Cap-And-Trade Bill Nears Last Committee Hearing — And A Late Test

If it passes into law this year, a proposed cap-and-trade system in Oregon faces a lot of questions.

The Oregon Supreme Court may need to decide whether forcing large polluters to pay for emissions constitutes a “tax,” and whether some revenues scooped up by the program are restricted to roads and schools.

But as the proposal, House Bill 2020, approaches what might be its final hearing before a Legislative committee, it first faces a more pressing question: Should it be significantly altered, as a chair of that committee would like?

State Sen. Betsy Johnson, D-Scappoose, on Thursday revealed a set of sweeping amendments to the cap-and-trade proposal. The changes — crafted with the help of opponents to the plan —include significant new carve outs for fuel importers, natural gas companies and waste operations. They would also weaken emissions-reduction goals currently set out in the bill.

The 19-page package of amendments isn't so different from changes cap-and-trade opponents have been pressing for months. But those proposals came from Republicans, largely powerless to substantively change legislation supported by the Democrats who hold supermajorities in both chambers. These suggested alterations come from Johnson, the most vocal cap-and-trade skeptic in the Democratic ranks and co-chair of the Joint Ways and Means Committee, where the bill sits.

Johnson’s office did not return a request for comment Thursday, but she’s been clear about her position on HB 2020.

"Should that bill pass," the senator recently said on her weekly podcast, "I think that it has the very real potential to cripple Oregon's economy and to change our economic landscape, particularly in rural Oregon, in ways that we could not have imagined."

HB 2020 was slated for a hearing before the Ways and Means Committee on Friday, but it has since been removed from the agenda — apparently over concerns not everyone understood the content of Johnson's amendment.

As it currently stands, House Bill 2020 would place a cap on Oregon’s greenhouse gas emissions, and lower that cap over time as a tool to push businesses to get greener. The state would reduce emissions to 45% below 1990 levels by 2035, and 80% below 1990 levels by 2050.

Oregon would also begin charging the state’s largest polluters for emissions, forcing utilities, fuel importers and industrial facilities to purchase credits, known as "allowances," for each ton of greenhouse gas they emit.

Those credits would be bought at auction, and could then be traded among regulated parties. Fewer credits would be auctioned off as the emissions cap declined, theoretically making them more expensive and spurring companies to emit less.

HB 2020 has backing from a broad coalition of environmental and community groups, but it has also faced criticism from those who believe it offers too many carve outs. For instance, large power companies would get completely free pollution credits for the first decade of the program — a nod to existing regulations that require them to reduce emissions. There are also free credits on offer for natural gas utilities and some manufacturing facilities.

Fuel importers are the only regulated entities not receiving freebies under the bill, a fact that could see gas prices rise by more than 15 cents a gallon. Revenues from fuel are expected to account for around 75% of the money the state brings in.

Money from the program would be spent helping Oregon reduce its emissions and deal with the emerging impacts of climate change, though there are other likely uses as well.

Johnson’s proposal would change the bill in some dramatic ways.

It would nix the 2035 emissions target of 45% below 1990 levels, instead lowering the state’s cap at a slower pace. It would ensure fuel importers weren’t regulated until 2025, slashing much of the revenue the state plans to generate in that time. And it would create more free pollution credits for natural gas, electricity providers, trash incinerators and new industry sectors that currently aren’t eligible.

The amendments would also allocate $10 million a year to wildfire preparedness, create a loan program to help industrial companies reduce emissions, and make other complex changes.

The changes amount to a wish list for industry groups that have been railing against cap-and-trade this year. Groups including the Oregon Trucking Associations, Oregon Manufacturers and Commerce, and the Oregon Farm Bureau have been circulating a letter to lawmakers registering their enthusiastic support for the changes.

"Our coalition has been meeting for many months to develop amendment language that would deliver significant carbon reductions without penalizing businesses and consumers," the letter reads. "While this version would ultimately still impose additional cost burdens on employers and consumers, we believe it will blunt some of the harshest negative impacts."

Even though she's in the majority party, Johnson’s amendment is a long shot. HB 2020 has been under intense scrutiny for months and has been redrafted again and again in the Legislature’s Joint Carbon Reduction Committee. With all that work — and backing of the bill by Democratic leadership — significant policy changes in the budget committee seem extremely unlikely.

Democrats also outrank Republicans on the budget committee, 13 to 7, meaning that even if Johnson and all GOP members support her package, they would still be outvoted.

A more pressing question might be whether the bill should pass with an emergency clause. That would put the cap-and-trade law into effect as soon as it was signed by Gov. Kate Brown, rather than three months after the end of the legislative session. In either case, the bulk of the program wouldn’t begin until 2021.

An emergency clause would also preempt opponents from being able to file a referendum placing all or part of the law on the ballot for voter approval. In a budget subcommittee hearing Wednesday, Republicans forced a vote to scrap the clause but were overruled by Democrats.

“The only thing that the emergency clause does is it takes away the referendum process from the voters in this state,” said state Rep. David Brock Smith, R-Port Orford, echoing comments of others in his party.

Sen. Kathleen Taylor, D-Milwaukie, said that wasn’t the case.

“Climate change is the issue of our time we have been working here in Oregon year after year to try to develop and start a program,” said Taylor, referring to roughly a decade of effort that has gone into establishing a carbon pricing program in Oregon. “I would like to think we understand that this is a serious situation and that we need to start working on this right away.”