A Climate Changed

Gov. Kate Brown’s executive order to reduce greenhouse gas emissions could give the state the economic boost needed to recover from COVID-19.

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During her four years working at the Natural Resources Defense Council in Washington , D.C., Nora Apter saw the impacts of energy-efficiency policies at the state and federal levels.

Apter graduated from Lewis and Clark College in 2012 and spent eight years in the nation’s capital working to strengthen federal environmental laws. She returned home to Oregon in March to become the climate program director for the Oregon Environmental Council, a nonprofit organization that advocates for environmental policies in the public and private sectors.

One week after starting her new position, Apter was not just in a new role but in a new economic climate. “My first day on the job was March 9, and the next day I went to Salem and got to pretend to take credit for the governor’s order,” she jokes. “I rounded out the week by packing up my desk to work from home because of COVID.”

0620 Nora IT4A1662Nora Apter, climate program director for the Oregon Environmental Council. Photo by Jason E. Kaplan

The day after Apter started her new position, Gov. Brown signed executive order 20-04, which directs 19 state agencies to adopt new standards and oversight responsibilities with the goal of reducing greenhouse gas emissions 45% below 1990 levels by 2035 and 80% by 2050.

It was a victory for the Oregon Environmental Council, which had supported Democratic lawmakers’ recent cap-and-trade bills, both of which were struck down by Republican walkouts.

Apter says the executive order serves as a new opportunity for Oregon to become a leader in energy efficiency as well as providing a jump-start to an economy facing recession from the global pandemic.

“The economic benefits will be widespread and cut across a variety of businesses and sectors,” she says.

Gov. Brown’s executive order establishes carbon-emissions reductions on manufacturers and other large energy consumers, known as stationary sources, among a raft of other regulations.

The difference between the governor’s executive order and previous cap-and-trade bills is that the governor’s executive order will have no carbon marketplace attached to it. Instead, all Oregon companies will have to navigate regulations and energy-efficiency standards that will take effect no later than January 2022.

For this reason, both advocates and opponents of the legislation have labeled the system “cap and reduce,” since no trading of carbon credits will be involved.

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One of the most sweeping tasks in the executive order falls to the Department of Environmental Quality. In addition to reducing food waste by 50% and regulating methane emissions from landfills, the department is responsible for placing limits on carbon emissions from stationary sources such as sawmills, landfills and manufacturers.

Richard Whitman, director of the Department of Environmental Quality, is clear that no decisions have yet been made about how to enact the governor’s mandate. His department will look at standards from California and Washington when crafting the new rules.

He adds it will look into alternative means of compliance that would allow emitters to choose the method of greenhouse gas reduction techniques that will work for them.

His office will meet large energy consumers and hold “director-level” talks with the heads of other state agencies, such as the Department of Energy and the Public Utilities Commission, to coordinate strategy.

“We are anticipating a very large public engagement process,” says Whitman. “We are going slow so that we do have effective engagement from all Oregonians on this kind of work. No one knows where we are going to be in November.”

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On March 9, the Oregon Legislative Emergency Board, a body designed to address emergency situations when the Legislature is adjourned, convened to address COVID-19 funding, as well as other fiscal issues not addressed in the legislative short session this year.

Included in the appropriations was a $5 million allocation to the Department of Environmental Quality intended to fund 10 new positions to help pursue the goals outlined in the order.

Some large emitters prefer the governor’s direct regulation of greenhouse gases over cap and trade. Rich Angstrom, president of the Oregon Concrete and Aggregate Producers Association, says greenhouse gas reduction policies should be focused on new technology rather than carbon.

“We didn’t like cap and trade, but we didn’t entirely oppose it,” he says. “I never liked the idea of creating an economy over carbon. I was more in the camp of ‘Just tell us what you want us to do.’”

Angstrom says government action should prioritize Oregon as an early adopter of carbon-reducing technology and create a “partnership approach” for government and businesses to reduce carbon output rather than one that only regulates carbon emitters.

“I don’t think this is going to make us economically unviable, but I do think this is going to cost the economy. When you tack on these programs, it’s a drag on the economy. The cost of producing products will get passed on to the consumer,” he says. “We’re not going to do something if we can’t make money doing it.”

Greenhouse gas-reducing technology has already had an impact on cement production: Methods of recapturing carbon and reintroducing it to cement mixes allow for fewer raw materials to be used during production. The Oregon Concrete and Aggregate Producers Association is looking to Europe as a model for green technology.

“It’s not like society isn’t already working toward this. Companies are already getting Energy Star Awards, becoming LEED certified. I want Oregon to lead on this issue,” says Angstrom.

“I like it when there’s both stick and carrot, when there’s a push from regulatory programs and a pull from programs showing companies’ energy savings. A lot of these technologies pencil better.”

Others are more critical of the governor’s direct regulation of greenhouse gases. Tyler Pepple, executive director of the Alliance of Western Energy Consumers, says that the new energy-efficiency standards for stationary sources and increased government oversight will make Oregon manufacturers less productive, not more, and will cause employers to create jobs in other states not subject to the same regulations.

The organization has a variety of energy-consuming businesses as members, including tech manufacturers Intel and Microsoft.

“There is very little most of these manufacturers can do to further reduce their energy intensity and still make the products Oregonians and the rest of the world rely on in their daily lives,” he says.

“The consequence of this [executive order] may be lower overall greenhouse gas emissions in Oregon, but it will be at the cost of reduced economic activity, not more efficient manufacturers.”

Despite his organization submitting a memo to the state’s Joint Committee on Carbon Reduction warning against the economic risks of cap and trade in February of 2019, Pepple says his organization would have preferred cap and trade.

“This [executive order] will likely require covered entities to make uneconomic decisions, which in turn will make it more likely that they will either shut down operations or shift production out of the state in favor of other locations.”

Pepple’s organization asked Gov. Brown to suspend the executive order during the COVID-19 crisis, arguing the recession will make participation more difficult. Brown refused.

Experts point out how the emission-reduction regulations come at an opportune time given the outsize impact poor air quality has on low-income households struggling to deal with the COVID-19 pandemic.

“Another economic benefit of the executive order is going to come from increased public health due to air quality,” says Jana Gastellum, deputy director for programs at Oregon Environmental Council. “With COVID-19 we are starting to see the economic cost of poor public health. Areas with lower air quality are seeing higher impact.”

A study from Harvard University’s T.H. Chan School of Public Health found that even relatively small increases in air quality can reduce higher mortality rates from the coronavirus.

Opponents of carbon legislation argue that policies that legislate greenhouse gas emissions harm companies that consume considerable amounts of energy and that must compete in markets where competitors are not regulated by carbon caps.

Examples of these industries, often referred to as energy-intensive trade-exposed operations, include pulp and paper mills, and producers of steel and cement.

Tom Ryan, director of corporate communications for International Paper, says his company understands the need to reduce carbon emissions but that it opposed cap and trade because of concerns the bill would make its paper mill in Springfield uncompetitive on the global market.

“We opposed the Oregon cap-and-trade legislation because it did not include sufficient allowances and protections for energy-intensive trade-exposed operations like our Springfield mill,” he says.

“It is difficult for us to comment on the executive order because there is so little detail. Our concerns around the treatment of EITE [energy-intensive trade-exposed] businesses and increased energy costs would remain the same.”

International Paper has taken steps to reduce greenhouse gas emissions, says Ryan. Since 2010 the paper company has invested $700 million in energy-efficiency and fuel-diversity projects, leading to a 20% reduction in overall greenhouse gas output. The company announced a goal of 35% reduction below 2010 levels by 2035.

“We’ve done all this while generating 75% of the energy at our integrated mills from carbon-neutral renewable biomass residuals rather than fossil fuels,” says Ryan. “Our Springfield mill is one of the most energy-efficient linerboard producers in the industry.”

Proponents of cap and trade lament that the policy is on the legislative backburner but are optimistic the governor’s new direct regulations can boost the economy.

Nancy Hamilton, director of Oregon Business for Climate, says that cap and trade would have been a better solution to tackle the climate crisis, although she says she applauds Gov. Brown’s “bold” executive action.

“Our organization has been heartened by the governor’s leadership, but there’s only so much you can do in the executive branch,” she says.

“We believe that creating a carbon marketplace and using the investment dollars generated by cap and trade would have a significant impact to help rural and marginalized communities.”

According to Hamilton, cap and trade could have brought economic benefits to rural businesses that consume less carbon. A carbon marketplace would have meant rural energy consumers would have had more credits to sell to larger energy consumers.

“When you’re not creating incentives, you’re not creating revenue,” she says. For that reason, the governor’s executive action is a “less powerful initiative” than cap and trade, and a version of carbon legislation is still worth pursuing, says Hamilton.

“There was a large fear campaign mounted by the opposition to cap and trade, which will ultimately cost our rural communities in the long run. Without a carbon marketplace, it’s not going to provide them the revenues they could have had,” she says.

Hamilton disagrees that COVID-19 should cause Gov. Brown to waver from or rethink the new emissions standards. Instead, she says the new mandates resulting from the governor’s order will be crucial for Oregon’s economy as it recovers from the economic downturn caused by the pandemic.

“A lot of our members have been having discussions about how you can marry this executive order with the federal stimulus money that’s about to come in,” she says.

Federal dollars spent on clean-energy projects could provide steady, well-paying jobs for those newly unemployed, she adds.

“There’s a long list of shovel-ready clean-energy projects across the state that could be done, and now people are out of work. It’s a crushing economic blow to the state, but we have to figure out a way to make lemonade out of this,” she says.

“For every one job in the fossil fuel industry, there are seven jobs in renewable energy. We cannot afford to squander this moment.”

With companies across the state applying for federal funding to keep their businesses afloat, the prospect of government agencies taking a larger role in business life might seem like business as usual.

In addition to the creation of more jobs, a shift toward a state with more robust energy standards will help make the economy more competitive in the emerging low-carbon market.

Hamilton gives the example of electric bus manufacturer Proterra, which moved its headquarters to California in 2015 to be closer to its customer base after the state’s cap-and-trade program came into effect. If a “low-carbon ecosystem” could be created in Oregon, similar economic opportunities could arise, says Hamilton.

Attracting new companies to move to the state may not happen in the short term, but the governor’s order will likely give a boost to companies that contribute to the emerging low-carbon economy. It may also accelerate the creation of homegrown “green” businesses that can compete more effectively as consumers increasingly demand carbon-neutral products.

“More and more, we are seeing entities and jurisdictions asking about a company’s carbon footprint, and what that company is doing to reduce its carbon footprint,” says Hamilton. “This will give Oregon companies a competitive advantage.”

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