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Oregon urged to design cap-and-trade program to link to WCI

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Oregon urged to design cap-and-trade program to link to WCI

Any Oregon cap-and-trade program for greenhouse gas emissions should be designed with the ability for a future linkage with existing systems in California and Quebec, according to an analysis presented during a Jan. 25 public workshop hosted by the Oregon Department of Environmental Quality.

The analysis, which examines various market design elements in Oregon, indicates that a program with a wide scope, covering as many sources of emissions as possible, would likely produce the most cost-effective reductions in Oregon.

"A broad sectoral scope incentivizes most cost-effective reductions and reduces possibility of leakage from capped to uncapped sectors," presentation slides from the workshop showed.

The analysis also indicates that carbon allowances under an Oregon cap-and-trade system should be auctioned "to provide flexibility in addressing distributional concerns."

Carbon offset rules in Oregon should be similar to those of Western Climate Initiative members California and Quebec. Also, an Oregon cap-and-trade program should include price floors and reserve prices to "enhance stability" and allowances should be permitted to be banked for future use.

Current Oregon law establishes a greenhouse gas reduction goal of 10% below 1990 levels by 2020 and a goal of at least 75% below 1990 levels by 2050. According to the Oregon Global Warming Commission's Biennial Report to the Legislature, dated September 2015, Oregon's total greenhouse gas emissions were pegged at nearly 61 million tonnes of CO2 equivalent in 2012, compared to a level of 56.9 million tonnes in 1990.

"Complementary policies implemented alongside a cap-and-trade program in Oregon may reduce the macroeconomic impact," the presentation said. "Based on preliminary modeling, complementary policies in Oregon may achieve reductions of 8-15 [million metric tonnes] of CO2e, leaving a gap of 9-16 [million metric tonnes] of CO2e to be mitigated by cap-and-trade in 2035."

The analysis was completed by the San Francisco-based consultancy firm Energy + Environmental Economics.

Although a bill that would have required the state to implement a cap-and-trade system fell to the wayside in early 2016, the Oregon State Legislature instructed the Oregon Department of Environmental Quality to conduct a study on how a market-based approach to reducing greenhouse gas emissions would operate in the state.

In November 2016, the Oregon DEQ released a partial draft study that examined how a greenhouse gas cap-and-trade system would operate in Oregon and possibly link with the existing programs in California and Quebec. The Oregon DEQ is expected to present all of its findings to the state legislature, which reconvenes in February.