Oregon Climate Action Program Q&A
How does Oregon's cap-and-invest policy work?
Oregon Legislators are currently considering passage of House Bill 2020 to create the “Oregon Climate Action Program.” The Oregon Climate Action Program would cap and price greenhouse gas emissions in Oregon, create clean energy jobs and invest in the restoration of our forests, rivers and streams. Economists overwhelmingly agree that putting a price on greenhouse gas emissions is a less costly approach to reducing emissions relative to other regulatory measures.
Commonly referred to as a “Cap-and-Trade” or “Cap-and-Invest,” the Oregon Climate Action Program:
- Creates certainty that emissions will be reduced.
- Protects low-income Oregonians and provides businesses with options to reduce costs.
- Generates revenue that can be invested in restoration of our forests, rivers and wetlands and strategies for adapting to the unavoidable impacts of climate change.
What will House Bill 2020 do?
House Bill 2020 will establish an “Oregon Climate Action Program” that would limit or “cap” the amount of greenhouse gas emissions allowed in Oregon and regulate the largest emitters. This type of greenhouse gas pricing program is commonly referred to as a “Cap-and-Trade” or “Cap-and-Invest” program. Some advocates for the bill refer to it as the Clean Energy Jobs bill.
How does a Cap-and-Invest Program work?
A Cap-and-Invest greenhouse gas pricing program is a market-based approach to reducing greenhouse gas emissions. The program would limit the amount of greenhouse gas emissions allowed in Oregon. To enforce the limit, the largest industrial emitters would have to purchase permits based on the amount of greenhouse gases they emit. The number of permits available will decrease each year to guarantee less emissions over time. The money generated from the sale of permits help communities and natural resource based industries develop greater resilience and adapt to climate change; enhance the capacity of natural and working lands to sequester and store carbon; and assist families, workers, and businesses with the transition to a low-carbon future.
The Oregon Climate Action Program will cover approximately 80% of greenhouse gas emissions in Oregon:
- Transportation fuels: Diesel and gasoline supplied in Oregon and used in vehicles
- Electricity: All electricity generated in Oregon, and electricity imported for use in the state
- Natural gas: All gas supplied in Oregon for use in buildings
- Large industrial sources: Facilities emitting over 25,000 tons CO2e from natural gas use, emissions from specific manufacturing processes, and landfills
- Other fossil fuels: This includes propane, home heating oil, and distillate fuels used in non-transportation
Do Oregonians support the bill?
Yes! Oregon voters overwhelmingly support a cap and invest policy: Seven in ten (71 percent) back the proposal, with 44 percent "strongly" in favor. Support for cap and invest crosses major demographic groups and politial parties, including rural and urban Oregonians.
Does the bill protect small businesses and low-income families?
Yes, the bill includes several cost-containment mechanisms to protect low-income Oregonians and Oregon businesses. Electric and gas utilities in Oregon are being given free allowances to protect low-income families.
Businesses will have options for meeting their compliance obligations:
- Modifying practices investing in new equipment to reduce their emissions.
- Purchasing allowances through a state auction. The auction will have a price floor and a price ceiling to prevent allowance prices from reaching too high or too low. The implementing agency can also release allowances from a Price Containment Reserve if it determines allowance prices are trading at too high of a price.
Additionally, the Oregon Climate Action program allows for banking. The ability to “bank” allowances for future use encourages early action to reduce emissions, a climate benefit.
- Buying allowances on the private market from businesses that are able to bring their emissions down faster than they are required to under the cap.
- Lastly, the Oregon Climate Action program allows entities to use certified carbon offsets. Offsets are produced from projects that reduce greenhouse gas emissions in sectors not covered by the cap-and-trade program. These have historically traded at a discount relative to the price of allowances.
The Time to Act is Now
Add your voice to the 7 out of 10 Oregonians who support a Cap-and-Invest Policy and take a small step that will make a big difference in the fight against climate change.