Peter Weisberg, The Climate Trust
Weekly Policy and Finance Update – February 20, 2018
|Oregon’s proposed preference for in-state offsets raises the potential for a legal challenge. Instead, the state should design offset protocols that work well for Oregon’s farmers, ranchers and foresters.|
Last week Oregon House and Senate committees passed their respective version of the Clean Energy Jobs Bill into their rules committees, which is being called a baby step forward. While it is still seen as a stretch to pass this cap and trade legislation over the next three weeks in Oregon’s short session, moving out of committee is an important first step.
Both bills grow the market for offsets. The House version allows polluters to meet four percent of their compliance obligations with offsets, while the Senate version allows up to eight percent. Both specify that no more than half of the offsets can come from projects that do not provide direct environmental benefits to Oregon, following California’s protectionist preference for in-state projects.
We strongly believe that discrimination against out-of-state projects is the wrong way to grow Oregon’s participation in the offset market. As raised by market practitioners and even the California Air Resources Board in previous discussions, there is concern that such a policy discriminates against out-of-state offsets and therefore violates the Interstate Commerce Clause. In its 2010 cap and trade rulemaking, the Air Resources Board documented this concern: “if California allows offsets from out-of-state projects there may be legal issues if quantitative limits on offsets projects within the State differ from that of out-of-state projects (i.e. the Interstate Commerce Clause).” Both the California policy, and now the Oregon replication of it, allow for more in-state offsets (up to the full offset limit) than out-of-state offsets (only half the limit), clearly raising the potential for a legal challenge.
Instead of this quantitative discrimination, Oregon should be focused on how to write offset protocols that work well for Oregon’s farmers, ranchers and foresters. The Climate Trust has seen great potential for grassland conservation projects in Eastern Oregon, yet no protocol exists in a compliance market to guarantee a buyer for the resulting credits. Oregon could encourage in-Oregon projects by moving forward and allowing credits certified under a grassland conservation protocol to qualify for compliance in its system. As we have discussed before, California based its existing forest carbon protocol on California forest practice rules; Oregon has a chance to write a new forest protocol that works for our existing rules.
By focusing on crafting the rules that govern offset projects to consider Oregon’s opportunities to reduce and sequester emissions, Oregon’s cap and trade system can encourage Oregon projects without raising the prospect of a legal challenge.
|Staff Report: Proposed Regulation to Implement the Cap-and-Trade Program Volume II Appendix D
California Air Resources Board, Oct 2010
Interstate commerce clause referenced on page D-36
|Lawmakers move carbon cap bills closer to full vote
Ted Sickinger, The Oregonian, Feb 15, 2018
Latest In-State Offset Proposal Will Raise Legal Challenge
Nicholas van Aelstyn, Sheppard, Mullin, Richter & Hampton LLP, July 12, 2017
Harnessing the Power of the Private Sector with Opportunity Zones Sean Penrith, Feb 12, 2018
Solving State Budget Challenges with Cap and Invest Sheldon Zakreski, Feb 5, 2018
Recommendations to Accelerate California’s Digester Development Peter Weisberg, Jan 29, 2018
Image credit: Flickr/Mark Jensen