Western Climate Initiative Cap & Trade Trials & Tribulations

Implications for Oregon

Once heralded as the vehicle to impose a Greenhouse Gas (GHG) Cap & Trade system on the western U.S. and Canada, the Western Climate Initiative (WCI) now appears severely compromised, at least south of the 49th parallel, and this could influence what Oregonians will see in the next legislative session.

Originally made up of seven states (including Oregon) and four Canadian provinces, the WCI was envisioned to be a semi-regulatory body designing and administering sweeping multistate GHG reduction efforts. The scope was to include state by state limitation and forced reductions, via a comprehensive Cap & Trade system, in everything from utility emissions to gasoline and home heating.

The effort was ill-handled from the start. Made up of non-elected staffers appointed by their governors or premiers, for years, the WCI met behind closed doors and excluded observers and the media, much to AOI's objections, producing innumerable reports, policy documents, and issue papers. No one knows how much all of this cost Oregon state government as the project was never subject to legislative approval or line item budgeting.

One of the WCI's problems was its inability to resolve implementation issues. Unable to compound a fair, workable, and detailed plan as to how complex GHG allocation and reduction strategies would be applied uniformly by each of its member states, the WCI punted by producing guideline documents which managed to be both vague and complex at the same time. State legislatures, including Oregon's, facing the same difficulties, then proposed to punt the problem to their agencies. The agencies, having no one else to punt to, would have been (or in California's case, was) charged with devising, enacting, and enforcing sweeping regulatory mandates.

Active membership in the WCI by U.S. states has dwindled. Arizona has bailed out. Utah's legislature passed a resolution against WCI membership. Oregon's legislature, after strong opposition from AOI and a broad employer/union coalition, nixed SB 80, which would have given the DEQ authority to write and enforce rules restricting even gasoline and home heating fuels. Washington and Montana have not enacted WCI Cap & Trade legislation. California may repeal its Cap & Trade law via a ballot initiative in November. New Mexico's draft GHG Cap & Trade proposal is full of caveats. In short, the WCI may end up being a predominantly Canadian, or Cal-Canadian, enterprise.

What does this portend for Oregon?

A new Cap & Trade bill in the 2011 Legislative Session is not out of the question; Oregon's WCI supporters may see a bill as part of an effort to rejuvenate the WCI or encourage a federal program. More likely, Oregon will see proposals to enact new or expanded indirect means of GHG reduction. Some of these may be beneficial and supported by AOI. The Business Energy Tax Credit (BETC) has resulted in major reductions in electric energy (coal) use while boosting jobs. Improved traffic flow, reducing congestion and more efficient use of highways, shipping, and rail all help.

There will; however, be efforts to drive up energy costs via new taxes, fees, or assessments on energy use or transportation as a means of reducing GHG. The rational for this will be twofold: (1) increased energy costs reduces GHG emissions as it curtails energy use; and (2) increased energy costs are good (as espoused by proponents) for business because when faced with high enough energy costs, businesses invest in conservation measures that then save them money and also create new jobs to design, install, and service the conservation measures.

Clearly, GHG is a big factor in many public debates. Many state agencies and local governments are already informally incorporating GHG policy into their ongoing activities as evidenced by battles over liquefied natural gas (LNG) and the I-5 bridge replacement. AOI members are involved in virtually every aspect of these issues.

One thing is for certain, although enthusiasm for the WCI may be cooling, the whole GHG issue is just heating up.