage based, it is due to the accumulation of taxes, fees and regulations that have eroded the competitiveness of the wood products industry in North American and global markets.”

The statement became a matter of heated debate in the Senate on Monday, when three Republicans rose to read portions of it. Controversy emerged because the letter quoted state Sen. James Manning Jr., D-Eugene, as suggesting corporations could leave Oregon if they didn’t want to pay higher taxes.

Manning objected to that, saying his sentiments had been mischaracterized, and the senators should not be impugning him. Republicans responded they were merely reading from a statement, not accusing Manning.

In the end, Senate President Peter Courtney took responsibility, saying he hadn’t read the statement before allowing it to be read on the Senate floor.

“I was the one at fault,” he said, “because I gave permission.”