Amid a flurry of objections by Republicans, a raft of potential legal problems, and several last-minute amendments to reduce its economic impact on specific interest groups, Oregon’s proposed carbon cap and trade policy passed out of a Ways and Means subcommittee Wednesday evening on a 5-3 vote.
House Bill 2020 and a companion bill, Senate Bill 1051, were scheduled for a work session and possible vote by the full Ways and Means Committee on Friday. But the main bill was pulled from the committee’s agenda after Sen. Betsy Johnson, D-Scappoose and one of the so called tri-chairs of the powerful joint budget committee, proposed a last-minute and sweeping set of amendments that would deeply undermine the bill as it stands today.
Johnson is the fiercest critic of the climate policy bill among Democrats, but it’s not clear she has the political juice to stop the bill, which is one of Democratic leaders’ top remaining priorities in the session. But it’s also unclear if the bill as it exists today has the votes to pass the Legislature.
Johnson’s proposed amendments, first reported by OPB, would exempt transportation fuel providers from regulation until 2025, trash the state’s interim emissions reduction target in 2035, and offer up a slew of new exemptions for electricity service suppliers, natural gas suppliers and industrial companies. Those amendments are anathema to the the bill’s backers and broad coalition of environmental groups who are supporting it.
The “Clean Energy Jobs Bill,” as backers have dubbed it, is one of the most sprawling and potentially impactful pieces of legislation to ever come before Oregon lawmakers. It envisions a wholesale reduction in Oregonians’ use of fossil fuels, and an associated decrease in greenhouse gas emissions equivalent to 80 percent below 1990 levels by 2050.
That’s the worldwide emissions reduction that a consensus of scientists have determined is necessary to hold global temperature increases to 2 degrees Celsius, considered a crucial threshold to prevent the most dire consequences of global warming.
To get Oregon there, House Bill 2020 would require companies in the utility, transportation and industrial sectors to buy emission allowances in a state-run auction or on a secondary market to cover each metric ton of carbon equivalents their operations emit. As the state reduces the supply of allowances, they will theoretically become more expensive, increasing fossil fuel prices and incentivizing business and consumers to reduce their consumption and related emissions.
The principal criticism of the bill is that it will put Oregon on the bleeding edge of climate activism. Oregon would be only the second state to institute an economy-wide limit on greenhouse emissions, behind California. However, Oregon’s legislation could impose substantial costs on businesses and consumers with only a negligible impact on global emissions.
On the upside, proponents say Oregon will get ahead of the curve on climate change, bolstering its economy by investing substantial sums in renewable energy, climate change adaption and mitigation programs. They also argue it would head off significant costs that global warming will impose, including increased energy, public health, wildfire, flood and storm damage costs and reduced salmon harvests. The bill, according to at least one economic analysis, will be a net benefit to Oregon’s economy.
A long-awaited revenue impact statement was posted to the Legislature’s website Wednesday indicating that the bill would raise $1.3 billion when it took effect in the 2021-23 budget cycle, rising to $1.8 billion by the 2025-27 biennium as the price of emission allowances rose.
The Legislative Fiscal office also completed an analysis showing the 54-employee bureaucratic apparatus required to implement the bill would cost about $23 million in the coming two-year budget cycle, with potentially significant increases in future years.
Almost three quarters of the revenues expected from the bill would come from increases in transportation fuel prices. The Legislative revenue office expects that to translate to about to about 22 cents a gallon increase at the pump in 2021, when the policy kicks in, increasing to 78 cents a gallon 10 years later and $3 a gallon by 2050.
The assumption is that that the policy will cause Oregonians to gradually, but completely convert to electric passenger vehicles by 2050. That’s considered the most important driver of projected emission reductions.
Likewise, policy makers are predicting that the bill’s impact on natural gas prices will result in wholesale increases in energy efficiency. Industry groups project a 12 percent rate increase for residential consumers by 2021 increasing to 40 percent by 2035.
The policy would backstop other state measures forcing electric utilities to decarbonize, while requiring industrial companies to adopt the most efficient technologies to reduce their emissions, or pay for them.
In the meantime, policy makers have adopted myriad amendments to water down the price impact on consumers and businesses. They include free emissions allowances for electric utilities and industrial companies, rebates of gasoline price increases for consumers making less than 250 percent of federal poverty guidelines, and free allowances to natural gas utilities to offset any rate increases for low-income customers.
Last month, lawmakers upped the freebies for gas utilities to offset 25 percent of any rate hikes for all customers. And in a companion bill that passed out of Ways and Means Natural Resources subcommittee Wednesday, they extended rebates of fuel price increases to agricultural and timber companies.
One persistent question is whether those rebates are legal.
The Legislative Counsel’s office has long held that any increase in gas taxes would be dedicated to the state highway trust fund. And in mid-May, it issued an opinion in response to questions from Rep. Christine Drazan, R-Canby, that suggested any revenues from allowances sold to providers of natural gas – estimated at about 10 percent of total revenues --would have to go into the Common School Fund.
Opponents also contend that the legal analysis, which refers to the allowance revenue as a “tax,” indicate that the entire bill would need to be passed by a three-fifths vote in the Legislature.
“It’s pretty clear that HB 2020A is a tax and therefore needs three-fifths support in both chambers to advance,” said Preston Mann, a spokesman for the business group, Oregon Manufacturers and Commerce.
The bill’s sponsors disagree. They point to a 2017 analysis by the Legislative Counsel’s Office that determined that winning bidders at allowance auctions would be buying something of value -- the right to pollute -- so the auction revenues don’t amount to a tax.
“Legal opinion on this is split, and we’re not sure how the courts will rule,” said Sen. Michael Dembrow, D-Portland and co-chair of the Joint Committee on Carbon Reduction. “HB 2020 assumes that this is the case, but we have made provisions for the possibility of the (revenues) not being restricted. We’ve put expedited review by the Supreme Court into the bill on both the tax and the constitutional restriction issues, as we know that lawsuits will likely be coming, and we want them resolved before the program begins.”
Rep. David Brock Smith, R-Port Orford, said Wednesday that he had serious concerns with the bill because it was complicated and would increase Oregonian’s cost of living, particularly in rural areas. He offered an amendment to remove the bill’s emergency clause, saying the only reason it was included was to prevent opponents from referring the measure to voters.
Emergency clauses allow legislation to go into effect immediately, preventing opponents from gathering the required signatures within 90 days to refer the legislation to voters on the ballot.
Several Republicans joined him. Sen. Fred Girod, R-Stayton, called HB 202o “the worst bill I’ve ever seen.”
Democrats voted down all Republican amendments, saying it was time to take definitive action on global warming.
“This bill makes total sense,” said Rep. Paul Holvey, D-Eugene. “If we don’t address these issues. it will cost are economy far, far more moving forward.”