A New Approach in Oregon’s Greenhouse Gas Initiative

In February, the Oregon Legislative Assembly will be considering modifications to proposed economy-wide pricing of carbon emissions that came close to adoption last year.The carbon market that will take shape under Oregon’s proposed legislation is expected to be vibrant and efficient. Its overall design will guide the state in achieving its strong emissions reduction goals.A key modification to last year’s proposal is the phase-in of carbon pricing for transportation; beginning in the Portland area in 2022, it will spread to all metropolitan areas in 2025 and to the rest of the state at an unspecified date.In the short run, compared to economy-wide coverage of transportation, the phase-in would have no observable effect on the carbon price or emissions.In the long run, it is important that rural residents are given clear expectations that they will also face a carbon price in the future, in order to motivate more efficient vehicle purchases and land use decisions beginning today.Sixty percent of the allowances associated with natural gas consumption will be allocated to utilities for consignment to an auction, and the revenue from the auction will be used to provide targeted compensation and efficiency improvements.Trade-exposed industries will receive free allocation of tradable allowances or equivalent value. It is expected and important that the final version of the legislation preserve an incentive for emissions reductions at these facilities.