Birth, death and rebirth of Oregon's carbon market

Oregon was the first state in the U.S. to pass a law capping greenhouse gas emissions from power plants, and the first to create the prototype of a state-mandated carbon exchange. In 1997, the Oregon Legislature passed House Bill 3283, requiring all newly built energy facilities to keep their carbon dioxide emissions 17% below the cleanest power plant in the country. If unable to reach that target, the companies could pay to offset their emissions by investing in activities that would absorb and store carbon dioxide or cut emissions.

It led to the creation of the Oregon Climate Trust, today known as The Climate Trust, a nonprofit designed to acquire carbon offsets for companies. To do so, the group identified, evaluated, quantified and verified projects that could offset carbon dioxide emissions. The trust came up with some of the first methodologies for measuring carbon storage from forests and other ecosystems, and the first protocols for ensuring the accuracy and integrity of projects.

In the years following the passage of House Bill 3283, Oregon legislators tried and failed at least nine times to pass legislation that would have put a price on carbon dioxide pollution and would have required all polluting companies in the state to cap their emissions by either buying or trading carbon credits.

The last attempt to pass such a cap-and-trade law in 2020 made national news when Oregon’s Senate Republicans walked out of the legislative session to avoid voting. Oregon has not passed such legislation since, and instead, the Oregon Department of Environmental Quality has had to piecemeal together its own programs to begin putting prices on greenhouse gas pollution. In 2016, it enacted the Clean Fuels Program, which requires fossil fuels suppliers, such as Chevron and Exxon Mobil, to gradually reduce the carbon dioxide emissions from the fuels they sell in Oregon, until they’ve cut emissions at least 37% by 2035. The companies selling fossil fuels in Oregon essentially owe a carbon debt to DEQ. To pay it, they can reduce the carbon intensity of their fuels by blending them with biofuels, such as those from vegetable oils and animal fats. They can also buy carbon credits from clean fuels producers to offset some of their emissions. Clean fuels producers, such as companies installing electric vehicle charging stations, earn carbon credits from the environmental quality department. For every ton of carbon emissions they save from entering the atmosphere, they receive one carbon credit. Buyers and sellers negotiate the sale price, but the average price for each Oregon credit in 2023 was about $129. The department is also currently trying to reinstate a carbon investment program that’s similar to House Bill 3283.

The Community Climate Investments program would charge companies $129 per offset they wish to buy to meet some portion of their required emissions reduction under Oregon’s Climate Protection Program. Officials at the environmental quality department say this reflects the costs of running the program, the true cost of carbon dioxide emissions and the costs of investments that will help the state transition off of fossil fuels. The Climate Protection Program, which is being reworked by the environmental department and is expected to be reinstated by early 2025, calls for a 50% reduction in greenhouse gas pollution by 2035 and a 90% reduction by 2050.

The department would send the bulk of the money to a nonprofit that would help fund community-based projects such as weatherizing public buildings, installing heat pumps or solar panels at affordable housing sites, or buying electric vehicles or vehicle chargers for community groups and tribes.

Oregon’s neighbors have also acted, with California and Washington already running government-regulated carbon markets. Washington’s launched in early 2023, and generated more than $1.8 billion in credits in its first year. But in November, Washingtonians will vote on whether to have it dismantled following a ballot initiative to repeal the state’s landmark climate legislation, including its cap-and-invest program. That initiative is being led by a conservative political committee funded largely by a Washington hedge fund manager and part-time farmer, Brian Heywood. Critics say the program won’t significantly move the needle on climate change but will drive up fuel, food and energy prices.

California’s market has been around since 2012, and has, according to a 2020 report, generated more than $12.5 billion in revenue from hundreds of projects over the years, which are expected to keep nearly 45 million metric tons of carbon dioxide out of the atmosphere. That’s equal to taking more than 10 million gas-powered cars off of California roads for a year.

Nearly 40 countries have imposed a government-mandated tax on carbon dioxide emissions. These include much of the European Union, or EU, China, Argentina, New Zealand and Japan. And dozens of countries have propped up government mandated cap-and-trade programs. This also includes every country in the EU, Canada, Colombia, South Africa and Australia, according to the World Bank. Despite efforts over the last 20 years, Congress has failed to pass legislation that would put a price on carbon dioxide pollution in the U.S. and create a federally mandated and regulated cap-and-trade market for emissions.

Reporting for this project was supported by the MIT Environmental Solutions Journalism Fellowship.