The Oregon Climate Action program is designed to reduce emissions to target levels informed by the best available climate science; 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. Emissions covered by the program include:
fuels: Diesel and gasoline supplied in Oregon used in vehicles
All electricity generated in Oregon, and electricity imported for use in
gas: All gas supplied in Oregon for use in buildings
industrial sources: Facilities emitting over 25,000 tons CO2e from natural
gas use, emissions from specific manufacturing processes, and landfills
fossil fuels: This includes propane, home heating oil, and distillate
fuels used in non-transportation
Click here for more detailed data on these
Emissions from fuels
such as gasoline, diesel, and propane will be regulated at the companies
importing the fuels for distribution within Oregon.
Emissions from natural
gas will be regulated at the natural gas utilities for their direct sales to
residential, commercial, or industrial customers.
Emissions from natural
gas sold by marketers and other distributors will be regulated at those
companies, not at the utility.
electricity generated in Oregon will be regulated at the generating facilities.
Electricity imported for
use in Oregon will be regulated at the entities scheduling this power for
delivery in the state.
Large industrial entities with reported
emissions > 25,000 tons will be directly regulated for their process related
emissions and natural gas emissions. Emissions from the gas that serves these
entities will be subtracted from the emissions obligation of the natural gas
utility or marketer that serves them.
The cap declines by a constant tonnage
amount each year to achieve a 45% reduction in capped sector emissions below a
1990 baseline by 2035, and an 80% reduction in capped sector emissions below a
1990 baseline by 2050.
Assuming a start date in 2021, total
emissions covered by the cap need to decline by a total of 43.4 million metric
tons over the 29 year program period to achieve the 80% below 1990 target.
Under business-as-usual, emissions from
sectors covered by the Oregon Climate Action Program are projected to reach
50.0 million metric tons, an 8% increase from 1990 levels. With the cap
proposed in the Oregon Climate Action Program, emissions in capped sectors will
fall to 25 million metric tons by 2035, a 45% reduction below their 1990
levels. By 2050, emissions from capped sectors fall to 9.2 metric tons, an 80%
reduction below their 1990 levels.
In comparison, California’s program,
which began in 2013, has set an interim target of 40% below 1990 levels by
2030. Quebec, which also began in 2013, is on a trajectory to achieve a 38%
reduction by 2030.
The Oregon Climate
Action program will distribute the majority of allowances through regularly
occurring auctions. In a standard auction, entities bid for allowances and
allowance prices are gradually increased until all excess demand is eliminated.
All allowances are then sold to those bidders at this market clearing price.
from the sale of allowances at auction are deposited in an account with the
state treasury. The Oregon Climate Action program designates those proceeds for
activities that achieve the programmatic goals.
Oregon Climate Action program includes certain cost control measures. The allowance
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.
the Oregon Climate Action program allows for banking and trading of allowances.
This helps to ensure ample liquidity in the market, while providing flexibility
for regulated entities. The ability to “bank” allowances for future use
encourages early action to reduce emissions, a climate benefit.
the Oregon Climate Action program allows entities to use certified carbon
offsets for no more than 8% of their compliance obligation. Offsets, which
result from greenhouse gas reductions in sectors not covered by the
cap-and-trade program, have historically traded at a discount relative to the
price of allowances.
Oregon Climate Action Program covers emissions associated with facilities that
generate electricity in Oregon and emissions associated with power imported to
serve customers in Oregon. For electricity generated in Oregon, the point of
regulation is the generating facility. These facilities would be responsible
for emissions reported to the state as a generator.
imported power, the point of regulation is defined as the entity that first
schedules the imported power for delivery and consumption in Oregon. Those
entities will be responsible for emissions associated with the power they schedule
onto the grid in Oregon. Multi-state entities like Pacific Power, Bonneville
Power Administration, and Idaho Power have balancing authorities that cross
multiple jurisdictions. Those entities report emissions to the state based on
their systems’ emissions factors that reflect the mix of generating resources
they use to serve their multi-state systems. This factor, multiplied by the
load they serve in Oregon, determines their emissions regulated under the
program. This approach to regulating imported power is comprehensive and should
account for all emissions associated with power imported to serve load in
Oregon. It is expected to cover the following entities:
for the electricity they import and distribute to their retail customers
Power for the electricity they import and distribute to their retail customers
Power for the electricity they import and distribute to their retail customers
Power Administration for the electricity they provide to Oregon consumer-owned
utilities; (BPA will need to acquire a waiver from the federal government to
participate in a state regulatory program)
for the non-BPA electricity they provide to Oregon consumer-owned utilities
utilities or other entities working on their behalf for non-BPA electricity
provided to consumer-owned utilities
service suppliers for the electricity they provide their direct-access
program will exclude emissions associated with imported power scheduled for a
consumer owned utility if those emissions annually average less than 25,000
Climate Action Program is designed to encourage electricity providers to shift
toward cleaner sources of energy. An electrical grid powered by wind, solar,
hydropower and other renewable resources will reduce emissions associated with
electricity consumption, and it can help reduce emissions in other sectors
(e.g. transportation) as technologies switch to clean electricity.
electricity sector is already decarbonizing, due largely to market forces
driving low carbon alternatives, the state’s renewable portfolio standard, and
a state mandate to eliminate coal from Oregon electricity customer rates by
date certain. The Oregon Climate Action Program is designed to incentivize
further reductions without duplicating costs.
Climate Action Program allocates allowances directly to customers of investor
owned utilities (IOUs) to account for planned reductions reflected in customer
rates. This protects households and businesses served by the utilities from
paying twice for the same emissions reductions. For the period of 2021-2030,
direct allocation to these companies will follow a forecast of emissions from
electricity to serve their retail customers. This forecast will be based on
emissions data in the most recent integrated resource plan acknowledged by the
Public Utility Commission (PUC) or an update to the plan, as of January 1,
2021. This period corresponds to the timeline during which IOUs are already
required to transition from legacy coal to renewable resources. For the period
2031 – 2050, direct allocation to IOUs will decline at the same annual decline
as the program’s overall cap, beginning from the allocation made in 2030.
Climate Action Program maintains incentives for IOUs to switch to cleaner
resources faster, even with a direct distribution of allowances. IOUs that
reduce emissions faster than their forecast will have allowances to monetize to
the benefit of their retail customers, as approved by the PUC. If IOUs emit
more than their forecast, they must acquire additional allowances in the
market. This means that utilities will consider a price on carbon equivalent to
the market value of those allowances as they approach dispatch and resource
Allowances distributed to IOUs can be only used for
compliance with emissions associated with their Oregon retail load, or can be
monetized to the benefit of the utilities’ customers. Opportunities could
include investments in weatherization, energy efficiency, bill assistance, or
transportation electrification. These decisions are to be made for the benefit
of utility customers, not the utility’s shareholders. The Public Utility
Commission oversees this process in its role as the regulator of investor owned
Consumer Owned Utilities
Consumer owned utilities in Oregon rely heavily on
hydropower, but often balance or supplement that power with market purchases.
During periods of low hydro output, they may engage in more market purchases or
contract for thermal generation and report higher emissions as a result. The
Oregon Climate Action Program directly allocates to entities scheduling
electricity for COUs an amount equal to a forecast of their emissions in 2021.
That forecast will be based on representative years’ emissions, to be
determined in rule making. From 2022-2050, the allocation declines from the amount
of allowances allocated in 2021 at the same annual decline as the program’s
distributed to COUs can be used for compliance with emissions associated with
their Oregon load, or can be monetized to the benefit of their customers, as
overseen by their boards.
Price Containment Reserve
Each year, an
amount of allowances to be determined in rulemaking will be distributed to an
electricity price containment reserve. Allowances in this reserve will be used
to moderate electricity price increases from unexpected increases in emissions
that are outside the control of utilities, such as extreme variability in
The Oregon Climate Action
Program will cover all GHG emissions from natural gas combustion at different
types of entities, depending on how the gas is being brought into the state and
the type of entity that uses the gas. Natural gas combustion at a large
facility (a facility with more than 25,000 mtCO2e per year) is covered at the
level of the specific facility, instead of at the supplier level, and the
emissions are subtracted from the supplier’s emissions to prevent double
counting. All remaining emissions from natural gas are covered at the natural
gas utility or marketer supplying the gas.
The Oregon Climate Action
Program provides allowances to natural gas utilities to cover the emissions
attributable to low income residential customers.
The proposed Oregon Climate Action
Program regulates the fossil fuel combustion emissions and industrial process
emissions from large manufacturers. Facilities with emissions over 25,000
mtCO2e annually are regulated directly under the proposed program. Those
facilities are responsible for reducing emissions or acquiring enough
allowances and offset credits to account for their emissions over a multi-year
The proposed Oregon Climate Action
Program regulates the emissions from large landfills that report emissions over
25,000 mtCO2e, but excludes any emissions that are captured and used for the
generation of renewable energy. Most large landfills in Oregon have
landfill gas capture systems installed that capture some of the methane from
the landfill and use it to produce electricity or renewable natural gas, these
recaptured emissions are excluded from the cap-and-trade program.
more information on these point source emissions under the Oregon Climate
Action Program, read this explanation: Point Source Emissions under Oregon Climate Action Program
There are about 30 large industrial
manufacturers in Oregon with emissions above the 25,000 mtCO2e/year threshold
and compete on price in competitive national and international markets.
These facilities have limited ability to absorb or pass through a carbon
price. In this case, carbon pricing can lead to leakage, meaning
production, and the associated emissions and economic activity, could shift to
another jurisdiction with a lower or no carbon price.
To inform the Legislature on how to avoid
leakage, the Carbon Policy Office contracted with Vivid Economics to conduct a
study of leakage risk across
these manufacturing sectors. The report found that all potentially
regulated manufacturers in Oregon are emissions intensive and trade exposed
(EITE) and the state should provide assistance to mitigate the potential for
leakage at these facilities. The Oregon Climate Action Program proposes to
directly allocate allowances to these facilities to reduce their cost of
compliance given their emissions intensive, trade exposed status. There
are about 30 manufacturers in this category, ranging from cement production to
frozen potato production to semiconductor manufacturing.
For more details on large industrial
facilities and allowance allocation to those facilities, read this explanation: Point Source Emissions under Oregon Climate Action Program
Emissions from transportation fuels such as
gasoline, diesel, propane, and CNG will be regulated upstream from the point of
retail sale, at the companies importing the fuels for distribution within
Offset credits represent emission
reductions from sources not covered by the cap, and are generally equivalent to
an allowance. The program will also
allow regulated entities, like utilities, industrial plants, and transportation
fuels suppliers, to meet up to 8 percent of their compliance obligation using
offset credits. Offset projects must result in greenhouse gas emissions
reductions or removals that are real, permanent, quantifiable, verifiable,
enforceable, and not otherwise required by law; and are in addition to any
other greenhouse gas emissions reductions or removals that would otherwise
occur.Offset credits offer an opportunity to spread the incentive for emission
reductions to sources not directly covered by cap-and-trade program. Offsets
can also serve as an important cost control mechanism, providing lower cost
compliance options and thereby dampening potential increases in the market
proposed Oregon Climate Action Program allows regulated entities, like
utilities, industrial plants, and transportation fuels suppliers, to meet up to
8 percent of their compliance obligation using offset credits. For
more details on the use of offset credits in the Oregon Climate Action Program,
read this explanation: Offset Credits under Oregon Climate Action Program
The bill designates the Carbon Policy Office at DAS as the implementing agency. In Governor Brown’s budget, she proposed the creation of a new agency, the Oregon Climate Authority. The Oregon Climate Authority would replace the Carbon Policy Office and the Department of Energy. The Oregon Climate Authority would be responsible for implementing the state’s climate goals, including the Oregon Climate Action Program. The Legislature will consider a bill later this session to create an Oregon Climate Authority.
Oregon Climate Action Program designates proceeds from the sale of allowances
at state auction for activities that advance the programmatic goals. The value of allowances is returned to the
economy in ways that ensure the state achieves its climate goals equitably and
from the sale of allowances at state auction are deposited in accounts with the
state treasury. Proceeds that are constitutionally dedicated to the state
highway trust fund will be deposited in a Transportation Decarbonization
Account. Those funds will be designated for highway fund eligible state,
county, local, or MPO projects that also achieve the Oregon Climate Action
funds will be deposited in a Just Transition Fund to provide assistance to
workers and their families in the event of displacement. Other funds will be
deposited in a Climate Investments Fund for activities and projects that
achieve emissions mitigation, climate adaptation, carbon sequestration, and/ or
clean energy transition.
two years, the implementing agency will issue a report to the Governor and
Joint Legislative Committee on Climate Action that outlines the best available
opportunities for climate mitigation, adaptation, and carbon sequestration. To
inform that report, the implementing agency must consult with other agencies
and a citizen’s advisory board that reflects the diversity of Oregon. The Environmental Justice Task Force will then review that report and issue its own
recommendations to the Joint Legislative Committee on Climate Action and the
Governor. The Joint Legislative Committee on Climate Action will then make a
recommendation for how to allocate proceeds from the Climate Investments Fund.
It will do this every two years as part of the standard state budget process.
economic impacts of cap-and-trade programs have been well studied by
economists. Resources for the Future summarized the literature on the economic
impacts of cap-and-trade programs in this report for the Carbon Policy Office.
Additionally, the Carbon Policy Office has commissioned an economic impact analysis of the Oregon Climate Action program. Results will be available