Legislature eyes Cap and Trade (Tax)

Associated Oregon Industries
Oregon’s largest business advocate

by Mike Freese

In the upcoming 2016 “Short Session,” legislators will debate a controversial cap and trade bill, labeled the “Healthy Climate Act.” In short, the bill proposes to raise billions in new revenue on the backs of unsuspecting businesses and consumers. Proponents suggest this is necessary for Oregon to do “its part.”

Without question, Oregon is a leader in meeting global climate change challenges. We recognize that Oregon’s natural environment is one of our great assets. It’s intertwined with our history, identity, and economic development designed to attract new companies and talent. That’s why Oregon businesses have been leading the effort to find new ways to reduce energy use and carbon emissions. Nobody has a more urgent mandate to act in an environmentally responsible way than we do. Our values and those of our workers and the communities we call home demand no less.

That is why Oregonians lead the nation in supporting a clean economy. According to the Energy Information Administration, Oregon already produces over 74% non-carbon emitting energy and in terms of gross domestic product, Oregon produces more with less carbon emissions than any non-nuclear power state. These statistics will only improve as Oregon moves closer to achieving its renewable portfolio standard in 2025. In addition, according to the U.S. EPA’s state inventory of CO2 emissions (2013 data), Oregon’s industrial sector emits 13% less CO2 than it did in 1990. In other words, the industrial sector has met the 1990 goal seven years ahead of schedule. This is all due to the investments of businesses and consumers. Unfortunately, the proposed cap and trade legislation proposes to further punish Oregon businesses and consumers that have made investments in clean energy.

In simple terms, the Healthy Climate Act requires the Department of Environmental Quality (DEQ) to cap greenhouse gas emissions below 1990 levels by 20% in 2025, 45% in 2035 and 75% in 2050. To meet those targets, the DEQ must create a “market mechanism” to allow for trading of carbon credits or “allowances.” An allowance is a regulatory term for an authorization for certain entities to emit greenhouse gases, like CO2. Over time, with fewer allowances made available to meet the greenhouse gas emissions caps, these allowances become more expensive. The revenues generated from the sales of allowances would fund projects approved by government agencies and select committees.

Proponents suggest that the revenues would go to rural Oregon and fund climate mitigation projects. However, the bill language provides no certainty that those projects will benefit anyone other than the select few special interests empowered to allocate money; environmentalists and government employees.

Moreover, this is an aggressive, costly proposal that fails to address cost or economic impacts. The result: higher energy costs, a depressed economy, and no meaningful contribution toward improving an otherwise global problem. According to a study commissioned by the Legislature, Portland State University found that carbon prices (e.g., “allowances”) need to be priced at $60 per metric ton to meet the ambitious 2025 cap. Using 2014 emission levels, this would result in over a $3 billion tax increase on businesses and consumers, raising gas prices by approximately $.60 per gallon and electricity rates by approximately 30% by 2025. Overall, the proposal would have a significant impact on our working class and lower income workers trying to heat their homes, drive to school, or even find work.

In response, proponents claim California’s economy has not suffered as a result of their cap and trade program. What proponents fail to mention is that California’s manufacturing sector is struggling and has lost more jobs than any other state since 1998 (604,800). In addition, studies show that the California cap and trade program is a $2,500 hidden tax on families and reducing wages across the manufacturing sector.

Unlike California, Oregon relies on manufacturing and low cost energy. In fact, 30% of Oregon’s Gross Domestic Product (GDP) comes from the manufacturing sector. The manufacturing sector doesn’t just provide jobs, it provides jobs that pay 30% more than the average worker. All of which are critical to a healthy economy. Unfortunately, the cap and trade legislation will require tens-of-millions of dollars in new compliance costs that will force companies to leave Oregon to other higher carbon emitting energy markets. That’s not good for Oregon’s environment, economy, workers and communities.

Instead of a go-it-alone approach and attacking Oregon employers and the lower income workers, this Legislature needs to revisit its priorities. There is a way to balance a healthy climate and a healthy economy, but the Healthy Climate Act isn’t the way. Oregon businesses have demonstrated their leadership and willingness to reduce energy use and carbon emissions. There is much more to be done if we work together toward this shared goal.

The Healthy Climate Act increases prices on those least able to afford it, drives jobs to other states, and harms the goal of reducing global greenhouse gas emissions. AOI is strongly opposed to this bill.