Oregon lawmakers remain divided over cap-and-trade bill

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Oregon House Democrats agreed to slow the progress of cap-and-trade climate change legislation to avoid a repeat of last year's Republican walkout.

Republican leaders left the state last year shutting down the budget process and threatened to use similar tactics this year because they dislike the cap-and-trade legislation.

Oregon House Speaker Tina Kotek, a Democrat, called passing cap-and-trade legislation one of her highest priorities.

Lawmakers approved a two-year budget in 2019 and are meeting in a shorter even-year session with a lighter, more-focused agenda.

The cap-and-trade tussle threatened to delay progress on other issues this year before House Speaker Tina Kotek, a Democrat, struck a compromise with Republican House leaders that potentially will keep Republicans from exiting the state. Democrats have solid majorities in both houses.

Kotek agreed to slow progress on Senate Bill 1530 after House Republican leadership asked for an opportunity to learn more about the cap-and-trade bill, Danny Moran, Kotek's communications director, said.

“When the cap-and-invest concept developed last year, that process occurred in a joint committee made up of House and Senate members, which has not been the case this session,” Moran said.

Kotek introduced a companion bill, House Bill 4167, on Monday to allow members to participate in public hearings before it comes to the floor for a vote. The legislation was referred to the House Committee on Rules, where it is scheduled for a public hearing on Thursday.

SB 1530 had been scheduled for a possible vote in the Senate’s Joint Committee on Ways and Means Tuesday morning, which could have led to a floor vote this week; but the budget committee work session was canceled early Monday afternoon.

“While the cap-and-invest concept has been through as much public process in the Legislature as any in recent memory, including more than 30 hours of public hearings over the last two sessions, Speaker Kotek agreed House members will benefit from additional time with this important bill,” Moran said. “Passing cap and invest this session remains the speaker’s top legislative priority. The costs of the climate crisis are already here and Oregon needs to make investments in impacted communities across the state while moving our economy forward.”

Slowing the pace allows lawmakers to work together to govern, rather than simply substituting closed-door negotiations with special interests for a public process with elected officials, House Minority Leader Christine Drazan, R-Canby, said in a statement.

“We now have an opportunity for our nonpartisan experts to take the time needed to analyze this bill and I will be calling for leadership to allow additional hearings to ensure a thorough review and a fully transparent process for the citizens of Oregon,” Drazan said.

The legislation is modeled after California’s cap-and-trade program, which has raised $12.5 billion in state revenue through its auctions since 2012, according to the California Air Resources Board. The regulation establishes a “cap” on overall emissions from large emitters by issuing a limited number of permits, also known as allowances. Allowances can be bought and sold, or traded, which creates a market price for allowances and an incentive to lower costs by reducing emissions.

Money from California auctions have supported the state’s $80 billion high-speed rail project with $2.7 billion, $847 million for community air protection projects, $262 million for agriculture emission reductions, and $488 million for low carbon transit operations as of Oct. 15, according to the CARB. In a somewhat controversial move, California lawmakers also voted during last year’s budget process to take $100 million annually from cap-and-trade to create clean drinking water infrastructure in areas of the state lacking good systems.

Environmental economist Gilbert Metcalf, an associate at the National Bureau of Research, said what money from cap-and-trade programs is spent on is really beside the point, because the concept is to give businesses an incentive to shift away from fossil fuels.

“In reality, the money could go for any number of uses,” Metcalf said. “Government could give the money back to individual households or build green infrastructure.”

Eleven states have adopted carbon-pricing policies. Ten Northeast states from Maryland to Maine, excluding New Jersey, have participated in the Regional Greenhouse Gas Initiative, which limits carbon dioxide emissions in the power sector.

Since the program went into effect in 2009, RGGI has raised $3.4 billion to support wind and solar projects, Metcalf said.

SB 1530 calls for Oregon to start selling allowances to businesses through auctions in 2022. The government would also give some allowances away.

The auction money would go into state funds named in the bill, including highways, climate investments, a greenhouse gas initiative and schools. Some 25% of the climate find would support the State Forestry Department’s wildfire mitigation efforts.

Every year, the state will decide how many allowances to release into the market via auction.

A number of bills also have been floated in Congress this year to establish a carbon tax at the national level, which Metcalf said would be more effective because it doesn’t put states who adopt cap-and-trade at a competitive disadvantage against states that don’t.

“I think it’s important that Oregon is doing it,” Metcalf said. “I think it’s important that states take action as long as the federal government is not acting. But in the long run, I think the federal government needs to take action.”

The three major bond rating agencies have all added climate change as a factor in how they rate governments. Fitch Ratings includes an environmental social governance score at the end of each of its reports.

“The global marketplace has been demanding that steps be taken to lower the carbon footprint or they won’t do business with companies,” said Nancy Hamilton, director of Oregon Business for Climate, an alliance of businesses that support the state’s efforts to pass cap-and-trade legislation.

Climate change shouldn’t be a partisan issue, particularly in a state that has in its DNA a focus on being good stewards for the environment, Hamilton said.

If the speaker thinks slowing the process will change the tenor of the Republican voice and keep them in the building, then it was worth it, she said, adding that the Legislature needs to maintain the momentum and pass the legislation this year.

“I worked with Gov. Ted Kulongoski on cap-and-trade legislation 10 years ago,” Hamilton said. “This has gone on long enough; we need to move forward.”

The organization that Hamilton heads counts businesses that collectively employ more than 30,000 Oregonians.

“We represent businesses that comprise broad swaths of industries around the state,” Hamilton said.

Those businesses believe passage of the bill will grow the state’s economy, because money from cap-and-trade would help fund innovations for the state’s highest polluters to emit less carbon, she said. Doing that would make the businesses more competitive globally, she said.

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