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Greenhouse Gas Cap & Trade Program
Colin McConnaha, DEQ Senior Climate Policy Advisor
Greenhouse Gas Cap & Trade Program | Oregon Department of Environmental Quality
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What is cap & trade?
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Elements of a cap & trade program
• Scope
– Point of regulation
• Emissions cap
• Allowance distribution
– Minimize “leakage”
– Revenue
• Cost containment
– Offsets
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Covered(83%)
Not Covered (17%)
Transportation
33%
Electricity
30%Natural Gas
9%
Large industrial
processes
7%
Other fossil fuels
3%
Small users of fossil fuels
5%
Waste
2%
Other
2% Agriculture
9%
Emissions covered by cap
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Points of regulation
5
Transportation fuels
•Terminal racks
• Importers
Electricity
• In-state generators
• Importers
Natural gas
• Utilities
• Pipelines
• Large industrial users
High emitting facilities
• Industrial process
• Large natural gas users
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Emissions cap
• Align with Oregon’s GHG targets
• Cap declines over time
• Key consideration for linkage with other
jurisdictions
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Allowance distribution methods
• Auction
• Free
– See next slide on minimizing leakage
• Consignment (hybrid)
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“Leakage”
• Issue: Oregon industries may be at a disadvantage with firms in areas without a carbon price
– Reduces jobs & economic output in Oregon
– Does not reduce emissions
• Response:
– Free allocation to firms competing with businesses in areas without a carbon price
– Invest auction proceeds in these businesses
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Revenue
• Revenue from transportation may be
restricted
• Remaining auction revenue could:
– Benefit disadvantaged & rural communities
– Minimize impacts to utility rates
– Further reduce emissions
– Other state priorities
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Approx. revenue in 2021
($millions)
10
$280
$410
VERY rough
estimate of
potential revenue
generated by
auction of
allowances
Transportationfuels
Other emission sources
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Cost containment
• Banking
• Linkage
• Price floor
• Price ceiling
• Offsets
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Questions?
12Greenhouse Gas Cap & Trade Program | Oregon Department of Environmental Quality
Colin McConnaha, DEQ Senior Climate Policy Advisor