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Poten&alPolicyPathwaysforOregon
SeanPenrith
Execu&veDirectorTheClimateTrust
9/24/15
INVESTWITHPURPOSE
Topics
• Targets
• Realworldperformance
• Oregon’schoices
• Implica&onsfortheregion&compliancewith
CleanPowerPlan
CarbonMarketandSpecialPurposeFundManagementExperience• Managedover$43millionincarbonfinancingforgreenhousegasemissionreduc&onprojectsandseven
na&onalprograms.• Over18yearsofexperienceindomes&cvoluntary&compliancecarbonmarkets.
History• TheOregonLegislatureestablishedtheOregonCarbonDioxideStandardin1997,requiringpowerplantsto
mi&gateapor&onoftheirGHGemissions.• Todate,allnewOregonplantshaveelectedtopayTheClimateTrusttomanagethiscomplianceobliga&on.
TheClimateTrustiscurrentlymanaging$22millionfromthisprogram.
3
TCTPorXolio
StrongOregonFocus
TMFBiofuels,Boardman
OSU,Corvalis
RoseburgLFG,DouglasCounty
Astoria
Commi]ed$6,141,754toOregon-baseddigesterprojectsforecasttodeliver741,054credits.Theprojectsare:1.FarmPowerTillamook-Tillamook2.FarmPowerMistyMeadow-Tillamook3.JCBiomethane-Junc&onCity4.RESLochmead-Junc&onCity5.RESOakLea-Aumsville6.RoseburgLFG-Roseburg7.TMFThreeMileCanyonFarms-Boardman
Currently$0.50ofeverydollarcommi]ediskeptinOregonundertheCO2Std.
2015DracReport
“Oregon’s emissions in 2020 projected to be ~11 MMTe in excess of the 51 MMTe state goal established by Legislature for that year."
By 2035, absent significant additional intervention, the gap (between business-as-usual emissions and a linear trajectory to the 2050 goal) is likely to exceed 30 MMTe.”
TheClimateTrust’scarbonpricingresearch• Comprehensiveprimaryandsecondarypeerreviewedresearchpublished2014[report]• Examined>iveexistingmechanismsaroundtheworld
ResearchContext
3concerns:• Isola&onfromorintegra&onwithsurrounding
C&Tstates
• Alignmentwithstategoals
• Progressmadetowardsreal&credibleCO2reduc&on(in&me)
2researchques&ons:• WhatmighthappenifOregonchoosesatax?• WhatmighthappenifOregonchoosescap&trade?
C&T?
C&T
?
Indicestracked
Carbonpricingasatool
CarbonPricing101:Decisioncriteria:Doesthestatewantcertaintyonprice,orcertaintyofCO2reduc&ons?1. CarbonTaxa&on:RegulatedpriceoneachtonofCO2
emi]ed,butemissionsareallowedtofluctuate
2. Cap&Trade:Placea“cap”orlimitontotalpermissibleemissions,butpricespertonofCO2areallowedtofluctuate
Keyfindings
Oncepassed,programsurvivabilitywasdeterminedbybuilt-inflexibilitytowithstandpoli&calturnoverandeffec&veholis&cprogramdesigntoachieveresultsacrossallindicators.
TheClimateTrust’scarbonpricingresearch
• Impactsonkeyindices:• Takeawaymessages:
• Designformaximumimpactacrossallfourindices
• ManagerevenueresponsiblyandlinkrevenuetoGHGreduc&on• Considercomplimentarypolicies• Planforpoli&calturnover• Beginsimplyandincreasecomplexityover&me• Priori&zeflexibility,transparency,andvalidity
Currentstatusofthesesystems:California
• Emissionsaredownby3.8%forcoveredenNNes
• CAgrewitseconomy6.6%between2010and2013
• C&Tauc&onrevenuepassed$1.6Bmark
• CAa]racted$21BincleanenergyinvestmentcapitalsincesigningofAB32
• 491,000jobsadded(3.3%growth;na&onal2.5%)
• 25%ofprogramrevenuetargetedatdisadvantagedcommuni&es
• Californialeadsthena&onwiththehighesttotalmanufacturingoutput($239B)ofanystate
Currentstatusofthesesystems:BC• Taxhasreducedemissions5-15%
dependingonmodelingused• BC’seconomyhasoutperformedtherest
ofCanadaduringthe&methetaxhasbeenineffect
• Taxfrozenat$30/tonsince2013• Becausetheystoppedraisingthetax,
revenueisfallingbehind–moreisbeingreturned!
• $1B/yeartaxrevenuesoffsetothertaxes,buthascreateddoubtonenvironmentalbenefitthisapproachachieves
Credit:SightlineIns&tute
Sources:“BC’SCARBONTAXSHIFTAFTERFIVEYEARS:RESULTSAnEnvironmental(andEconomic)SuccessStory”,SustainableProsperity2013“Bri&shColumbia’sRevenue-NeutralCarbonTax:AReviewoftheLatest“GrandExperiment”inEnvironmentalPolicy”,SustainableProsperity,NicholasIns&tuteatDukeUniversityandUniversityofO]owa,2015
Currentstatusofthesesystems:RGGI• Emissionsfrompowerplantsdown40%since2010,
halfofthisa]ributeddirectlytoRGGI• Totaleconomicgainstoregionof$2.9BinRGGI’s
firstsixyears• 30,200job-yearsaddedtoregioninRGGI’sfirstsix
years• Totalrevenueraisedsofarover$2.2B,nearlyall
reinvestedincleanenergy,renewables,jobs,etc.• Consumershavesavedacumula&ve$341Mon
electricityand$118Mongasandoil• Mostrecentauc&onclearedat$6.02,raising$152M• 6of8RGGIstatessubjecttotheCPParesetto
achievetheir2030targetsby2020!
Credit:SightlineIns&tute
ExpenditureofRGGIproceeds:
Sources:“TheEconomicImpactsoftheRegionalGreenhouseGasIni&a&veonTenNortheastandMid-Atlan&cStates”,TheAnalysisGroup2011“TheEconomicImpactsoftheRegionalGreenhouseGasIni&a&veonNineNortheastandMid-Atlan&cStates”.TheAnalysisGroup2015Auc&onresultsfromRGGI.org,Sept.2015
Currentstatusofthesesystems:EUETS
• TheEUgrewitsGDPby45%between1990and2012,whilereducingemissions19%
• EUhassetanemissionreduc&ontargetof40%by2030andhasproposedchangestotheETStohelpmeetthisgoal:• Allowanceswillbeheldoffthemarket
ininstancesofoversupply(backloading)• Capwilldeclinefasteracer2020(2.2%
peryear)Sources:EUETSpagesoftheEuropeanCommissionwebsite,h]p://ec.europa.eu/clima/policies/ets/index_en.htm
Commonapproachestoclimatemi&ga&onPros Cons
Regula&on • Emissionreduc&onispriori&zed • Moreexpensivethanmarketbasedsolu&ons,duetolackofabatementflexibility
• Subjecttorepealduetopoli&calturnover
CarbonTax • Easytounderstand• Mayu&lizeexis&ngadministra&on
structures
• Emissionreduc&onsnotassured• Canberegressiveifdesignedincorrectly• Needslegisla&veapprovaltoincreaseover&me• Difficulttoharmonizethroughouttheregion
CapandTrade • Emissionreduc&onsassured• Revenueraisedcanbereinvestedinlow-
carboneconomicdevelopment• Cost-containmentmechanismsarebuiltin• Enableslowestcosta]ainmentthrough
trading
• Requireseffec&veadministra&onandoversight• Complexityaroundintegra&onwithexis&ng
policiesanduseofrevenuesderived
FeeandDividend
• Creates“s&ckiness”topreventagainstrepeal
• Socialequityisques&onableifeveryonereceivessameamount
• Dividenddistribu&onmaynotcontributetodevelopmentoflowcarboneconomy
Sources:“Markets versus Regulation: The Efficiency and Distributional Impacts of U.S. Climate Policy Proposals”, MIT May 2014
Oregon’sChoices1) Cap&Trade(HB3470):ModeledacerCalifornia’sAB32
• GivesORS468A.205greenhousegasreduc&ongoalsthemandateitneeds(10%below1990levelsby2020and75%below1990levelsby2050).
• Appliesthebestavailablescience.• ConsolidatesOregonlaws,rulesandpoliciesaboutemissionsintoacomprehensiveframework.• Mandatesemissionreduc&onswhicharereal,quan&fiable,verifiableandenforceable.• Requiresleastcostimplementa&onstrategies.• Providesprotec&onsthatimpactsdonotfalldispropor&onatelyonlowincomecommuni&es.• Authorizesamarket-basedtradingandauc&onprogramsimilartoCalifornialawAB32.• Whileopponentsofcap&tradearguethatitscomplexi&esareadisadvantage,thissamecomplexity
maycontributetoincreaseddifficultyinrepealingacap&tradeprogramonceinplace.
Oregon’sChoices2)CarbonTax(anddividend):• Sendscomprehensiblemarket-basedmessagetoconsumers,peopleunderstand"tax.”• Taxa&onisgenerallyperceivedaseasiertoadministerbecauseitcanu&lizepor&onsofexis&ng
taxstructures.• Canchoosetoremitsfundsbacktoci&zensdesignedtobuildsupport(s&ckiness).• Offerspricecertaintytoaidindustryplanning(Note,thepriceofcarbonundertheEUETS--the
mostvola&lesystemweexamined--wasnomorevola&lethanthatoffossilfuelscommodi&eslikeoilornaturalgas).
• Itisnotablethattherearenotyetanymul&-jurisdic&onalcarbontaxschemes;thecomplexityofwri&nginterlockingtaxcodeforjurisdic&onswithinaregionmayhavepreventedthistypeofschemetodate.
• Ataxdesignhastocontemplatepricingthatwillassurea]ainmentofstate’sGHGreduc&ongoals.
• Targetedreinvestmentof(apor&on)taxproceedsshouldbuildacleaneconomy/jobs.
Bearinmind….• NeitherC&Tortaxonitsownislikelytoreduceemissionsenough
tomeetthedrama&cemissionreduc&ontargetsneeded.• California’sAB32wasneverabillspecificallyaboutcap-and-trade.
ItwasacomprehensivebundletomeetitsGHGreduc&ongoals.• A‘marketbased’mechanismwasalsoarequirementunderAB32,
thoughnotspecified.• AllrevenuefromAB32’scap&trademust,bylaw,beusedto
reducegreenhousegasemissions• AB32’sdecreasingcapwithfloorprice+costcontainmentreserve
=>benefitsofcapwithpricecertainty/stability.• SomeEuropeancountries,likeSweden,areusingtaxesasan
elementofcomplementarypolicy,tocoversectorsnotcoveredbycapandtrade.
• Goodprogramdesigncanshieldagainsttheriskofgamingormarketmanipula&on.
Implica&ons:RegionalMarket• Oregon,Washington,California,andBChavepledgedtoaligntheircarbonpolicyefforts• Quebecannouncednewcarbonreduc&onofa37%reduc&onbelow1990levelsby2030,themost
ambi&oussuchtargetinCanada.LinkingwithOntarioETS• TheWestCoastrepresentstheworld’s5thlargesteconomy• By2017,¼oftheworld’semissionswillbepricedinsomeform!
Implica&ons:CompliancewithCleanPowerPlan
EmissionStandardsPlan–stateplacesfederallyenforceableemissionstandardsonaffectedelectricgenera&ngunits(EGUs)thatfullymeettheemissionguidelines
-canbedesignedtomeettheCO2emissionperformanceratesorstategoal(rate- basedormass-basedgoal)
StateMeasuresPlan-stateincludes,atleastinpart,measuresimplementedbythestatethatarenotincludedasfederallyenforceableemissionstandards
-designedtoachievethestateCO2mass-basedgoal-includesfederallyenforceablemeasuresasabackstop
Credit:IETAandEPA• Stateshaveflexibilityto
designtheirowncompliancestrategieswiththeCPP
• Choiceofrateormassbasedapproach
• Emissionstradingisencouraged
• Manystatesalreadyexploringinterstatetradingprogramsasamethodofcompliance
Oregoncanpricecarboninawaythatreducesemissions,contributestolow-carboneconomicgrowth,provideswell-paying
jobs,andincreasessocialequity.
Centralclosingques&on:
Istherea4metoacknowledgethata‘compe44vedisadvantage’rela4vetootherjurisdic4onspalesinthefaceofplanetarydisadvantageifwecon4nuetoprocras4nate?
A.“AnEvalua&onofPoten&alCarbonPricingMechanismsfortheStateofOregon”h]p://climatetrust.org/wp-content/uploads/2014/07/An-Evalua&on-of-Poten&al-Carbon-Pricing-Mechanisms-for-the-State-of-Oregon.pdfB.“AchievingCarbonRevenueLeverage”h]ps://climatetrust.box.com/s/4r9024k54fyxgbtlpufpC.DraUOregonGlobalWarmingCommissionReporth]p://www.keeporegoncool.org/mee&ng/oregon-global-warming-commission-mee&ng-%E2%80%93-september-2015D.MarketsversusRegula&on:TheEfficiencyandDistribu&onalImpactsofU.S.ClimatePolicyProposalsh]p://globalchange.mit.edu/files/document/MITJPSPGC_Rpt263.pdf
