Cap-and-Trade Moves to Top of Agenda for 2018 Session

Published Thursday, September 28, 2017

Last week, Legislative Democrats and the Governor's office announced creation of work groups to put together carbon-reduction legislation for the 2018 Short Session. This effort appears to have emerged as the top priority for the Session, and the business community needs to be prepared.

Described as cap-and-trade or cap-and-invest, the most likely approach to carbon-reduction legislation would follow the approach of SB 1070 introduced in the last days of the 2017 Legislative Session. Similar proposals have been around the Legislature for years. The AOI (now OBI) Foundation funded an economic analysis that demonstrated a cap-and-trade proposal similar to SB1070 would lead to slower economic growth overall in Oregon and would hit several industries that provide well-paying middle-class jobs particularly hard. For these reasons, Oregon Business & Industries (OBI) has led coalitions to defeat SB 1070 and similar legislation.

There's no question that Oregon businesses and employees value Oregon's environment. It binds us to place and communities. Nobody has a more urgent mandate to act in an environmentally responsible way than we do. But much of Oregon also needs more employment opportunities and better paying jobs. Cap-and-trade would hurt working families and create big challenges for many of our communities. This approach is the wrong way to protect the environment and support employees throughout Oregon.

Here's what has happened so far:

Senator Michael Dembrow (D-Portland), Chair of the Senate Committee on Environment and Natural Resources, and Representative Ken Helm (D-Beaverton), Chair of the House Committee on Energy and Environment, with House and Senate leadership approval, have organized four climate policy workgroups based on constituencies addressed in the base bill (SB 1070 from the 2017 Legislative Session). These work groups and their leaders are:

  • Agriculture, Forest, Fisheries, Rural Communities and Tribes - Representative Helm;
  • Utilities and Transportation - Senator Lee Beyer (D-Springfield);
  • Regulated Entities - Senator Dembrow; and
  • Environmental Justice and Just Transition - Representatives Pam Marsh (D-Ashland) and Diego Hernandez (D-Portland).

These workgroups are intended to convene three times before November 21 when the bill draft must be complete for the 2018 Legislative Session. OBI has been asked to take part in the "Regulated Entities" and "Utilities and Transportation" workgroups. We plan to participate, provided discussions are bipartisan and our policy suggestions are considered. We will be guided by the OBI Greenhouse Gas/Climate Policy, which states:

"Greenhouse Gas Reduction: Ensure climate policies adopted at any level of government take into account existing policies and do not damage Oregon's competitiveness and do not focus on a single sector of the economy."

The cap-and-trade model under consideration does not meet this standard. The FTI Consulting analysis funded by our Foundation demonstrated that a program with this design would result in $1.3 billion in lost gross domestic product (GDP) by 2035 and 4,800 fewer jobs that would be created otherwise. The manufacturing sector, which represents 16% of the Oregon economy, would be particularly hard hit, the analysis revealed. Cap-and-trade also would affect consumers through sharply higher fuel and energy prices.

Moreover, the type of policy under consideration would not achieve the goals of its proponents. Oregon already has one of the cleanest economies in the nation, which is remarkable when you consider our economy is one of the most manufacturing-dependent. Oregon's industrial employers emits 13% less CO2 than it did in 1990 and our commercial sector emits 3% less in than in 1990.

Contrast that environmental performance with California, which implemented a cap-and-trade system in 2010. In 2013, California emissions had increased. California also has one of the worse manufacturing growth rates in the nation. Even proponents admit that implementing a cap-and-trade program in Oregon will not change Oregon's climate due to global climate change. Adopting policies that discourage manufacturing in Oregon would shift those activities, and accompanying jobs, to states with looser environmental regulations and likely would increase emissions.

There is a way to balance a healthy environment and a healthy economy, but a system modeled after SB 1070 is not the right approach. A coalition of businesses and trade associations has formed to defeat a cap-and-trade/invest bill in the Short Session. The Legislature should continue to work with the business community as it designs climate policy and prioritize the immediate state budget issues in the 2018 Short Session.

If you would like more information about this issue, please contact Mike Freese.