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Oregon Should Look to Offset Quality, Not Offset Usage Limits

Sheldon Zakreski, The Climate Trust
Weekly Policy and Finance Update – January 15, 2018


Oregon’s 2018 cap and invest bill’s requirement of offset usage limits as a condition for linkage could mean no jurisdiction could meet this criterion.

The Oregon legislature has been gearing up for placing a direct price on carbon now for nearly two years. These efforts have largely focused on capping carbon emissions and placing a price on tradable allowances that represent the right to emit one metric ton of carbon dioxide equivalent emissions. A key advantage of cap and trade over a carbon tax is that the market can be linked with other jurisdictions. Realizing this benefit, given Oregon’s relatively small carbon footprint, one of the primary objections is to plug into the much larger Western Climate Initiative market already consisting of California, Ontario and Quebec.

The draft bills spell out that one of Oregon’s requirements for approving linkage is that offsets meet certain conditions in the bill, including Offset Usage limits. This is different to how other jurisdictions tackle offset requirements when assessing linkage. California, for example, requires linkage candidate jurisdictions ensure offsets be real, permanent, quantifiable, verifiable, and enforceable. The draft Oregon House bill limits offset usage to 4% with no more than 2% coming from out of state projects. By contrast Ontario and Quebec have an 8% usage limit. California’s usage limit will change in 2021 and mirror the House bill, but offset usage in California will increase in 2026 to a ceiling of 6%. In its current form, it appears as though none of these jurisdictions would meet Oregon’s offset usage requirement for link.

This is something that can still be addressed as the legislative session doesn’t start for about a month. A recommended fix is to emulate California and focus on offset quality and enforceability rather than usage limits, which can fall and/or rise in linked jurisdictions due to any number of factors. The risk of not doing so is ongoing uncertainty among Oregon compliance entities about the viability of a linked market.

Research and Resources

California Air Resources Board

What Would Cap-and-Invest Mean for Oregon?
MJ Bradley & Associates, January 2018

Top News Headlines

Lawmakers unveil ‘cap and invest’ carbon pricing bills
Ted Sickinger, The Oregonian, January 9, 2018 

Interest groups respond to ‘cap and invest’ bill
Paris Achen, East Oregonian, January 9, 2018

Nothing But Clear Skies Blog

The Question of Linkage 
Sean Penrith, The Climate Trust, September 5, 2017

Recent Scorcher

CA Should Explore Options to Increase Offset Usage Peter Weisberg, Jan 8, 2018
Carbon pricing Hits a High Note Sean Penrith, Dec 19, 2017
Ontario’s Auction Emphasizes Political Risk to Cap and Trade System Peter Weisberg, Dec 11, 2017

Image credit: Flickr/Mark Jensen

This post first appeared on The Climate Trust | Invest With Purpose, please read the originial post: here

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Oregon Should Look to Offset Quality, Not Offset Usage Limits


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