Comments Greenhouse Gas Emissions Program: Illustrative Scenarios and Program Development

State of Oregon Department of Environmental Quality Comments Greenhouse Gas Emissions Program: Illustrative Scenarios and Program Development

This document is a compilation of written comments received in response to DEQ’s illustrative scenario discussion held on Dec. 2, 2020 and general program development.

Comments

350 Deschutes 2 Ash Grove Cement Company 3 Climate Solutions and Oregon Environmental Council 6 Columbia River Steamship Operators’ Association 9 Darlene Chirman 12 Dave White 13 Environmental Defense Fund 19 Elders Climate Action 25 Elizabeth Graser-Lindsey 32 EVRAZ 34 Food Northwest 63 Green Energy Institute 67 League of Women Voters 74 Marsha Hanchrow 76 Natural Resources Defense Council 77 Oregon Association of Conservation Districts 78 Oregon Fuels Association 80 Oregon Wild and Beyond Toxics 82 Pacific Northwest Chapter of Institute of Scrap Recycling Industries 84 Dr. Pat DeLaquil 86 Ralph Cohen 88 The Climate Trust 90

1 Statement of Interest for the DEQ Rulemaking Advisory Committee Submitted by: Diane Hodiak, Executive Director, 350Deschutes. Thank you for this opportunity.

Stretch target by 2050. Which is beyond the 35% below 1990 levels by 2035 Thank you for the opportunity to submit my comments. Please include Forest Biomass Emitters and Burning Sites. Emission reduction Today is Superior to future emission reductions. The carbon debt of forest biomass burning approaches 75 years before it truly reaches carbon neutrality. Particularly if lifecycle analysis is used and emissions from transport and storage are included. Nonetheless, when the final “Biomass Sustainability and Carbon Policy Study” (aka the “Manomet Report”) was issued, the results surprised even the researchers. The study concluded that net carbon emissions from burning biomass in utility-scale facilities emitted more carbon than even coal, and that it would take decades to pay off the “carbon debt” created by harvesting forests for fuel. Small burners (i.e. thermal and combined-heatand-power facilities) with higher efficiencies were found to have shorter payoff periods for their carbon debt, but even their emissions exceeded those from fossil fuels for several years. Partnership for Policy Integrity

Offsets are important, but secondary to real emission reductions. Here in Central Oregon, an equity group, Warm Springs Tribes have a carbon sequestration program. This is a positive instance of positively sourced offsets. But limitations (I believe California ARB is at 8%) are needed and they should follow strict rules. (real, quantifiable, additional and permanent project-based emission reductions) They should not be allowed for polluters who operate in locations in proximity to vulnerable communities.

Interagency Communication and Problem Solving What is the vehicle or committee to make this happen? Beyond the Global Warming Commission which has been mired in politics. Is there a hub for synergizing ideas and solutions? One agency might help another or work together on public works. For example, ODOT might acquire land for mobility paths while another solves the problem of vacant space. Or, one agency might share their GHG emission inventory. (hopefully each agency will do one?) to assist another agency in doing their inventory.

2 December 8, 2020

VIA EMAIL

Colin McConnaha Manager, Office of Greenhouse Gas Programs Oregon Department of Environmental Quality 700 NE Multnomah Street, Suite 600 Portland, OR 97232

Re: Comments on DEQ’s Cap & Reduce Rulemaking Scenario Materials

Dear Mr. McConnaha:

Ash Grove Cement Company (Ash Grove) appreciates the opportunity to comment on the Department of Environmental Quality’s (DEQ) December 2, 2020 greenhouse gas (GHG) Cap & Reduce Illustrative Scenarios document. Ash Grove operates a portland cement plant in Durkee, the only such plant in the state of Oregon. The cement produced at this plant is used in the construction of highways, bridges, commercial and industrial complexes, residential homes, and a myriad of other structures. Any cement used in Oregon either comes from this plant or is imported from another state or country. A greenhouse gas life cycle analysis for portland cement would recognize that for cement imported into the state, a substantial amount of the GHG emissions is attributable to transportation of the product. Cement imported into the state will inevitably have a significantly larger carbon footprint than cement produced in the state.

Ash Grove has a long history of reducing GHG emissions in Oregon. Energy is Ash Grove’s largest production cost and so we have every incentive to reduce our overall energy consumption. Towards this end, Ash Grove operates a highly efficient preheater/precalciner kiln that employs extensive heat recovery to extract and reuse thermal energy across the process. In recognition of this effort, the U.S. Environmental Protection Agency awarded the Durkee plant ENERGY STAR® certification in 2016. We have also heavily invested in the plant to minimize indirect emissions associated with our use of electricity in the process. Ash Grove remains committed to producing cement in Oregon and doing so in a manner that minimizes our carbon footprint to the extent reasonably possible.

3 In 2018, the Oregon Carbon Policy Office engaged Vivid Economics (Vivid) to conduct a study of industry sectors in Oregon that are subject to leakage. Vivid defined “leakage” as the process whereby carbon cost passthrough causes production shifts from jurisdictions with more carbon regulation to jurisdictions with less carbon regulation raising net global emissions. The 2018 Vivid study noted that cement manufacturing is consistently identified in all GHG programs as subject to leakage; for example, the California Air Resources Board identifies cement manufacturing as at “high risk” of leakage. Vivid concluded in its analysis that Ash Grove’s Durkee cement plant would likewise be subject to significant risk of leakage as the result of carbon pricing. In short, Vivid concluded on behalf of the Oregon Carbon Policy Office that portland cement manufacturing is an Emissions Intensive, Trade Exposed (EITE) industry.

Ash Grove appreciates that in the December 2, 2020 Illustrative Scenarios document, the Department identified the containment of costs for businesses and consumers as one of the three primary goals of the Cap & Reduce program. This concept is particularly important for EITE industries as a failure to recognize cost would result in a global increase in GHG emissions. Such an outcome under Cap & Reduce would harm Oregon’s economy and promote climate change. Those are outcomes that we can all agree are to be avoided.

Ash Grove likewise appreciates the outline of the three scenarios in the December 2 document, but was looking for details on how EITEs would be addressed under any such program. None of the three scenarios outlined a compliance pathway that would address the unique needs of an EITE industry such as cement manufacturing. It is critical that each EITE industry be held to an emissions performance level reflective of what best available technology can achieve. This can best be accomplished by benchmarking for EITE industries and distributing allowances based on what can reasonably be achieved instead of what has been achieved historically. Each individual EITE can then make its own resource allocations to comply in the most effective way. However, given that, by definition, an EITE cannot pass carbon costs through to its customers, a conventional mass cap approach such as is outlined in the three scenarios cannot be applied to the small segment of the state’s emissions inventory reflective of EITE industries. Otherwise, as the Vivid study clearly pointed out, the unavoidable result will be to squeeze production and jobs out of the state. The blessing and curse of Oregon is ready proximity to ports that make it easy to import substitute products. Where, as with portland cement, there is global oversupply and the good itself is fungible, even small price increases can devastate a local business resulting in increased global GHG emissions.

Ash Grove stands ready to assist the Department as it develops specific provisions for EITE industries. Through our corporate parent, CRH, we have access to a wealth of experience operating under other carbon schemes including those in the European Union and Canada. We recognize the need to keep production and jobs in the state while exemplifying good practices. Towards that end we encourage DEQ to call on us to help in developing a program that will ensure that EITE industries do their part in limiting GHG emissions but also remain viable employers and leaders in their communities. A hard mass cap with mandatory reductions bearing no correlation to what is technically feasibly will do nothing to safeguard low income communities such as those in Baker County or to reduce global GHG emissions. By contrast, a program that incentivizes EITE industries to implement technically feasible GHG reductions benefits the state in multiple ways.

4 In addition to a technology focused program, we also encourage DEQ to build into its Cap & Reduce program features that will encourage the replacement of virgin fuels with alternative fuels consisting in part of materials that have already served their original intended purpose. In a heavily controlled facility such as a cement kiln these fuels can reduce global GHG emissions associated with fuel extraction and processing while minimizing any emissions. Incorporating this approach into the Cap & Reduce program will address issues of equity, emissions and cost.

We appreciate your work on this program and your willingness to ensure that EITE industries remain a viable part of Oregon’s rural counties. The most recent statistics from Oregon’s Department of Human Services indicate that Baker County has a nearly 30 percent higher poverty rate as compared to the rest of the state. A previous economic review board determined that 116 Ash Grove Cement jobs in Baker County would affect 600 spin off jobs locally and is equivalent to 114,000 jobs in Portland. The loss of Ash Grove Cement would serve to increase the disparity in poverty between Baker County and the remainder of the state. Addressing EITE industries such as cement manufacturing is an important means of improving the health and welfare of Baker County and Oregon.

Please do not hesitate to call me if you have any questions about these comments.

Sincerely,

Brian Rhees ______

Brian Rhees Regional VP West Ash Grove Cement Company

5 December 9, 2020

Office of Greenhouse Gas Programs Department of Environmental Quality 700 NE Multnomah St. Suite 600 Portland, OR 97232

RE: DEQ Cap and Reduce Illustrative Scenarios

DEQ’s Office of Greenhouse Gas Programs,

Thank you for the opportunity to comment on DEQ’s Illustrative Scenarios related to cap and reduce program design. Climate Solutions and Oregon Environmental Council offer the following joint comments:

1) Emissions reductions and equity should not be tradeoffs for program design and should not be weighted equally with costs.

DEQ’s written presentation of the three program goals could be read to suggest that emissions reductions, equity, and costs should be weighted equally in program design and that it is a zero sum game between the three (e.g. use of an equilateral triangle to depict the three goals). It was reassuring to hear during the presentation that DEQ does not see it this way.

DEQ should not weigh the three equally. Cap and reduce is ultimately about reducing emissions to address the climate crisis and alleviate air pollution and other climate burdens on frontline communities. Industries have externalized these costs on families, communities and the environment and need to be held accountable for their pollution moving forward.

2) Equity and emissions reductions are not mutually exclusive

DEQ’s inclusion and discussion of an equity-focused program design element in a less steep cap decline scenario, but not in the steep decline scenario, painted a misleading picture that equity and steep emissions reductions are at odds with each other. That is not the case. Steep emissions reductions actually promote equity by helping avoid the worst impacts of climate change on frontline communities and also improving air quality in frontline communities.

6 3) A steep cap decline and an initial cap that requires reductions from day one are necessary parts of any scenario

DEQ presented scenarios that differ on the steepness of the cap decline as well as whether the initial cap is set below total regulated emissions. These should not be items to toggle. Science says we need to reduce emissions sooner rather than later to avoid the worst impacts. As a result, DEQ should require and front-load earlier reductions rather than pushing reductions out to later years. This includes a steep decline and setting the initial cap at a level that will require emissions reductions from day one (functionally this would likely mean setting the cap below the estimated emissions for the covered entities that year). In addition to the scientific imperative mentioned above, we also know from Energy Trust of Oregon analysis presented to the Legislature that there are industrial energy efficiency opportunities at the ready that could result in immediate benefits (e.g. reduced ghg emissions, cost savings, and job creation).

4) Any scenario DEQ pursues should at least be consistent with achieving the state’s climate goals – particularly the 2035 goal.

It was very disappointing that DEQ did not provide any assurance that the cap and reduce program would attempt to at least track the state’s 2035 and 2050 greenhouse gas reduction goals. The Executive Order directs the agencies – including DEQ - to do everything in their authority to help achieve the goals. In addition, each of the Executive Order provisions regarding cap and reduce state that the program should reduce emissions “consistent with the science-based emissions reduction goals” set forth in the Executive Order. We also know that those targets are a minimum as the science continues to evolve that we need to go further and faster on emissions reductions. The goals as written provide the flexibility to go above and beyond and DEQ should also consider designing a program that does that.

5) Key components of program design are missing from these scenarios

In addition to not including whether the cap decline is tied to the overall state goals (in particular the more near-term 2035 target) as noted in #4 above, there were a number of other key pieces left out of the scenarios. For example, the scenarios did not include where the regulatory thresholds would be set and how many entities would be covered. While DEQ noted these and other specifics were purposely not included, these are critical components to program design and need to be part of scenario discussions moving forward.

6) Mass-based standards should be a core design element of the program as DEQ noted

Mass-based standards provide assurance of achieving overall emissions reductions and desired outcomes as DEQ has noted in its brief. This assurance of achieving overall emissions reductions is critical to addressing the climate crisis.

7 7) Use of DEQ-authorized protocols to achieve co-benefits in Oregon communities should be considered further

The potential use of alternative compliance options with DEQ-authorized protocols to reduce emissions and deliver co-benefits to Oregon communities as outlined in Scenario 2 is an interesting new idea that is worth further conversation. As DEQ noted, there are a number of climate solutions such as electric buses or electric heating systems that can reduce greenhouse gas emissions and also provide additional benefits. Further discussion of the possibilities is needed to better understand the vision and contours of this idea.

8) A more holistic discussion and consideration of costs (and benefits) is needed

DEQ’s discussion of costs does not appear to reflect a holistic consideration of costs. For example, it does not appear to factor in the cost of inaction on climate change nor air quality improvements from cap and reduce that can produce savings for people and businesses. A fuller picture of costs and benefits should be provided before making program design decisions. DEQ should also consider broadening the term to “economics” to reflect the more holistic consideration of costs and benefits.

Thank you again for the opportunity to comment and we look forward to the formal rulemaking process.

Sincerely,

Zachariah Baker Nora Apter Oregon Policy Manager Climate Program Director Climate Solutions Oregon Environmental Council

8 December 8, 2020

Mr. Colin McConnaha Manager, Office of Greenhouse Gas Programs Oregon Department of Environmental Quality Lloyd 700 Building 700 NE Multnomah St. #600 Portland, OR 97232 Email: [email protected]

RE: Cap and Reduce Rulemaking of Transportation Fuels

Dear Mr. McConnaha:

As the representative agency for ship operators on the Columbia River, we monitor state rulemaking to ensure uniformity of rules so maritime commerce on the Columbia River is not adversely impacted relative to other waterways or other states. Over the last several years, the Oregon legislature has considered legislation to cap greenhouse gas (GHG) emissions from sources in the State. In each iteration of that potential legislation, the legislature made sure to not include marine vessels and marine fuels. Recently, Oregon DEQ has begun a process to develop rules to cap and reduce GHG emissions from operations in the State. The CRSOA requests that Oregon DEQ follow the lead of the legislature to exclude marine vessels, specifically fuels used for marine vessels, from any GHG regulation.

I. THE COLUMBIA RIVER STEAMSHIP OPERATORS ASSOCIATION Established in 1922, the Columbia River Steamship Operators’ Association consists of members and associate members representing ship owners, operators, agents, tow companies, and bunkering companies as well as terminal operators, launch companies, and ports along the Oregon Coast and Columbia/Willamette River Systems. The mission of the Columbia River Steamship Operators’ Association is to facilitate trade, provide business leadership, exercise principles of environmental stewardship, serve as an industry focal point, and promote operating policies and practices that are safe, reliable, efficient, and cost effective.

The Columbia River trade corridor is the lifeblood of our regional economy, supporting over 56 million tons of foreign trade at a value of over $21 billion annually. The Columbia River is the nation’s number one wheat export gateway, with over half of all US wheat being transported to export markets through the Columbia River. Our river is America’s second largest exporter of corn and soybeans. It is the third largest grain export gateway in the world, as well as the West Coast’s leader in dry bulks, mineral bulks, wood exports and auto exports. Over 40,000 local jobs are dependent on marine transportation.

CRSOA’s purpose is to make the ports in the Columbia River region increasingly popular for commercial ships and shippers to come and do business. This is accomplished by ensuring that quality services are provided at competitive prices in a safe, secure, reliable, and efficient manner. We are

9 proud of the longstanding work of the maritime industry regarding ship emissions to ensure safe navigation, environmental responsibility, and competiveness of our regional ports.

II. INTERNATIONAL STANDARD ARE REDUCING GHG EMISSIONS FROM MARINE VESSELS. Around 80% of global trade by volume is carried by sea (UNCTAD, Review of Maritime Transport, 2018). But, GHG emissions from international shipping were estimated to be just 2.2% of global anthropogenic emissions (Third International Maritime Organization GHG Study, 2014).

For more than twenty years the International Maritime Organization (IMO), a specialized agency of the United Nations, has been developing and implementing requirements to reduce the shipping industry's GHG Emissions. The IMO has set requirements for the industry to achieve GHG emissions reduction consistent with the Paris Agreement goals: reduction of GHG emission by at least 50% by 2050 compared to 2008, and reducing the carbon intensity of emissions by 40% by 2030, and 70% by 2050 compared to 2008 levels.1 Steps that have had an immediate impact include: Mandatory design requirements for new ships, which set increasingly strict carbon intensity standards and mandatory Ship Energy Efficiency Management Plans for operators to improve the energy efficiency of all ships. These measures have already had a near-20% reduction in GHG emissions.

The IMO is now incentivizing, on an international scale, development and integration of low-carbon fuels to move ship traffic toward a no-carbon fuel platform. For example, the use of liquefied natural gas (LNG) as an alternative fuel has increased and greatly reduces GHG, as well as NOx, SOx and particulate matter emissions, from marine vessels. The IMO is actively working with partners across the globe to develop zero-carbon fuels to achieve the 2050 target.

III. REGULATIONS IMPACTING INTERSTATE MARINE COMMERCE INJURE OREGON’S ECONOMY WITHOUT IMPROVING THE ENVIRONMENT. Shipping is a global industry, with global markets impacting the movement of goods. Ships call on ports that make the most logistical and economic sense for getting the goods to market. Where states implement regulations that negatively impact shipping, those ships go elsewhere. Were DEQ to regulate maritime emissions while, for example, California and Washington do not, the simple economic reality is that local commercial activity will be negatively impacted. Growers, manufacturers, and distributors, now faced with increased shipping costs in Oregon, will turn to ports in neighboring states with a lower cost of doing business. In other words, the commercial activity itself does not disappear—it simply leaves Oregon.

The Oregon legislature was acutely aware of this economic disincentive (known as “leakage”) when it specifically excluded emissions caps for watercraft in developing its “cap and trade” regulations over the last several years. In 2019, the Joint Committee on Carbon Reduction excluded GHG emissions from fuel in marine vessels in HB 2020. See S. 17(2)(a). And, in 2020, SB 1530 also explicitly excluded GHG emissions from fuels used in marine vessels. See S. 6(1)(a).

1 Likewise, the International Chamber of Shipping (ICS) announced in October 2020 that an overwhelming number of UN members have agreed to legally binding measures to ensure a 40% reduction of carbon intensity across the global maritime fleet by 2030, compared to 2008.

10 Not only would DEQ rulemaking on marine fuels cause economic hardship and be contrary to clearly expressed legislative intent, it is quite possible that such an initiative would have the unintended consequence of increasing GHG emissions. For example, manufacturers and shippers of raw and processed grains (one of the major export commodities for Oregon), would need to go further—to Washington or California ports in order to reach export markets. This extra time and distance in transit would require additional emissions from less-efficient transportation sources. Ultimately, state specific efforts to reduce emissions from marine vessels will injure commerce but not reduce GHG emissions.

IV. CONCLUSION Because marine navigation safety and environmental protection are paramount in the Columbia River, we request exemption of marine fuels from any regulatory framework regarding carbon emissions. We hope you will take our suggestions and insights into consideration. We look forward to working with DEQ as a collaborator and partner in safeguarding Oregon’s maritime industry and improving environmental quality.

Respectfully,

Kate Mickelson Executive Director

Cc: Nancy Bennett, Policy and External Affairs Manager, ODEQ, via email CRSOA Board of Directors, via email Mark Landauer, CRSOA Oregon Lobbyist, via email Brien Flanagan, Darien S. Loiselle, CRSOA General Counsel, Schwabe Williamson & Wyatt

11 From: Darlene Chirman Sent: Sunday, December 6, 2020 1:07 PM To: CapandReduce Subject: DEQ Cap and Reduce

DEQ: I urge you to address methane leaks--identification and repair, as a GHG with much higher warming capacity than CO2, and lasting a shorter time in the environment. While no natural gas is brought to the surface from the ground in Oregon, there needs to be a program to monitor for leaks at processing plants. Also, methane can be captured from landfill sites and substituted for below-ground sources, helping to reduce methane on two fronts. The natural gas plants and large industrial users are fairly concentrated, and thus an efficient way to address methane reduction. Natural gas storage facilities are likely to be in industrial areas, ofte close to low-income communities, thus addressing equity issues as well.

Thank you, Darlene Chirman

12 From: Dave White Monday, December 7, 2020 4:25 AM Sent: FW: Well documented science about Climate change and COVID-19, Cap and trade/or green new deal are lies of the IPCC Subject:

Our goal for 2021 is to cause more than 2.5 billion native trees and shrubs planted. I have commitments for 2 billion more already. I will be presenting at the AGU Fall Conference. Other presentations are on the climate change page on leftmedilies.com Climate Change Conference zoom. On Netflix please watch “kiss the ground” movie. I clearly explains why we can’t lower atmospheric CO2 by working on emissions of CO2. These are scientific facts: Atmospheric CO2 is not an emissions issue. It’s a loss of photosynthesis. The residence time is 150 years! Our experiment on US 26E in Portland Oregon Clearly shows we can plant native shrubs and trees

The Intergovernmental Panel on Climate Change reports are science fiction! Cctruth.org/ipcc.pdf I review their reports just like I review manuscripts for the journal where I am now promoted to editor because of my expert reviewability. For example: would you take your car to be fixed by a mechanic who said they could fix it 50-66% of the time? Of course not. However we have given the IPCC 30 years and $2.8 trillion and they have no effect on atmospheric CO2 or anything. If this would have been a college class they would have scored an F. The global sea rise is 1.1 mm/yr and not accelerating!

Thanks Dave White Chemical Engineer with Master's level study in Statistics Climate Change Truth Inc.

The Intergovernmental Panel on Climate Change reports are science fiction More than 5 billion trees have been planted due to the science I presented. 7 billion scheduled in the next four years. Cctruth.org A 501-3c non-profit scientific research group. Limited funding at this time. We have no agenda except the scientific truth about Climate Change and all research.

13 Why the Intergovernmental Panel on Climate Change reports are science fiction! cctruth.org/ipcc.pdf

1. Atmospheric CO2 equilibrium statement had zero references to any published manuscript. 2. The actual equilibrium is 8.6 gt/yr.

3. Their only probability for their solution to work by lowering emissions of CO2 is 50-66%. Would you take your car to a mechanic who said they could fix it 50-66% of the time? 4. The scientific consensus is 33% not 97% 5. The IPCC GWP (Global warming potential) is false because it assumes equal

concentrations of GHG. CO2 is 412 ppm CH4 is 1.8 ppm and so on. 6. Sea level rise is 1.1 mm/yr and not accelerating. The Jakobshavn Glacier in Greenland has grown for the third year in a row. 7. Residence time. In a 2003 report, the IPCC said it was from 5-200 years. Average residence time is 150 years.

8. Netflix watch “Kiss the ground” movie explains even if we stopped all CO2 emissions

atmospheric CO2 will not lower. 9. Use of Unscientific Terms. The document uses the unscientific terms highly (or otherwise) likely six times, unlikely three times, and highly (or otherwise) confident sixty-two times.

10. The graph they use to say cause and effect for emissions vs. CO2 rise has not been updated since 2012. After 2014 worldwide emissions were mostly flat, with a 3% drop last year. The rate of rise for atmospheric carbon dioxide is less than 3 parts per million (ppm) This graph shows we can replace grass in medians and sides of roads with native trees and shrubs. They will consume a large portion of the carbon dioxide from vehicles.

14 Learn the correct unbiased science about Climate Change and Covid-19. Science is never settled! Leftmedialies.com-> Climate Change page. Keynote address at Climate Change Conference 9/22/2020 we have only 9680 deaths due to COVID-19. Video from another conference where I schooled an IPCC Scientist. Magazine article with video of my expert review of The Intergovernmental Panel on Climate Change reports which are science fiction! Residence time document, which explains it. State of Oregon sanctioned experiment. Four more conference links Leftmedialies.com -> COVID-19 page. 8 medical doctors and two attorneys on our team. Video of Dr. H and I speaking at Open up Oregon Another Doctor warns us not to take the COVID-19 vaccine Our 4th manuscript shows the CDC broke the law when they threw out their standard pandemic book and used staff to write the guidance we are under. We only have 9700 deaths from COVID-19. COVID-19 is not airborne transmitted. 5 proofs. COVID-19 treatment is Hydroxychloroquine and zinc! Children pose zero risk to spread COVID-19. Three other published manuscripts.

15 Why the Intergovernmental Panel on Climate Change reports are science fiction! cctruth.org/ipcc.pdf

1. Atmospheric CO2 equilibrium statement had zero references to any published manuscript. 2. The actual equilibrium is 8.6 gt/yr.

8. Netflix watch “Kiss the ground” movie explains even if we stopped all CO2 emissions

16 Dave White From: Sent: Monday, December 7, 2020 4:27 AM To: Subject: A faster way to lower atmospheric carbon dioxide

The local and worldwide media know this and won’t tell anyone. The Intergovernmental Panel on Climate Change reports are science fiction! cctruth.org/ipcc.pdf 1. Atmospheric CO2 equilibrium statement had zero references to any published manuscript. 2. The actual equilibrium is 8.6 gt/yr.

3. Their only probability for their solution to work by lowering emissions of CO2 is 50‐66%. Would you take your car to a mechanic who said they could fix it 50‐66% of the time? 4. The scientific consensus is 33% not 97% 5. The IPCC GWP (Global warming potential) is false because it assumes equal

8. Netflix watch “Kiss the ground” movie explains even if we stopped all CO2 emissions atmospheric CO2 will not lower. 9. Use of Unscientific Terms. The document uses the unscientific terms highly (or otherwise) likely six times, unlikely three times, and highly (or otherwise) confident sixty‐ two times.

17 The effect of stopping the Indian rainforest from destruction and more than 5 Billion trees planted. Normally November through May atmospheric CO2 increase 1.5 ppm per month. This February we had zero rise.

A 501‐3c non‐profit scientific research group. Limited funding at this time. We have no agenda except the scientific truth about Climate Change and all research. Google Scholar Facebook Researchgate over 800 reads Acta Scientific agriculture Journal editor and Board Member https://studio.youtube.com/channel/UCMs4YNKinCkmq8N3s1NmB4A

______From: Sen Prozanski

Thanks Dave White Chemical Engineer with Masters level study in Statistics [email protected] 971‐409‐7199 Climate Change Truth Inc. The Intergovernmental Panel on Climate Change reports are science fiction More than 5 billion trees have been planted due to the science I presented. 7 billion scheduled in the next four years. Cctruth.org A 501‐3c non‐profit scientific research group. Limited funding at this time. We have no agenda except the scientific truth about Climate Change and all research.

18 December 9, 2020

Oregon Department of Environmental Quality Office of Greenhouse Gas Programs 700 NE Multnomah St. Suite 600 Portland, OR 97232 cc: Kristen Sheeran, Nik Blosser, Richard Whitman Submitted via Email

Re: Comments by Environmental Defense Fund (EDF) on Program Development to Reduce Greenhouse Gas Emissions: Illustrative Scenarios.

Environmental Defense Fund (EDF) submits the following comments in response to the illustrative scenarios which the Oregon Department of Environmental Quality (DEQ) has developed to inform development of its cap and reduce program. The illustrative scenarios that DEQ has developed are a useful tool for considering how various program design components can work together to achieve program goals, and we appreciate DEQ’s commitment to running a thorough public scoping process over the past several months. With these comments we would like to provide feedback on the framing and assumptions for the illustrative scenarios, and address some of the scenario components that we think would best position the cap and reduce program to achieve its goals.

All scenarios must, at minimum, achieve the E.O. 20-04’s greenhouse gas emissions reduction goals, including the 2035 goal. In all scenarios, the cap must (at minimum) decline consistently from the January 2022 start date of the program, linearly, consistent with meeting the 2035 target while accommodating any major emission reductions already in the pipeline, such as announced coal retirement dates. EDF strongly believes that the E.O. requires a cap and reduce program with a cap decline trajectory that provides certainty that Oregon will meet its emissions reduction goals—such a cap trajectory is a core requirement for an adequate cap and reduce program.

The E.O. clearly states that the EQC and DEQ shall take action necessary to cap and reduce GHG emissions “consistent with” the E.O.’s science-based emissions reduction goals for 2035 and 2050. While the many other programs initiated or strengthened by the E.O. will play an important role in reducing emissions, the cap and reduce program is the only policy that can place a firm and declining limit of GHG emissions across all major emitting sectors of the economy. This means cap and reduce is the only policy tool that can act as a backstop to ensure the E.O. targets are reached, whether other policies under or over perform relative to expectations.

19 Moreover, if the policy scenarios are not calibrated to achieve the same level of GHG abatement it will be less instructive to compare how they perform across other metrics.

Achieving equity as a program goal, and compliance instrument distribution. In the illustrative scenarios issue brief, the triangle diagram representing policy priorities suggests that DEQ seeks to weight equity equally with other policy priorities. The issue brief, however, does not acknowledge that the equity objective starts off at a disadvantage if DEQ is eliminating all options that include distributing allowances to non-emitters in order to equitably distribute the value of allowances to all Oregonians. The, DEQ should seek to utilize tools to promote equity wherever available, include creative solutions.

DEQ could build more equitable outcomes into the cap and reduce program by modifying its strategy —assumed in the illustrative scenarios issue brief—of freely distributing all allowances directly to covered entities. We recommend that the program include allocation of allowances to non-emitters, in order to ensure that the value inherent in the program’s compliance instruments is not captured solely by polluters. This approach would include some level of project-based allowance allocation to non- regulated entities, with requirements that 1) those allowances be made available for transaction by regulated entities via the online platform that DEQ is developing to administer the program; and 2) allowance value be used for investments that will reduce emissions and are consistent with statutory and executive order objectives. Our previous comments on Technical Workshop Four provide additional detail on how allocation to non-emitters would support program goals and statutory mandates, and we would be highly interested in responding to any questions or concerns that DEQ has about this approach.

In order to build equity into the program, it is also critical that DEQ utilize all available opportunities to make free allocation conditional on the source having made some investment in direct, on-site reductions or in programs that will encourage a “race to the top”, as referenced in our previous technical workshop comments—these opportunities should be utilized with the specific goal of achieving emissions reductions in highly impacted communities. Some version of scenario three’s contingent allowance distribution should be a foundation of policy options moving forward. EDF has addressed the strategy of contingent distribution in previous comments but would be happy to explore this topic further with DEQ.

The program should cover all major emitting sectors. Broad coverage remains a critical priority for the cap and reduce program. Yet, it is explicitly not addressed in the illustrative scenarios. At a minimum, the program cap must cover emissions associated with all transportation fuels, residential natural gas and heating oil, all electric power generated in Oregon, and all greenhouse gas emissions from industrial operations. In the illustrative scenarios issue brief, DEQ includes “sources of emissions” in a list of program elements that can be defined in countless ways and could be applied the same across each

20 scenario. We understand DEQ’s point that program coverage does not need to vary across each scenario—however, the E.O. clearly outlines a broad vision for coverage of the cap and reduce program (“large stationary sources” and “transportation fuels”) and recommend that broad program coverage (as described above) should be an assumption for all program scenarios. The illustrative scenarios should not be silent on such an important design question.

Appreciate inclusion of mass-based standards across program scenarios. We appreciate DEQ’s decision to include mass-based emissions caps across all three program scenarios. This decision reflects the strong support for a mass-based approach that has been conveyed throughout the public scoping process. As we have mentioned in previous comments, this approach offers clear advantages over intensity-based standards, including: • Consistency with the executive order, which sets mass-based emissions reduction goals. • Increasing the environmental integrity of the program by putting a true cap in place that assures that overall emissions reductions goals are achieved. • Administrative simplicity.

Some trading across sectors is important in all scenarios. We also appreciate that all program scenarios provide covered entities with the ability to trade compliance instruments across sectors. Allowing trading between all covered entities, regardless of sector, will create important flexibility for regulated groups and will allow for lower overall program costs while maintaining an ambitious reduction trajectory for the cap. Trading will also create an implicit, consistent carbon price across all the covered sectors, creating an incentive for investments in decarbonization. This approach builds a measure of robustness to uncertainty into the program by allowing for different entities in different sectors to make the cost-optimal contribution to reducing emissions in a given compliance period, without requiring DEQ to predict what those optimal contributions will be on an entity-by-entity basis.

Expand and clarify options in scenario three for ensuring direct reductions. We note that scenario three includes restrictions on trading, and it is unclear how these restrictions would work in practice and why we are evaluating them. There are reasons to consider policy design features that can secure direct emissions reductions in communities that are most impacted by air pollution. If crafting a scenario to maximize direct emissions reductions in the areas that will provide the most benefit to overburdened communities, DEQ could include trading restrictions in scenario three that restrict trading for facilities that are contributing to a cumulative pollution burden for disproportionately impacted communities. Other strategies that DEQ could explore to facilitate direct emissions reductions in targeted geographies include replacing the restrictions on trading in scenario three with a combination of 1) significant use of free allocation contingent on making some direct reductions on-site through efficiency improvements or other technologies, and 2) policies outside of cap-and-reduce that fall into the command-and-control category and require specific reduction technologies in certain sectors.

21 This would achieve the desired aim of scenario three, which DEQ states “primarily achieves emissions reductions directly by regulated entities, with little compliance flexibility.” The command-and-control options would likely prove more costly, but this would more accurately reveal how to balance the cost-effectiveness policy objective and provide a useful comparison point between scenarios.

Explore how to include output-based allocation, and limit allocation based on historical emissions. In the illustrative scenarios issue brief, DEQ indicated that it does not currently have the necessary output data from regulated entities to use as a basis for output-based allocation of compliance instruments. During the virtual discussion of the illustrative scenarios, DEQ also indicated that they would need to explore whether DEQ could require the needed data from covered entities as part of the regulation. We see no reason why DEQ wouldn’t be able to secure the data necessary. We strongly encourage DEQto request the data needed to facilitate output-based allocation as part of the regulation, and receive this information ideally in the first year of the program. Entities wishing to receive output based allocation could be required to submit the data if they would like a free allocation; alternatively, this data could be incorporated into the existing GHG reporting rule framework. In the first year or early years of the program, it may be appropriate for DEQ to allocate allowances based on historical emissions as a transition step. However, after that, if regulated sources are receiving allowances directly, allocation should be output-based to capture the many benefits (e.g. mitigation of leakage) that we have described in previous comments. Allocation based on historical emissions risks rewarding the dirtiest polluters and penalizing those industries that have taken the early initiative to reduce emissions beyond what is required. We would also encourage DEQ to allocate to entities based on a benchmark that recognizes best-in-class efficiency.

When allocation is based on historical emissions, it is critical that companies do not have an opportunity to artificially inflate emissions to receive more allowances. Thus, historical emissions for calculating allowances should come from 2019 data or earlier. In previous workshop comments we make recommendations for placing allowances in a reserve based on any uncertainty related to COVID-19 economic impacts or other forms of uncertainty.

Assume inclusion of a reserve. It is unclear from DEQ’s description of scenario one why excluding a reserve of allowances is under consideration. We have previously commented on the important benefits that a reserve can offer—both for environmental integrity and program stability—with no comparable downsides. Across all scenarios, a reserve provides important benefits and we do not see any meaningful reason to exclude a reserve. Therefore, we recommend that a reserve be assumed as part of the program design.

22 Alternative compliance instruments. In scenario one, DEQ describes the ability of covered entities to use alternative compliance instruments (ACIs) as “significant.” It is not clear what level of alternative compliance DEQ considers to be significant. A key goal of the cap and reduce program is direct, on-site emissions reductions by covered entities. If alternative compliance instruments are included in the program, they should play a limited role. A maximum of 6% may be appropriate for the percentage of an entity’s compliance that can be achieved with ACIs, even in a scenario where DEQ would characterize the ability to use ACIs as significant. In addition, ACIs could be used to refill a reserve of allowances, if necessary, to keep prices in check.

As explained in our previous comments on DEQ’s Technical Workshop Three: Alternative Compliance Options, EDF continues to believe that alternative compliance instruments should not include in-scope emissions reductions or any emissions reductions from sectors that could reasonably be regulated under a future cap, even if those emissions are not initially capped. We continue to believe that a good guiding principle would be excluding ACIs from any sector regulated under a cap program in another jurisdiction. In a scenario with ACIs from in-scope emissions reductions, we would be highly concerned that in-scope ACIs could undermine the ability of the cap to act as a firm limit on pollution. This could happen if the ACIs effectively increase the level of the cap because they are providing a “credit” for reductions that would have already occurred. We have yet to see any satisfactory proposal that would address the risk of this type of double counting and ensure that ACIs from in-scope emissions reductions represent reductions that will truly help Oregon achieve its reduction goals. At minimum, any proposal for ACIs from in-scope emissions should include a cap adjustment to ensure they do not increase the level of the cap and undermine the firm limit the cap will place on pollution.

DEQ has stated that the goal of allowing ACIs from in-scope emissions reductions is to direct benefits and investment toward Oregon communities, specifically environmental justice and impacted communities. However, an approach that seeks to achieve this goal through alternative compliance would do so potentially at the expense of benefits resulting from direct, on-site reductions by covered entities—in particular, this approach would be at odds with a goal of maximizing the health benefits that result from the reduction of co-pollutants. This tradeoff should be carefully considered in evaluating the potential of in-scope ACIs to provide benefits for communities. If DEQ is considering allowing ACIs from under the cap, options to protect against this tradeoff could include restricting the use of ACIs by covered entities whose air pollution emissions are contributing to cumulative impact burdens in Oregon’s most overburdened communities, or making a cap adjustment to lower the cap based on the number of allowed ACIs. There are other strategies that DEQ can and should utilize to build equity and community benefits into the cap and reduce program without doing so at the expense of on-site emissions reductions, including through allocation to non-emitters and/or by requiring that covered entities make investments in order to receive some portion of their direct allocation.

23 These other strategies are particularly important for equity considerations because ACI’s should, at maximum, comprise only a small percentage of program compliance.

A goal of evaluating the illustrative scenarios is to examine tradeoffs inherent in different program design decisions. With the context provided by our comments above, we believe that the following combination of program design choices will best position the cap and reduce program for success: • Coverage: At a minimum, the program cap must cover emissions associated with all transportation fuels, residential natural gas and heating oil, all electric power generated in Oregon, and all greenhouse gas emissions from industrial operations. • Initial cap level: Set based on a level lower than recently reported emissions (Scenario 1). • Cap trajectory: Steep decline over time (Scenario 1). The initial cap level and cap decline trajectory must be set at a level that ensures that Oregon meets or exceeds E.O. 20-04’s emissions reduction goals, including the 2035 goal. This is necessary in order for the cap and reduce program to serve as a backstop that guarantees the E.O.’s goals are met. • Basis for compliance instrument distribution: Initial distribution is a proportion of cap based on recently reported emissions; allocations are regularly updated with new data and can be adjusted based on other requirements, such as development of long-term emissions reduction plans (Scenario 3). DEQ and EQC require reporting of data needed for output-based allocation, and allocations after the initial distribution are output-based. DEQ should also consider advancing equity goals through project-based allocation to non-regulated entities, as described above. • Ability to trade instruments: Yes (Scenarios 1 and 2). • Ability to use alternative compliance instruments: If DEQ allows alternative compliance instruments, they should play a limited role. A maximum of 6% may be appropriate for the percentage of an entity’s compliance that can be achieved with ACIs. • Types of allowable alternative compliance options: If ACIs are included in the program, only out-of-scope emissions reductions should be a source of ACIs (Scenario 1). • Compliance instrument reserve: Yes, set aside from within the cap and accessible based on certain criteria (Scenarios 2 and 3). Thank you for your consideration of these comments. We look forward to continued engagement with DEQ on these and other topics in order to shape the most effective, ambitious cap and reduce program possible.

Sincerely, Erica Morehouse Senior Attorney, Environmental Defense Fund [email protected]

Kjellen Belcher Senior Analyst, Environmental Defense Fund [email protected]

24 COMMENTS ON PROPOSED MODELING SCENARIOS FOR DEVELOPMENT OF OREGON’s CLIMATE ACTION PLAN Prepared by Robert E. Yuhnke On behalf of Elders Climate Action, Oregon Chapter Submitted December 9, 2020 Executive Summary. Elders Climate Action submits these comments to further develop themes discussed orally at the December 2, 2020, public meeting. Our concerns include 1) the failure to acknowledge the role of climate science in developing an emissions scenario to ensure that the final OCAP will achieve the Governor’s objective of protecting future generations from the worst effects of climate change; 2) the failure to include an emissions scenario that would achieve the zero CO2 emission target by 2050 that is identified by the IPCC as necessary to stabilize the climate at 1.5o C; and 3) the failure to identify the economic, social, public health and environmental costs of the damage that will by climate change if action is not taken to stabilize the climate at 1.5o C. Introduction. Elders Climate Action is concerned that none of the emission modeling scenarios proposed by the Oregon Department of Environmental Quality (DEQ) reflect the urgent need for an Oregon Climate Action Plan (“OCAP”) that is designed to achieve zero CO2 emissions by 2050, with at least a 45% reduction from 2010 levels by 2030. The failure to model a zero emission scenario reflects an implied policy decision that a zero emission plan is NOT under consideration, and has for all practical purposes been discarded as a regulatory option. Commenters are also concerned that language used to describe modeling scenarios fail to recognize that replacing energy sources that rely on combustion of carbon fuels with alternative sources of energy will, in most cases, produce long-term cost savings for the economy, air pollution and public health benefits, increased employment opportunities and other benefits for our society in addition to mitigating climate impacts. In addition, the described scenarios do not account for the costs of inaction. Unmitigated climate change, especially changes linked to global mean temperature changes greater than 1.5o C, will have devastating impacts on the economy, forest and fishery resources, air pollution and public health, water supplies and water contamination, agricultural productivity affected by water shortages and fires, and other unacceptable impacts. Meaningful modeling of emissions scenarios must account for the economic, public health, social and environmental benefits as well as the initial investment costs to replace carbon fuels, and recognize the massive costs that will result if the impacts of climate warming are not prevented. Acknowledging the Science – Climate Stability Requires Zero CO2 Emissions.

25 Commenters request that DEQ adopt the following principles to guide its analysis of regulatory options and final decisions for the design of an acceptable OCAP. First, DEQ must state that it will be guided by the science and make clear to decisionmakers what the science demands that must be accomplished if we are to have any hope of stopping the rapid unfolding of the climate crisis, preventing further climate disruption, and stabilizing the climate again at levels that can be tolerated by human civilization. Second, DEQ should acknowledge that the best, most comprehensive, credible and reliable source of scientific information and analysis for understanding the global climate regime, and how changes in GHG emissions are likely to change that regime, are the reports published by the International Panel on Climate Change (IPCC). The IPCC’s October 2018 report to the COP1 in response to the request from world leaders at the Paris Conference establishes the emissions targets that MUST be met to have a 50/50 chance of avoiding overshoot beyond 1.5o C above the pre-industrial baseline. For an OCAP to be based upon sound science, the IPCC-recognized targets (zero CO2 emissions by 2050, and 45% below 2010 emissions by 2030) must be adopted as DEQ’s guidepost for determining what is adequate to protect the planet and Oregon from ther expected but unacceptable impacts to Oregon’s economy, public health, and the safety and stability of our communities if the mean global temperature exceeds 1.5o C. Third, DEQ should determine that the environmental, public health and economic consequences of allowing mean global temperature to rise more than 1.5o C are unacceptable, and that keeping global temperature rise from exceeding 1.5o C is necessary for stabilizing the climate at a level that, although not likely be acceptable to most people or protective of public health or the safety of our communities, will nonetheless at least prevent some of the worse consequences of a 2o C or greater rise in global temperature, and possibly avoid a runaway climate disaster beyond human control. The IPCC Findings. The IPCC’s 2018 report reviews and analyzes the scientific literature to provide the best information available to answer two critical questions: 1) What are the differences between the consequences of allowing the planetary climate system to rise 1.5o C compared to 2o C above the pre-industrial background? 2) What limitations on CO2 and other GHG emissions must be achieved to avoid overshooting a 1.5o C or a 2o C rise in global temperature? Consequences of 1.5o C and 2o C rise in global temperatures are both unacceptable, but 2o C is significantly worse.

1 Global Warming of 1.5o C, available at https://www.ipcc.ch/sr15/.

26 The 2018 report catalogues numerous expected adverse consequences of both a 1.5o C and a 2o C rise and in global mean temperature.2 Of likely greatest concern to Oregon are – 1) increases in mean summer temperatures and the frequency of hot days above the 99th%ile of the baseline temperature range, and the increased duration of the summer dry season that, together, will more quickly dessicate the coastal and Cascade forests each year, increase the ignitability of forest fuels, increase the frequency and intensity of wildfires, increase the production of hazardous concentrations of fine particle pollution (smoke), and increase the adverse health consequences of public exposure to multi-day extreme hazard pollution episodes; 2) diminished summer stream flows and warmer surface water temperatures that interfere with the survival of cold water fish species (salmonids) and contribute to algal blooms that produce toxic contamination of fishery habitats and water supplies; 3) increasing ocean acidification and ocean temperatures that together prevent reproduction and survival of some marine species, cause some native local species to abandon Oregon waters in search of cooler waters, and diminish productivity of species remaining in the local water column which in turn will reduce the catch, make commercial fishing unprofitable, and further reduce the food supply for resident orca populations; 4) the frequency and duration of extreme precipitation events that cause flooding, erosion, displacement of human populations in flood-prone areas, the destruction of freshwater and anadromous fish spawning habitat and contamination of municipal water supplies; 5) warmer winter temperatures that convert winter snow precipitation events to rainfall thereby reducing the high altitude storage of water which diminishes water resources available for agriculture and municipal uses during the spring and summer, and increases the likelihood of drought, diminished stream flows, crop loss, loss of fishery habitat, and inadequate water supplies for residential and industrial users and fire fighting. 6) increased formation of, and human exposure to concentrations of ground level ozone harmful to public health that will be exacerbated by warmer summer temperature regimes that govern ozone formation in the atmosphere. Each of these effects of climate change are now occurring in Oregon. The destruction of property, disruption of daily life, cost to the economy, pollution of the atmosphere and water supplies, impairment of human health, and damage to wildlife, the environment and habitats will accelerate in coming years as the climate continues to warm. The climate crisis is upon us now, and can only worsen as additional atmospheric loadings of GHG emissions contribute to climate forcing. For example, the frequency, intensity, areal extent and duration of wildfires have increased significantly in the last five years. During the 2017 fire season, wildfire in Oregon destroyed one-half million acres for the first time in the State’s history. In 2018 wildfire consumed 660,000

2 Global Warming of 1.5o C, Chapter 3: “Impacts of 1.5o C of global warming on natural and human systems.”

27 acres of forest. In 2020 over 1 million acres were incinerated, along with more than 4,000 homes, and 11 lives lost. These losses, the economic toll, the injury to our health from air pollution, and the emotional burden it imposes on Oregonians can only be expected to grow year after year until GHG emissions are reduced to zero, and the climate is stabilized. Your modeling must recognize that these adverse impacts of wildfire will continue to expand, and that stabilizing the climate at 1.5o C will not stop the fires. But if we fail to stabilize the climate at 1.5o C fire damage will become far worse. Currently the World Meteorological Organization concluded that “[t]he global mean temperature for January to October 2020 was around 1.2°C above the 1850–1900 baseline, used as an approximation of pre-industrial levels.”3 The IPCC found that global mean temperature was at about 1.0o C above baseline in 2010. In 2010, the climate regime had not yet triggered a significant change in wildfire conditions compared to historical fire patterns in the Pacific northwest. But by 2017 new records were being set. By 2020, the impacts of wildfire had begun to increase exponentially compared to the historical baseline. The 2018 report states that the global mean temperature is rising about 0.2o C per decade,4 which suggested then that 1.5o C rise would be reached about 2035. New modeling being performed for the next IPCC report, AR6, suggests that 1.5o C above the pre-industrial baseline will be reached by 2030 if GHG emissions are held to current rates, and 2o C reached by 2050.5 Given that the frequency and ferocity of wildfire in Oregon began to increase significantly after 2015 under the climate conditions associated with 1.2°C rise above the 1850–1900 baseline, the march higher toward a 1.5o C rise between 2020 and 2030 can be expected to accelerate the extent of damage caused by wildfire. If the doubling of the fire zone between 2017 and 2020 continues, we can expect 2 million acres burned annually by 2023, 4 million by 2026, and possibly 8 million by 2030 when global temperature is expected to reach 1.5°C above the 1850– 1900 baseline. Eight million acres is nearly one/third of the temperate rainforest between the Pacific Ocean and the crest of the Cascades. Fires of this scale are imaginable. The wildfires in Australia during the last austral summer destroyed 12 million hectares (120,000 sq/kilometers or 30 million acres) of “bush.” The fires in California during 2020 have destroyed nearly 5 million acres. Fires of this magnitude will cause massive damage to Oregon’s forests, rural communities, wood products industry, public health, housing stock, roads and waterways, wildlife and environment. Fires of this scale in Oregon are possible, if not probable, by 2030 in a 1.5o C climate regime. The scale of fires likely under a 2o C rise in global temperature would be catastrophic to the State’s economy and its people. During the fire season the State will likely become uninhabitable for all but seasonal residents under a 2o C climate regime. Permanent residency may not be

3 “2020 on track to be one of three warmest years on record,” World Meteorological Organization (Dec. 2, 2020) available at 2020 on track to be one of three warmest years on record | World Meteorological Organization (wmo.int). 4 Global Warming of 1.5o C, Chapter. 1 (Section 1.2.1.3). 5 “Analysis: When might the world exceed 1.5C and 2C of global warming? | Carbon Brief (Dec. 4, 2020).

28 possible until all the forest cover is destroyed by fire and future fire risk is limited by the lack of fuel. But the IPCC analysis implies that a 2o C rise will be the inevitable consequence of only reducing emissions by 80% between now and 2050, thereby allowing total atmospheric loadings to continue to grow, albeit at a slower rate, until zero emissions are achieved to stabilize the climate at a higher temperature. To limit warming to a 2o C rise in global temperature, zero emissions must be achieved no later than 2070.6 If the Governor intends to protect Oregon and its residents from a horrific future of expanding fire zones, perpetual smoke pollution, deaths and destruction, DEQ must adopt a plan designed to contribute to preventing more than a 1.5o C rise in global temperature. Stabilizing the Climate Requires Zero Emissions, Not 80% Reduction. The IPPC analysis demonstrates that climate stability can be achieved only by reducing GHG emissions to zero. To stabilize global temperature at any level, ‘net’ CO2 emissions would need to be reduced to zero. This means the amount of CO2 entering the atmosphere must equal the amount that is removed. Achieving a balance between CO2 ‘sources’ and ‘sinks’ is often referred to as ‘net zero’ emissions or ‘carbon neutrality’.7 A stable climate regime at any level cannot be achieved by reducing emissions by 80%. If GHG emissions are reduced by only 80% by 2050, the global mean temperature will necessarily rise well above 1.5o C. Based on the IPCC’s 2018 analysis, to stabilize the climate at 1.5o C, GHG emissions must reach ‘net zero’ or ‘carbon neutrality’ by 2050. Limiting warming to 1.5°C implies reaching net zero CO2 emissions globally around 2050 and concurrent deep reductions in emissions of non-CO2 forcers, particularly methane (high confidence). Such mitigation pathways are characterized by energy- demand reductions, decarbonization of electricity and other fuels, electrification of energy end use, deep reductions in agricultural emissions, and some form of CDR [carbon dioxide reduction] with carbon storage on land or sequestration in geological reservoirs.8 Zero emissions must be achieved sooner or later to stabilize the climate. To minimize the losses and deaths associated with devastating warmer climate effects, the OCAP should be designed to achieve zero emissions as soon as possible, but not later than 2050 to optimize the possibility of

6 “For limiting global warming to below 2°C with at least 66% probability CO2 emissions are projected to decline by about 25% by 2030 in most pathways (10–30% interquartile range) and reach net zero around 2070 (2065–2080 interquartile range). {2.2, 2.3.3, 2.3.5, 2.5.3, Cross-Chapter Boxes 6 in Chapter 3 and 9 in Chapter 4, 4.3.7}” Chapter 2, Exec. Summary. 7 Global Warming of 1.5o C, Chapter 2, FAQs. 8 Id., Exec, Summary.

29 avoiding overshoot beyond 1.5o C. The consequences of an 80% reduction OCAP is unacceptable. The Governor’s Executive Order. In issuing her executive order 20-4 (EO), Governor Brown acknowledged the importance of stabilizing the climate to protect the health and safety of Oregonians, and to preserve the vitality of the State’s economy. Given the urgency and severity of the risks from climate change and ocean acidification, and the failure of the Legislature to address these immediate harms, the Executive branch has a responsibility to the electorate, and a scientific, economic and moral imperative to reduce greenhouse gas emissions and to reduce the worst risks of climate change and ocean acidification for future generations, to the greatest extent possible within existing laws…. The Governor’s EO “calls for the State of Oregon to reduce its GHG emissions (1) at least 45% below 1990 levels by 2035, and (2) at least 80% below 1990 levels by 2050.” [Emphasis added.] The EO orders DEQ and other agencies to “exercise any and all authority and discretion vested in them by law to help facilitate Oregon’s achievement of the GHG emission reduction goals set forth in paragraph 2….” By calling for reductions of at least 45% by 2035, and 80% by 2050, the Governor recognizes that agencies have discretion to at least consider and propose actions that include those that will achieve 100% reductions by 2050. The DEQ has discretion to adopt at least one emission reduction scenario that contemplates a 100% reduction in emissions. Given the Governor’s stated intention of fulfilling the “moral imperative” “to reduce the worst risks of climate change and ocean acidification for future generations to the greatest extent possible,” commenters believe that DEQ must develop, propose and consider at least one regulatory option designed to achieve zero emissions, including an emissions scenario for modeling purposes that could achieve zero CO2 emissions by 2050. CONCLUSION. The 2018 IPCC report clearly states that zero emissions must be achieved no later than 2050 to have an even chance of avoiding overshoot of the 1.5o C target, and that carbon dioxide reductions will be necessary to stabilize the climate thereafter. The IPCC also states that even if 2o C is selected as the preferred target, zero emission must be achieved by 2070 to avoid overshooting that target. An 80% reduction in emissions will not stabilize the climate. It will simply slow the rate at which the climate system continues to warm beyond acceptable targets. We ask DEQ to determine that policy approaches that fail to stabilize the climate system, or that allowing the additional destruction to Oregon that will result from increasing temperatures to 2o C, are not acceptable. Policies must be designed to prevent warming beyond 1.5o C which requires that zero emission be achieved no later than 2050.

30 To accomplish what the science tells us we must achieve to stabilize the planetary climate system at 1.5o C, we request that DEQ include a 2050 zero emission scenario for all purposes, including – 1) modeling potential zero CO2 emissions scenarios, including zero emissions of the co-pollutants emitted when combusting carbon fuels that impair human health (e.g., SO2, NOx, EC, black C, PAHs, benzene, toluene, xylene, 1,3 butadiene, aldehydes, arsenic, mercury) by causing between many hundreds to thousands of pre-mature deaths annually in Oregon, impairing normal fetal and childhood development that contribute to long-term adverse health impacts, and other diseases of air pollution that impair the quality of human life; 2) identifying source sectors that must eliminate the combustion of carbon fuels and estimating the time horizons for each sector to end the combustion of carbon fuels to achieve zero CO2 emissions by 2050 and a 45% reduction from 2010 levels by 2030; 3) estimating the short-term capital costs and long-term reductions in operating costs associated with switching to alternative energy sources to replace the combustion of carbon fuels; 4) the employment shifts (losses and gains) in the economy that will be associated with eliminating jobs in sectors such as mining and rail transport of coal, coal-fired power generation, drilling, refining, rail and pipeline transport of oil, the production, sale, fueling and maintenance of mobile sources powered by petroleum fuels, natural gas drilling and pipeline transport, and its combustion in boilers and furnaces to generate steam, space heat or in internal combustion engines, and the replacement of these carbon-related jobs with new jobs created to manufacture, install, operate and maintain renewable sources of electric power, and to manufacture and install zero emission energy sources to power mobile sources and heat homes and offices.

Respectfully submitted, Robert E. Yuhnke, On behalf of Elders Climate Action

31 Elizabeth Lindsey From: Wednesday, December 2, 2020 12:19 PM Sent: Subject: Public Comment on GHG Emission Reduction Scenarios

DEQ Commission and Staff:

A hybrid scenario is needed that combines the best of scenarios 1, 2 and 3. Those best elements are: Initial cap level: Scenario 1 -- lower than recently reported emissions Cap Trajectory: Scenario 1 -- Steep decline over time Basis for compliance instrument distribution [meaning unclear] -- new data is used to determine if GHG emissions are declining according to plan; if they aren't, the plan must be made more aggressive. Trading instruments can invite phony reductions. Alternative compliance instruments have sometimes been fakes. Types of Allowable Alternative Compliance Options: Scenario 3 -- None; emission reduction must be directly achieved by the regulated entity.

Concerning: program start and end dates; the length of a compliance period immediate (compliance becomes harder with delays); duration until GHG emissions are zeroed and CO2 reaches 350 ppm regulated greenhouse gases and sources of emissions fossil fuel burning; un-natural industrial sources (natural sources -- plants and animals -- within carbon and nitrogen cycles that are in steady state are not regulated though decreases/sequestering can be encouraged to bring down atmospheric CO2 levels) points of regulation at source -- well, mine, state border for a GHG fee; at local industry emissions thresholds to determine individual regulated entities

Concerning your statement "...the largest and least-costly options for emissions reductions, such as carbon sequestration in public forests, may not be located near impacted communities in Oregon." While forest sequestration is good, it is not the largest nor least cost option for emission reductions. Reduced transportation is likely the largest and least cost option for CO2 emission reductions. Single occupancy driving could be reduced the most by chain businesses (grocery store chains, retail chains, bank chains...) and governments (with clerks, human resource, engineering, each specialty) moving (chains)/trading (government) their employees to the work location closest their residence and non-chain business entering into negotiations to trade employees to minimize commuting. Some employees could be encouraged to move. Rural communities can be helped to get retail chains to use on-line order and pick up locations in the community in cooperation with existing businesses. Building energy conservation is is a major source of GHG emission reductions. Weatherizing homes (insulation, blocking leaks of heat), zonal heating, more people per household, raising thermostats and using sweaters and coats all offer significant savings some at next to know cost. Reduced consumption is a major source of GHG emission reductions. Consumer goods need to be repaired and retained for longer product lives whether it is cars, appliances, clothes, furniture, leisure, etc. Local food should be encouraged.

The "carrot and stick" aspects of these scenarios were not evident, but they are critical to evaluating cap and reduce scenarios for effectiveness, fairness, etc.

32 * A revenue-neutral carbon tax at the source -- well, mine, border -- is ideal and Oregon should be advocating for the bi-partison federal carbon fee and dividend bill. It includes the equity provision by returning the fee to all Americans including our rural people. * A vehicle-mile-traveled fee is also an incentive and its cost is offset by returning it to the businesses participating in the commuting reduction efforts, described above, based on their success in reducing GHG emissions among their employees and potentially their customers. * Business GHG emissions can be priced and the revenue can be returned for the purpose of GHG reductions. In fact, Oregon doesn't even need to collect the money, but the business could submit the rectification with their taxes (like Obamacare subsidized individuals do with their federal taxes).

Elizabeth Graser-Lindsey

From DEQ:

33 Moore Noise, LLC

December 9, 2020

Oregon Department of Environmental Quality Cap and Reduce Program 700 NE Multnomah Street, Suite 600 Portland, OR 97232-4100

Submitted via email to [email protected]

This comment letter is submitted on behalf of EVRAZ Portland. Thank you for the opportunity to participate in the Illustrative Scenarios Workshop organized to discuss the developing Cap and Reduce regulations. First, we would like to acknowledge the complex and difficult task ahead of DEQ and state that we are committed to meaningful participation in this effort to reduce greenhouse gas emissions.

As the presented scenarios indicated, there will be trade-offs in the development of the Cap and Reduce Program Rules. As many participants commented during the Workshop, the ability to manage the trade- offs so that they meet the goals of the program will be dependent on the details of the rules. We offer the following comments on potential issues during selection of modeling scenarios and program alternatives development:

• To achieve the bold emission reduction goals of the program, the maximum flexibility to offset, trade, and invest (inside and outside of Oregon) will be imperative. Greenhouse gas emissions and resulting climate effects are global issues. Oregon is already a relatively low-emitting state (5th lowest on a per capita emissions basis) and may not have a reserve of easily achievable emissions reductions available in the local economy without significant adverse economic effects. Additionally, some key technologies for emissions reduction or capture that will be required, particularly in the long term, may not be implementable or cost-effective locally. Eventually, Oregon will need to become part of a larger emissions control and reduction program across the U.S. to have any reasonable possibility of success in achieving the aggressive state goals.

• We, once again, emphasize that previous work was performed in support of the Cap-and-Trade legislation on potential leakage1 effects for Energy Intensive Trade Exposed Industry. A copy of a presentation by Vivid Economics prepared for the Oregon Carbon Policy Office is attached. It is well recognized by many studies of how to achieve greenhouse gas emissions reductions that

1 Carbon leakage is the transfer of greenhouse gas emissions from a municipality, state, or country with strict carbon emissions policy or laws to other jurisdictions without, or with less strict, policy or laws.

34 certain industries, such as iron and steel and cement, are difficult to decarbonize sectors (Exponential Roadmap to Halve Emissions by 2030, Version 1.5, September 19, 2019, revised January 2020, page 36). Given that Oregon’s electric system is lower emitting than other locations in the U.S., leakage of emissions from Oregon have a high potential to increase global greenhouse gas emissions. This would be a program goal adverse result.

• DEQ requested input on the issue of “Direct Emissions Reductions by Regulated Entities” and its relation to co-benefits. This discussion is confusing in the context of the Cap and Reduce Program. Under the Cap and Reduce program, “regulated entities” include natural gas and fuel providers for all economic sectors. Natural gas and fuel would support polluting uses by residences, commercial buildings, and vehicles on roads, and would potentially cover a broad range of emissions over broad geographic areas. This would potentially affect many citizens in Oregon. The term co-benefits are typically considered as indirect benefits. However, in the discussion the term co-benefits seemed to be used to describe direct goals of the program. The co-benefits of “Direct Emissions Reductions” as described was not at all clear in the discussions.

Thank you for the opportunity to weigh in on these issues.

Sincerely, Moore Noise, LLC

Martha Moore, PE Principal Engineer/Member cc: Debbie Deetz Silva/EVRAZ

Attachment

35 Oregon Sectoral Competitiveness and Carbon Pricing: Summary of Results Report prepared for the Oregon Carbon Policy Office 36

December 2018 Contents

1. Introduction 2. Carbon leakage and competitiveness − Theory − Consequences − Evidence 3. Measuring carbon leakage risk − Determinants − Approaches elsewhere − Our approach 4. Oregon leakage risk assessment − Results − Policy responses 37 5. Conclusions and recommendations Oregon is proposing a cap-and-trade system to drive decarbonization, and this work aims to determine whether there might be any competitiveness impacts as a result

Oregon’s manufacturing sector has grown strongly in recent years − Over 2010-17, the sector’s employment grew by almost 19% relative to the national average of 9% − Oregon’s overall competitiveness is driven by the lack of a general sales tax, relatively low energy costs, and access to major export markets

However, many industrial activities in the manufacturing sector generate greenhouse gas emissions − These would be covered under a proposed cap-and-trade system

The aim of this work is to determine whether the cap-and-trade could lead to competitiveness impacts on industrial sectors, and how it might be designed to prevent carbon leakage 38 Contents

1. Introduction 2. Carbon leakage and competitiveness − Theory − Consequences − Evidence 3. Measuring carbon leakage risk − Determinants − Approaches elsewhere − Our approach 4. Oregon leakage risk assessment − Results − Policy responses 39 5. Conclusions and recommendations If the cap-and-trade is not designed to safeguard competitiveness, it could risk carbon leakage in covered emissions-intensive and trade-exposed (EITE) sectors

Carbon leakage occurs when a carbon price causes production to relocate to jurisdictions with less stringent carbon pricing Output / Investment / Short-term Long-term competitiveness competitiveness If policy is not designed to prevent carbon channel channel leakage, the carbon price could thus impact

40 domestic competitiveness while also increasing global emissions The consequences for competitiveness and the environment associated with carbon leakage make it a major focus for policymakers when introducing a cap-and-trade Carbon leakage could present a combination of undesirable outcomes for policymakers

Environmental: Carbon leakage could result in an increase in global emissions

Economic: It implies competitiveness impacts both at the sectoral level and state level

Socio-political: Domestic production and employment would shift to other jurisdictions, with secondary impacts

41 As a result, the issue of leakage is always one of the most controversial and important aspects when considering the design of carbon pricing mechanisms While evidence of carbon leakage is mixed – due to low carbon prices, successful policy design, or low compliance costs – it remains central to cap-and-trade design

Ex ante modelling of carbon leakage risk suggest leakage rates could be high − Economy wide modelling suggest leakage rates could be 5 - 15% − Sector specific modelling suggests leakage rates as high as 50 - 100%

However, ex post examinations of actual leakage have not yet found evidence for it, possibly due to:

Low carbon prices in many systems translating to only a small impact of carbon pricing

Policy has successfully prevented leakage, for example through free allocation of allowances

Costs of compliance are relatively minor and are only one factor in the multidimensional

42 production decision Contents

1. Introduction 2. Carbon leakage and competitiveness − Theory − Consequences − Evidence 3. Measuring carbon leakage risk − Determinants − Approaches elsewhere − Our approach 4. Oregon leakage risk assessment − Results − Policy responses 43 5. Conclusions and recommendations There are two elements – carbon cost exposure and cost pass-through capacity – that determine whether an industrial sector is EITE, and thus at risk of carbon leakage 44 North American jurisdictions identify EITE sectors in a variety of ways, and most tend to use early stages of their carbon pricing systems to gather data on impact

Alberta uses trade intensity and emissions intensity in a tiered manner but only British Columbia does support sectors in the High EITE category not determine EITE Quebec identifies all sectors, but exempts manufacturing sectors as certain sources from the EITE, and offers allowances to carbon tax under certain mining. The process for EITE conditions identification appears similar to California’s

California uses detailed data on Mexico’s cap and trade is expected trade and carbon cost exposure to pilot next year and its process to identify sectors at risk, and its for EITE identification is likely to be outgoing rule identifies sectors based on trade and emissions on a tiered basis in order to intensity 45 improve targeting Our approach for identifying EITE sectors in Oregon involved both quantitative and qualitative analysis to offer a holistic risk assessment 46 Contents

1. Rationale for a cap-and-trade 2. Carbon leakage and competitiveness − Theory − Consequences − Evidence 3. Measuring carbon leakage risk − Determinants − Approaches elsewhere − Our approach 4. Oregon leakage risk assessment − Results − Policy responses 47 5. Conclusions and recommendations Quantitative analysis suggests several sectors with high carbon cost exposure, but even those with low emissions intensities may be at risk of leakage 48 Final assessment suggests all covered sectors are at least likely at risk of leakage and thus the cap-and-trade should be designed to safeguard their competitiveness # Potentially Carbon Leakage Risk NAICS 4 code Sector Description Covered Facilities Assessment 3221 Pulp, Paper, and Paperboard 5 At risk 3273 Cement 1 At risk 3344 Semiconductors 6 At risk 3212 Veneer, Plywood, and Wood Products 2 At risk 3114 Food Manufacturing 5 At risk 3251 Chemicals 2 Likely at risk 3311 Iron and Steel 2 At risk 3211 Sawmills and Wood Preservation 1 At risk 3261 Plastics 2 Likely at risk 3315 Foundries 1 At risk 3274 Lime and Gypsum 1 Likely at risk 3279 Other Non-metallic Mineral Products 1 At risk 49 3272 Glass 1 At risk 2123 Non-metallic Mineral Mining 1 At risk Our results suggest that Oregon should nevertheless cover all EITE sectors, as the cap- and-trade can be designed to prevent adverse competitiveness impacts

There are 5 reasons why EITE sectors should not be exempted:

1. Precedence shows that cap-and-trades can be designed to prevent competitiveness impacts

2. Sectors and facilities in Oregon have some opportunities to reduce emissions at the margin

3. For a given emissions reduction target, exempting certain sectors would require an increase in stringency for non-exempted sectors, which could shift rather than reduce leakage risk

4. Some evidence indicates that a cap-and-trade can incentivise new technologies and processes, and can even drive higher revenue growth

5. As more jurisdictions across the US and the world, including China, begin pricing carbon in their industrial sectors, leakage risk to these jurisdictions will decline in the long run 50 To safeguard manufacturing competitiveness while also maintaining an incentive to reduce emissions, most jurisdictions offer a form a free allowance allocation 51 Contents

1. Introduction 2. Carbon leakage and competitiveness − Theory − Consequences − Evidence 3. Measuring carbon leakage risk − Determinants − Approaches elsewhere − Our approach 4. Oregon leakage risk assessment − Results − Policy responses 52 5. Conclusions and recommendations Oregon can successfully achieve the twin objectives of reducing industrial emissions and safeguarding competitiveness through appropriate cap-and-trade design Immediate priority Future priority recommendations recommendations

1. Recognize that all potentially covered 4. Investigate the availability and cost of manufacturing and mining facilities emissions reduction options to inform are at risk of carbon leakage future cap-and-trade phases

2. Prevent leakage risk by providing free 5. Gather more granular trade data to allocation based on current output refine the targeting of EITE sectors

3. Determine preferred approach to

53 developing emissions efficiency benchmarks for Oregon Appendix

1. EITE identification − Metrics − Methodologies − Sectoral examples 2. Policy responses and benchmarking − California and Alberta − European Union − Quebec 3. Data sources 54 Emissions intensity and trade exposure are the main identification metrics used in most international methodologies

Indirect 푬풎풊풔풔풊풐풏풔 풊풏풕풆풏풔풊풕풚 = 퐷𝑖푟푒푐푡 푒푚𝑖푠푠𝑖표푛푠 𝑖푛푡푒푛푠𝑖푡푦 + 퐼푛푑𝑖푟푒푐푡 푒푚𝑖푠푠𝑖표푛푠 𝑖푛푡푒푛푠𝑖푡푦 emissions included in key 퐷푖푟푒푐푡 푒푚푖푠푠푖표푛푠 (푡퐶푂 푒) 퐼푛푑푖푟푒푐푡 푒푚푖푠푠푖표푛푠 (푡퐶푂 푒) international = 2 + 2 퐺푟표푠푠 푣푎푙푢푒 푎푑푑푒푑 (푈푆$) 퐺푟표푠푠 푣푎푙푢푒 푎푑푑푒푑 (푈푆$) methodologies

푡퐶푂 푒 퐼푛푑𝑖푟푒푐푡 푒푚𝑖푠푠𝑖표푛푠 = 퐸푙푒푐푡푟𝑖푐𝑖푡푦 푐표푛푠푢푚푝푡𝑖표푛 푘푊ℎ × 퐸푙푒푐푡푟𝑖푐𝑖푡푦 푝푟표푣𝑖푑푒푟′푠 푒푚𝑖푠푠𝑖표푛푠 푓푎푐푡표푟 ( 2 ) 푘푊ℎ Direct emissions include emissions captured in Air Quality Permit reporting: all anthropogenic emissions such as combustion of 3 natural gas and fuel oil and most industrial process emission and cover the GHGs: CO2; CH4; N2O; and HGWP

푻풓풂풅풆 풆풙풑풐풔풖풓풆 = 푇푟푎푑푒 푎푠 푎 푠ℎ푎푟푒 표푓 푡ℎ푒 푑표푚푒푠푡𝑖푐 푚푎푟푘푒푡 퐼푚푝표푟푡푠 푈푆$ + 퐸푥푝표푟푡푠 (푈푆$) = 55 푃푟표푑푢푐푡𝑖표푛 푈푆$ + 퐼푚푝표푟푡푠 (푈푆$) Major international methodologies combine emissions intensity and trade intensity measures differently to determine carbon leakage risk

High

Medium Low

uses trade California* uses trade Alberta The EU ETS Phase IV intensity and emissions intensity and emissions metric multiplies trade intensity but determine intensity in a tiered intensity and emissions leakage risk in a tiered manner but only support intensity and compares manner sectors in the High EITE against threshold category 56 In general, jurisdictions often identify similar sectors as being at risk of carbon leakage EU ETS Phase EU ETS Phase Washington Sector description California Alberta Quebec III IV (proposed) Mining and Quarrying High ✓   ✓  Food Medium ✓ ✓ ✓ ✓ ✓ Sawmills Medium    ✓  Wood Products High ✓ ✓  ✓  Pulp and Paper High ✓ ✓ ✓ ✓ ✓ Chemicals High ✓ ✓ ✓ ✓ ✓ Plastics Medium ✓ ✓  ✓  Glass High ✓ ✓  ✓ ✓ Cement High ✓ ✓ ✓ ✓ ✓ Lime High ✓ ✓ ✓ ✓ ✓ Iron and Steel High ✓ ✓ ✓ ✓ ✓ 57 Semiconductors N/A ✓   ✓ ✓ California and Alberta support EITE sectors through output-based free allocation

California’s cap and trade currently reduces the risk of EITE sector leakage by: - Output-based allocation; and - Tiered transition support

The current mechanism categorizes facilities as low, medium, or high risk of carbon leakage and provides differential support based on leakage risk severity

Alberta’s CCIR addresses EITE sectors’ risk of leakage through: - Output-based allocation; and - Phase-in and transition support

Alberta categorizes also firms as either low, medium, or high carbon leakage risk but only supports those identified as high risk 58 The EU ETS Phase III developed 52 product benchmarks based on the average efficiency of the 10% most efficient producers in the sector

The low number of facilities across Oregon sectors poses a challenge to developing sectoral benchmarks, but a range of options exist to overcome this 59 Quebec identifies the majority of sectors covered under its cap-and-trade as eligible for free allowance allocation using benchmarks

Quebec identifies all manufacturing and mining sectors and some electricity producers as eligible for free allowance allocation − Free allocation is offered on an output basis, to reduce leakage risk − Allocations to covered facilities are determined by facilities’ performance against emissions intensity benchmarks, which help maintain emissions reduction incentives − Emissions intensity is either calculated as emissions per unit of product or per unit of fuel input.

Product benchmarks are based on average historical emissions intensity of production, either at the sector level, or at the individual facility level. Three elements of this approach are noteworthy for Oregon: 1. Most activities use benchmarks developed according to individual facilities’ historical emissions intensities; 2. Only a few activities are benchmarked using sector-level emissions intensity. These activities are lime production, cement production, and prebaked anode and aluminum production;

60 3. Further nuances to this methodology are included for facilities with missing data or those without a simple output product that can be used as a reference unit. The quantitative EITE identification process uses publicly available data sources from DEQ, the EIA and the US Census Bureau Assumptions Most Data Source Unit Granularity recent year US Census Oregon US$ NAICS 4 2017 International Trade Bureau Annual

US Census Oregon US$ NAICS 2 2012 Intra-US Trade Bureau Exchange rates for each year US Census over 2014-2017 US$ NAICS 4 2016 Value Added Bureau

US Census US$ NAICS 4 2016 Production Bureau

Direct emissions DEQ tCO2e NAICS 6 2017 2014 – 2017 National level Electricity EIA* MWh 2016 consumption NAICS 4 Carbon intensity of tCO e/ DEQ 2 State-wide 2016 the Oregon’s MWh Period chosen for analysis 61 electricity grid Contact us: Paul Sammon Engagement Manager

Company Profile

Vivid Economics is a leading strategic economics consultancy with global reach. We strive to create lasting value for our clients, both in government and the private sector, and for society at large.

We are a premier consultant in the policy-commerce interface and resource and environment-intensive sectors, where we advise on the most critical and complex policy and commercial questions facing clients around the world.

The success we bring to our clients reflects a strong partnership culture, solid foundation of skills and analytical assets, and close cooperation with a large network of contacts across key organisations.

Practice areas Climate Strategy Cities & Infrastructure Earth Observation Energy & Industry

62 Growth & Development Natural Resources Public & Private Finance December 8, 2020

Department of Environmental Quality Office of Greenhouse Gas Programs

RE: Illustrative Scenarios

Dear: Cap and Reduce Program Team, Food Northwest submits the following comments on DEQ’s Issue Brief “Program Development to Reduce Greenhouse Gas Emissions: Illustrative Scenarios.” We appreciate DEQ’s objective to illustrate that key design elements will be combined to form the Cap & Reduce Program and to examine the tradeoffs among elements.

Food Northwest supports the primary program goals: Emissions, Equity and Costs. In October 2020, we provided comments to DEQ on important program design elements. We believe the elements that we described, particularly Compliance through a Technology Standard (emissions reduction plans), are very workable and will achieve the Emissions and Costs goals. Our discussion of these elements is attached to these comments.

Projects that directly meet Equity goals are typically funded through revenues from a cap and trade or carbon tax program. While the Cap and Reduce Program does not generate revenues, Equity could be achieved through use of alternative compliance instruments. Equity projects could be structured to similarly meet the rigorous requirements of other offsets and could be used as alternative compliance instruments in the Cap and Reduce Program.

Food Northwest thanks DEQ for this opportunity to provide comments on the Issue Brief. We look forward to participating as a member of the RAC.

Sincerely,

Pamela Barrow, VP

8338 NE Alderwood Road, Suite 160, Portland, OR 97220 Phone: 503.327.2200 • Website: www.foodnorthwest.org

63 Program Elements

EITE Designation

Food processing/manufacturing must be designated an emissions-intense and trade- exposed (EITE). All facilities engaged in manufacturing as identified by industry group and code in the Attachment, Trade Exposed Food Industry Sub-sectors, should be designated as EITE.

The study conducted by Vivid Economics for the Governor’s Carbon Policy Office recommended that Oregon “Recognize that all potentially covered Oregon manufacturing and mining sectors face risk of carbon leakage and should be considered EITE . . .” (Vivid Economics, Oregon Sectoral Competitiveness under Carbon Pricing, December 2018, p. 82). The study evaluated food processing and determined that this sector is an EITE. (Vivid Economics, p.114). While the study focused on entities with emissions above 25,000 MtCO2e, the conclusion remains the same for all food processors that are trade exposed and rely on the use of natural gas.

Oregon’s food processors vary in both what they produce and how they produce it. Nevertheless, one thing remains constant, each food processor has market pressures that require they can meet demand at a competitive price. Affordable natural gas prices are critical for most companies to remain competitive in a global market. This program, if not designed properly, could have a devastating impact on the price of natural gas (or combusting it) that will drive production, jobs, and emissions to other jurisdictions. Ensuring food processing/manufacturing is designated as an EITE is a critical first step in creating a program that is both good for the economy and good for the environment.

Point of Regulation

Food Northwest supports EITE stationary sources as the point of regulation. This goes for all facilities that qualify as an EITE regardless of their level of emissions. Food processing facility operators have the ability to plan and directly implement GHG reduction projects. Our potential covered entities prefer to be responsible for emissions reductions instead of regulated through their fuel suppliers. In order to drive the most emissions reductions at the least cost, individual facilities should have the regulatory obligation.

Page 2 - Food Northwest 64 Food Northwest studies determined that 73% of food processing energy use is natural gas. These food processors are trade-exposed and potentially subject to emissions, economic and jobs leakage. While these facilities have been working diligently to reduce their energy use and emissions, program costs should be mitigated to avoid leakage (see technology compliance pathway below)

Distribution of Allowances

A 100% allocation of compliance instruments to qualifying food processors (EITE meeting technology standard benchmark) is necessary to prevent carbon, economic, and jobs leakage in the Oregon food industry. Free allocation to industrial entities at risk of emissions leakage will help maintain the competitiveness of Oregon’s EITE industries. Since the outset of its cap and trade program, California has allocated 100% free allowances to EITEs. In 2017, AB 398 extended 100% free allowances until December 31, 2030. CARB also eliminated its risk categories so that all manufacturing sectors receive 100% allocations. CARB believes that this approach provides the appropriate incentives to reduce GHG emissions while encouraging industrial production to remain in the state (minimizes leakage) and ensures the economic competitiveness of California industry. As in California, EITEs that receive 100% free allowances under Oregon’s Cap and Reduce will be obligated to take action to reduce their emissions. A 100% free allocation is not a “free pass” to do nothing.

Compliance through a Technology Standard

Food Northwest recommends DEQ incorporate compliance through a technology standard. The goal under any GHG reduction program is to avoid leakage. The primary tool used is the distribution of compliance instruments. This distribution should not, however, encourage inaction by covered entities. The goal is to allocate instruments in such a way that leakage is minimized and GHG emissions reductions are maximized. Distribution of instruments based on Best Available Technology is an approach to achieve this goal. This method was included in the 2020 legislative session’s SB 1530. We believe it is the best approach because it incentivizes and assures timely emissions reductions and allows EITEs to devote funds to reducing emissions rather than purchasing allowances.

Best Available Technology (BAT) is the most efficient technology for reducing GHG emissions, without changing the good being manufactured, that is technically feasible,

Page 3 - Food Northwest 65 commercially available, economically viable, and compliant with all applicable laws and rules.

The BAT program could be designed to include:

Audit: Each EITE would complete, using a qualified third-party professional, an audit of its fossil fuel combustion systems and non-combustion processes which generate GHG emissions. The audit would identify BAT technologies for the facility. It would also determine the BAT emission rate (tonne GHG/unit of output) for each material contributor of greenhouse gases at the facility.

Benchmark: The BAT emission rate would become the facility’s compliance instrument distribution benchmark.

Distribution of compliance Instruments: To receive 100% compliance instruments, at least 90% of emissions would be controlled by BAT or the facility would be on a path approved by DEQ to meet BAT.

Recognition of Early Action

We urge DEQ to include a means to reward companies for past actions to reduce energy use and emissions. RGGI advised EPA in its carbon reduction program that it should avoid any approach that imposes inequitable or disproportionate burdens on early movers and fails to recognize their substantial progress. Requiring equivalent percentage reduction for company A, which has already achieved most cost-effective reductions, and company B, which has taken little action and finds many inexpensive emission reduction opportunities still available, would effectively disadvantage company A for having taken early action. As an industry, food processors set aggressive voluntary reduction targets and have made significant progress toward Food Northwest’s 50% energy intensity reduction goal. Food companies have spent tens-of-millions of dollars reducing their energy use and emissions. Some potential covered facilities have already achieved a 45% reduction in carbon consumption.

The Western Climate Initiative (WCI) recommended, and RGGI and Quebec programs issued Early Reduction Credits for implementation of measures that reduced greenhouse gas emissions during a proscribed eligibility period prior to the cap and trade program. Equitable recognition in Oregon could be accomplished through a similar approach.

Page 4 - Food Northwest 66 10015 S.W. Terwilliger Boulevard Portland, Oregon 97219 Phone: (503) 768-6741 Fax: (503) 768-6671 E-Mail: [email protected]

December 9, 2020

Colin McConnaha Manager, Office of Greenhouse Gas Programs Oregon Department of Environmental Quality

Re: Comments on Cap and Reduce Program Illustrative Scenarios

Dear Mr. McConnaha:

The Green Energy Institute at Lewis & Clark Law School is a nonprofit energy and climate law and policy institute within Lewis & Clark’s top-ranked environmental, natural resources, and energy law program. Our team of attorneys and law students works to design comprehensive legal and policy strategies to address climate change and support a swift transition to a clean and renewable energy system. We appreciate the opportunity to comment on the Department of Environmental Quality’s (DEQ) Cap and Reduce Program Illustrative Scenarios.

DEQ’s illustrative scenarios apply several program design elements that would help the cap and reduce program reduce greenhouse gas (GHG) emissions in an equitable and economically feasible manner. In Part I of these comments, we highlight the scenario design options that have the greatest potential to achieve the program’s goals. DEQ’s illustrative scenarios also provide useful examples of the underlying tensions and trade-offs the agency must account for in developing cap and reduce rules. In Part II of these comments, we encourage the agency to consider and evaluate some additional implications that could also impact program outcomes and offer some potential strategies for addressing and balancing these tensions.

I. Scenario Design Choices that Best Achieve the Program Goals

DEQ’s illustrative scenarios present several design choices that could help achieve the program’s goals while addressing tensions that could impact the program’s implementation and end results. Many variables and uncertainties could influence the program’s ultimate outcomes and effectiveness of the program, and the interplay between design elements will also affect program outcomes. Out of the design options identified in DEQ’s illustrative scenario analysis, the elements identified in the following sections have the greatest potential to achieve and further the program’s goals of significantly reducing GHG emissions, prioritizing equity, and containing costs. However, we also want to urge DEQ to focus on identifying design options that help

67 achieve the program’s climate and equity goals, and to place less emphasis on design options that constrain costs. While the program should be designed to protect businesses and consumers from burdensome cost increases, there is a significant amount of uncertainty around the program’s potential cost impacts. There are also a variety of additional mechanisms that DEQ can instate to mitigate potential cost increases under the program. In contrast, there are fewer available mechanisms to ensure the program achieves its emissions and equity goals. Program design elements that establish a steep cap decline for actual in-state emissions, enable DEQ to redistribute compliance instruments in response to changing market dynamics, and allow regulated entities or specific sectors to invest in alternative compliance options that provide co- benefits to impacted communities will all help further the program’s climate and equity goals, while also providing compliance flexibility to control costs for businesses and consumers.

A. Cap Decline Trajectory

The program should aim to significantly reduce Oregon’s anthropogenic GHG emissions as quickly as possible, while limiting the availability of flexibility mechanisms that could undermine this objective. A steep cap decline that can be achieved through out-of-state offsets, such as the trajectory outlined in Scenario 1, would ultimately undermine the program’s emissions reductions potential by allowing regulated entities to continue emitting GHGs at or near their current rates. The cap trajectory outlined in Scenario 2 does a better job of achieving in-state emissions reductions while also providing regulated entities with enough flexibility to meet their compliance obligations. While the exact rate of emissions decline required under the program will depend on real-world data, we appreciate that Scenario 2’s trajectory reflects a balance between speed, flexibility, and the need to measurably reduce anthropogenic emissions in Oregon. We encourage DEQ to apply a similarly balanced approach to the cap decline trajectory established through the cap and reduce rulemaking, while also prioritizing the urgent need to reduce actual anthropogenic GHG emissions on the shortest timeframe possible.

B. Distribution of Compliance Instruments

The market shares and dynamics that exist today are unlikely to persist for the entirety of the program. Some sectors may experience dramatic reductions in emissions due to shifting consumer preferences or other market forces, which could leave some regulated entities with a glut of compliance instruments available to trade with other entities or sectors. The program should avoid locking-in the distribution of compliance instruments based on historic market shares or conditions. Instead, DEQ should include a mechanism for redistributing compliance obligations in response to shifting market dynamics and/or emissions trends. Illustrative scenarios 2 and 3 both provide good starting points for designing a compliance instrument redistribution mechanism. Scenario 3 also offers some additional design options that DEQ should explore further, including the potential to reallocate compliance instruments to reflect emissions reduction plans. However, there are some tensions and potential implications associated with the redistribution of compliance instruments that DEQ should also take into account. We discuss these tensions and implications in more detail in section II.C.

Green Energy Institute at Lewis & Clark Law School 68 C. Alternative Compliance Options

As we asserted in previous comments on the cap and reduce technical workshops, it is imperative that DEQ develop alternative compliance mechanisms that enable and incentivize regulated entities to invest in programs and projects that accelerate an equitable transition to zero- emissions systems and technologies while mitigating the program’s economic impacts on low- income and BIPOC communities.1 DEQ’s illustrative scenario 2 proposes a promising model for developing alternative compliance mechanisms. We fully support the development of DEQ- authorized alternative compliance protocols that reduce emissions, provide co-benefits in Oregon’s communities, and prioritize investments in energy justice and impacted communities. The alternative compliance model outlined in Scenario 2 would further the program’s emissions reduction goal by preventing regulated entities from satisfying their compliance obligations with out-of-state carbon offsets.

II. Additional Tensions and Strategies for Achieving Program Goals

DEQ has done a commendable job of identifying many of the key tensions and trade-offs that could impact the cap and reduce program’s implementation and outcomes. In addition to the issues identified in the illustrative scenarios analysis, we encourage DEQ to consider the potential implications of program design options relating to available compliance pathways and the distribution, redistribution, trading, and banking of compliance instruments. We also encourage DEQ to evaluate additional equity-related risks and consider developing mechanisms to further ensure that the program will achieve its equity goals. The following sections describe some additional tensions that could affect the program’s outcomes and offer potential strategies for addressing these issues.

A. Available Compliance Pathways

DEQ’s illustrative scenarios generally apply the same design mechanisms to all regulated sources and sectors. This approach is effective at illustrating many key tensions and trade-offs under the program, it does not capture some tensions relating to available compliance pathways for different types of regulated sectors. The cap and reduce program will apply to sectors that have varying degrees of control over the direct emissions associated with their business models, and compliance pathways that are available to one regulated sector may not be available to another regulated sector. We encourage DEQ to evaluate tensions relating to where emissions are produced relative to the point of regulation, what kinds of compliance pathways are available to sources and sectors based on where their emissions occur, and how certain program design elements could achieve different outcomes when applied to sources of direct or indirect emissions.

The majority of Oregon’s anthropogenic GHG emissions are produced through the combustion of fossil fuels such as natural gas and petroleum products. A portion of these emissions is produced by large stationary sources, such as industrial facilities. Another portion is produced at

1 Green Energy Institute Comments on Cap and Reduce Technical Workshop 3: Alternative Compliance Options, Sept. 10, 2020; Green Energy Institute Comments on Cap and Reduce Technical Workshop 5: Cost Containment, Oct. 2, 2020.

Green Energy Institute at Lewis & Clark Law School 69 decentralized locations, such as residential and commercial buildings that combust natural gas for heat and cooking, and another portion is produced by mobile sources like cars and trucks. While many state and federal air pollution programs regulate emissions from large stationary sources, it would be challenging from an administrative standpoint to impose emissions caps on decentralized sources, such as individual buildings and vehicles. Instead, it makes more sense to regulate the fuel suppliers and distributors that are indirectly responsible for the emissions produced from the fuels they sell to consumers. However, because these fuel suppliers do not have direct control over the actions of their consumers, regulatory mechanisms designed to control direct stationary source emissions may not have the same effect on indirect emissions from regulated fuel suppliers.

We encourage DEQ to compare and consider how various program design elements could influence the compliance activities of fuel suppliers in comparison to stationary sources. For example, illustrative scenario 3 restricts compliance instrument trading and does not include alternative compliance options as a means of achieving on-site emissions reductions. A large stationary source could presumably meet its compliance obligations under this scenario by installing new equipment or altering its operating practices to reduce its emissions. A natural gas provider, however, would have few compliance options available under this program, and would likely need to increase its rates to encourage its customers to reduce their gas consumption. DEQ recognized that scenario 3 could drive up costs and impose burdens on low-income gas customers and proposed mitigating these impacts through an exemption or financial assistance programs.2 However, DEQ could potentially achieve the same objective (i.e., reducing direct stationary source emissions) and mitigate cost increases by varying the program’s design elements for the different types of regulated sources. For example, DEQ could make alternative compliance options available for fuel suppliers, but not for regulated stationary sources. The agency does not need to follow a one-size-fits-all approach to effectively cap and reduce GHG emissions in Oregon, and could potentially achieve the program’s goals more quickly and more efficiently if it creates adaptable design mechanisms that reflect available compliance pathways for different types of entities.

B. Distribution of Compliance Instruments

DEQ is developing Oregon’s cap and reduce program during a period of unprecedented uncertainty. The COVID-19 pandemic and associated efforts to control the virus’ spread have had dramatic impacts on consumer behavior and economic performance. Many businesses and industries experienced a drop in GHG emissions in 2020 due to COVID-related shut downs and the shift to working from home, but these reductions are generally assumed to be temporary. While 2020 is almost certainly an outlier in terms of emissions trends and trajectories on an economy-wide basis, certain industries or sectors could experience a permanent shift in their pre- 2020 and post-2020 emissions rates. If DEQ initially distributes compliance instruments based on pre-2020 emissions, some sources or sectors could receive an over-allocation of compliance instruments. If the source or sector is able to bank and/or trade these excess allowances, it could undermine the integrity of the cap in future compliance periods.3

2 OREGON DEPT. OF ENVTL. QUALITY, PROGRAM DEVELOPMENT TO REDUCE GREENHOUSE GAS EMISSIONS: ILLUSTRATIVE SCENARIOS 7 (Dec. 2, 2020). 3 For the purposes of these comments, the term “allowance” refers to a cap and reduce compliance instrument.

Green Energy Institute at Lewis & Clark Law School 70 To preserve the integrity of the cap, DEQ should consider incorporating safeguard mechanisms into the program to prevent or mitigate potential over-allocations of compliance instruments in the initial compliance period. These safeguards could take any number of forms. For example, DEQ could intentionally withhold a larger percentage of allowances in an initial compliance instrument reserve to reduce the number of compliance instruments available for distribution. The agency could then establish temporary conditions for withdrawing instruments from the reserve that only apply in early compliance periods. Or DEQ could initially distribute compliance instruments based on pre-2020 emissions and establish a mechanism to automatically adjust this distribution if a source or sector banks and/or trades a threshold number of compliance instruments in the early years of the program. If any regulated source or sector receives an over-allocation of compliance instruments in any compliance period as a result of unanticipated market dynamics, DEQ should withhold at least an equal number of compliance instruments from the source or sector in the subsequent compliance period.

C. Redistributing Compliance Instruments

As we discussed in section I.B, DEQ should retain authority to adjust the distribution of compliance instruments to reflect changes in source or sector emissions profiles resulting from shifting market dynamics or other circumstances. However, there are some potential tensions between the need to account for changes in emissions rates resulting from market forces and changes resulting from intentional emissions reduction activities and investments. Redistribution protocols should be designed to avoid penalizing regulated entities that reduce emissions through investments and operational changes undertaken for compliance purposes. To achieve increasingly stringent compliance obligations, many regulated entities will presumably need to choose between investing in new technologies to reduce emissions or purchasing excess compliance instruments from other regulated sources. New technologies are typically capital- intensive, and regulated entities are more likely to make these investments if they can recoup their capital costs over time. The ability to sell compliance instruments provides one potential pathway for recouping these costs, so redistribution protocols should ensure that sources willing to make investments in emissions reduction technologies maintain some ability to generate and trade excess compliance instruments. Redistribution protocols should ideally aim to prevent over-allocation windfalls for regulated entities that reduce emissions due to market pressures, while still incentivizing regulated entities to invest in technologies, systems and practices that reduce emissions in the near-term.

D. Trading Compliance Instruments

The effectiveness of compliance instrument trading in achieving the program’s goals will largely depend on the accuracy of DEQ’s compliance instrument distributions. If every regulated entity and/or sector initially receives compliance instruments that under-reflect the sources’ or sectors’ business-as-usual emissions in a post-pandemic economy, an unrestrictive trading mechanism would theoretically encourage investments in cost-effective emissions reductions and establish a market price that accurately reflects the economic (if not social or environmental) cost associated with those emissions reductions. If, however, DEQ over-allocates compliance instruments to any sources or sectors, it could lead to an over-supply of allowances on the market that would drive

Green Energy Institute at Lewis & Clark Law School 71 down costs and deter other sources or sectors from investing in on-site emissions reductions. Restrictions on trading would help mitigate the impacts of over-allocation by helping reduce the supply of available allowances and incentivize investments in emissions reductions. If compliance instruments are under-allocated, however, restrictions on selling excess compliance instruments could potentially deter entities from investing in projects or processes that maximize emissions reductions in the near-term. To address these tensions, DEQ could consider establishing restrictive trading mechanisms that are automatically triggered if the available supply of unused compliance instruments exceeds a certain threshold.

E. Banking Compliance Instruments

The allocation of compliance instruments has similar implications for the banking of excess compliance instruments as it does for trading. If DEQ over-allocates compliance instruments to any sources or sectors, and those sources or sectors are permitted to bank their excess allowances indefinitely, it could result in an over-supply of allowances at any point in the future. If DEQ over-allocates allowances to multiple sources or sectors in its initial distribution of compliance instruments, a flood of banked allowances could completely undermine the program’s emissions reductions in later compliance periods. At the same time, however, the ability to bank excess compliance instruments could incentivize regulated entities to invest in early emissions reductions that would provide a greater benefit to Oregon than later reductions. Similarly to the trading issues described in the previous subsection, DEQ could potentially address these banking tensions by developing a mechanism that automatically triggers banking restrictions (such as a limit on the number or percentage of compliance instruments sources can bank at a time, or expiration dates on banked compliance instruments) if certain conditions occur.

F. Strategies to Promote Equitable Benefits and Outcomes

We agree with DEQ that equity must be a key priority under the cap and reduce program, and support the agency’s objectives to develop mechanisms to promote community benefits and alleviate community burdens, particularly in environmental justice (EJ) and impacted communities. We believe the alternative compliance framework described in Scenario 2 offers the strongest opportunity to achieve some of these objectives within the existing legal confines by creating an avenue to invest in projects that benefit impacted communities. Projects that reduce GHG emissions while helping EJ and impacted communities transition to zero-emissions technologies will provide meaningful immediate benefits while also protecting communities from future fossil fuel cost volatility.

However, investments in zero-emissions technologies alone will not effectively mitigate the long-term threats that climate change presents for Oregon’s frontline communities. To mitigate these risks to the greatest extent possible through state-level action, DEQ must develop a program that effectively and meaningfully reduces GHG emissions quickly and permanently. This is unlikely to occur if DEQ allows economic concerns to outweigh climate benefits in the design and implementation of the cap and reduce program.

Oregon’s persistent and widespread equity challenges largely stem from and continue to be driven by inequitable policies that are directly or indirectly designed to protect entrenched

Green Energy Institute at Lewis & Clark Law School 72 economic interests rather than community health and wellbeing. These policies generally were not adopted with malicious intent; instead, they were crafted in response to stakeholder input. The underlying problem is that powerful economic interests typically have the capacity and resources to influence decision-making to a much greater extent than individual citizens or communities. DEQ has made a concerted effort to address some of these imbalances through the cap and reduce stakeholder process, but these efforts may not be sufficient to override decades of ingrained institutional culture and practice. There remains a concerted risk that well-resourced commercial interests will constrain the program’s ambition and ability to achieve its goals, or encourage the agency to weaken the program’s emissions reduction potential at some time in the future. The burdens of either of these outcomes would fall disproportionately onto Oregon’s most vulnerable communities.

To mitigate these risks, DEQ should consider incorporating precautionary response measures into the program that would automatically trigger additional requirments or restrictions if programatic emissions reduction thresholds or other pre-determined conditions are not met. For example, if the state’s total reported emissions do not drop from one compliance period to the next, it could automatically trigger restrictions on banking and trading of compliance instruments. DEQ could also develop sector-specific response measures. For example, if fuel prices rise above a certain threshold, fuel suppliers could be required to submit a certain number of alternative compliance instruments from projects that mitigate cost burdens for low-income customers. These types of mechanisms could help ensure that the program stays on track to achieve its goals and address some of the influence-related imbalances that have the potential to stymy progress.

DEQ should also work with other agencies, municipalities, and community groups to identify other opportunities to further mitigate potential burdens on EJ and impacted communities through policues and program beyond the scope of the cap and reduce program. For example, DEQ could work with the Public Utility Commission to develop strategies to mitigate impacts to low-income electricity and gas ratepayers, and the agency could work with the Oregon Department of Energy, the Oregon Department of Transportation, and local governments to identify strategies to mitigate transportation-related burdens.

III. Conclusion

We want to thank DEQ for continuing to engage with stakeholders on technical design options and policy considerations for the cap and reduce program. Achieving the program’s climate, equity, and economic goals requires careful deliberation at the design stage to determine how available regulatory mechanisms could impact outcomes under varying conditions. We appreciate the opportunity to provide input on the implications of certain design options and offer suggestions for addressing the tensions and trade-offs that could influence the program’s outcomes. Thank you for considering our comments.

Sincerely,

Amelia Schlusser Staff Attorney, the Green Energy Institute at Lewis & Clark Law School

Green Energy Institute at Lewis & Clark Law School 7 73 December 7, 2020

To: Colin McConnaha Manager, Office of GHG Programs DEQ Cap and Reduce Program

Re: Cap and Reduce Scenarios

Because the League of Women Voters of Oregon believes that climate change is a serious threat facing our nation and planet, LWVOR supports climate goals and policies that are consistent with the best available climate science and that will ensure a stable climate system for future generations. We appreciate the work DEQ has done with the Technical Workshops, Town Halls, and the December 2 Illustrative Scenario Discussion to develop the Cap and Reduce program. The goals in Executive Order No. 20-04 are already less strict than necessary to meet the 2018 IPCC global target of net-zero emissions by 2050. We recognize that the longer it takes to reduce emissions, the greater the climate change impacts. The EO goals for 2035 must be treated as seriously as those for 2050. We realize it is a complex program with competing goals and especially with respect to the Equity concerns will be difficult to accomplish without legislative support. No matter how well the program is modeled and designed, over thirty years, conditions will change; the program has to be designed so that it can meet the goals independently of the changes. We appreciate the “Emissions, Equity, Cost” triangle showing the competing goals. However, we would like to see the “Cost” apex changed to “Economics” to indicate that benefits from the growth of clean-energy jobs and the avoidance of the negative impacts of climate change are to be taken into account in addition to the costs of reductions for the regulated entities. We believe it is important to identify early in the process which greenhouse gases and sources of emission are to be regulated, including setting the threshold for which specific entities will be included. This will allow giving notice so that the regulated entities can start planning for an early start of the program.

All greenhouse gases should be included unless there is a significant reason for exemption. Emissions from non-regulated types of gases or sources will cause the cap to be lowered on the regulated ones to meet the EO goals.

For some sectors there may be a trade off in setting the threshold. Setting the level too high will cause a significant amount of emissions to be unregulated; setting it too low will cause increased administrative burden on DEQ with little effect on reaching the caps.

74 Considering the differences among the sectors being regulated, we believe the various components of the program should not have to be the same for all sectors. We agree that some flexibility may be necessary to achieve rapid early reductions. However, the primary intent should be to have the regulated entities decrease their emissions. Therefore. use of flexibility options, especially later in the program, should be dependent on regulated entities showing realistic long-range plans for how they will meet the caps. Alternative compliance instruments should be limited to emission reductions in Oregon. Priority should be given to those benefitting impacted and environmental justice communities. We hope you find these comments helpful as you enter the Rulemaking phase.

Rebecca Gladstone Claudia Keith, Kathy Moyd, Julie Chapman President LWVOR LWVOR Climate Emergency Advocacy Team

75 From: HANCHROW Marsha R Sent: Wednesday, December 2, 2020 1:50 PM To: CapandReduce Subject: New GHG program

As with the City of Portland’s new program, this proposal is aiming to get air quality improvements from the big, corporate “Them.” Any program that ignores the many of Us who drive is missing a huge category. The last number I saw for the percentage of GHG emissions from transportation was 40%. I believe transportation is the largest single category. Work on getting Oregon to match the rest of the west coast’s diesel exhaust standards as a first step, and put some energy and money into public transit. Do something to get people out of their cars and monster SUVs. “Natural” gas leaks get very little attention. There are so many other things that are more or at least equally important.

The collection of other major contributions suggests a “Say their names” kind of marketing campaign, at very least.

Marsha Hanchrow

76 From: Angus Duncan Sent: Wednesday, December 9, 2020 4:35 PM To: CapandReduce Subject: Scenarios

Comment Memo to DEQ re Cap & Reduce Scenarios

We appreciate DEQ staff developing the three C&R scenarios as a creative way to help staff and stakeholders visualize some of the tradeoffs among the approaches underlying the scenarios. We particularly would welcome more fleshing out of these scenarios; e.g., introducing variables such as different sectors proceeding at different reduction rates, potentially even to different 2030 outcomes, reflecting more or less carbon-intensive emitters with greater or lesser abilities to reduce emissions cost-effectively (recognizing that trading among emitters is another way to capture flexibility that reflects these differences).

We are concerned, however, with an apparent negative response from DEQ staff to the question whether the outcomes of all three scenarios (or variations) must still be consistent with the emissions reductions anticipated and directed in the Governor’s Executive Order. If this outcome is not held constant across scenarios, two equally unsatisfactory outcomes ensue:

 the functionality of each scenario in other respects becomes secondary to the relative success each offers in achieving the stipulated reductions (many stakeholders will seek the greatest and earliest reductions possible, so cost and functional challenges are devalued for purposes of comparisons across scenarios);  the C&R carbon cap is generally regarded (e.g., in California’s Cap & Trade) as a backstop to other programmatic measures, while DEQ’s apparent dismissal of the value of achieving equal or better reductions suggests that those other measures are now standing as backstop to the C&R.

Many stakeholders, including NRDC, would likely resist such a reversal of roles as less likely to result in maximum emissions reductions from the combined effects of cap and programmatic actions.

Angus Duncan PNW Consultant, Natural Resources Defense Council

77 December 9, 2020

Colin McConnaha, Manager Office of Greenhouse Gas Program Department of Environmental Quality 700 NE Multnomah St, Suite 600 Portland, Oregon 97232

RE: Comments on Program Development to Reduce Greenhouse Gas Emissions: Illustrative Scenarios

Dear Mr. McConnaha:

The Oregon Association of Conservation Districts (OACD) thanks and commends DEQ for its effort to gather public input on its Cap and Reduce greenhouse gas program. OACD represents 45 local government Soil and Water Conservation Districts (SWCDs) throughout Oregon. The districts are charged with providing assistance to conserve natural resources and devote technical and monetary resources to promote management practices on natural and working lands. SWCDs are in an excellent position to help provide technical services and implement management practices on farms and forests that reduce greenhouse gas emissions and sequester carbon.

It is well known that soils and vegetation on the earth store an enormous amount of carbon that is cycled back and forth with the atmosphere. The exchange rates with the atmosphere and balance in carbon pools is substantially affected by our management practices on the land. With proper management practices we can effectively sequester carbon long-term, keeping it out of the atmosphere. Many of the management practices that sequester carbon have concurrent benefits to soil health, productivity of agriculture and forest lands and thriving ecosystems. Therefore, sequestering carbon on natural and working lands is not only good for the climate, it is good for the associated industries; a win-win situation.

Quantifying the amount of carbon sequestration on working lands can be difficult, but there are several established protocols for certain practices and others are in process of scientific review. Costs for monitoring and quantifying reductions can be challenging and costly. However, as the research and knowledge evolve in the coming years, new protocols will continue to be developed and the costs for monitoring and quantifying reductions will likely improve. Making sure that there is incentive for moving in this direction is essential because the potential

78 benefits of sequestration in natural and working lands is substantial. Currently the Oregon Watershed Enhancement Board (OWEB), the Oregon Department of Agriculture (ODA) and the Oregon Department of Forestry (ODF) are working with landowners to identify program potential, as is the Oregon Global Warming Commission (OGWC). Our partner, the Natural Resources Conservation Service (NRCS), is also developing policy and tools. There are specific landowner projects underway in Oregon now that can provide climate mitigation.

President-Elect Biden states in his newly released program for USDA as part of the Climate 21 memo that the agency should develop within the 2021-2023 fiscal year funds to establish a carbon bank to finance GHG reductions generated through improved land management practices using existing authorities under the Commodity Credit Corporation. In the first 100 days of the administration existing Farm Bill conservation programs can be targeted and funded to advance climate research and conservation and to create incentives to accelerate adoption of climate smart practices. Priority objectives such as these will expedite climate adaptation tools.

In the Issue brief it is apparent that there are potential opportunities for mitigating greenhouse gas emissions on natural and working lands through trading and compliance instruments. Having a wide variety of options for compliance is very important and OACD would like to see opportunities on natural and working lands maximized in a way that compliments the underlying uses of the land as providing such opportunities on Oregon’s working lands are also good for Oregon. This gets at the goal of equity which is prominent in the issue brief. And as most of the working lands are in or near rural communities, the benefits can be extended to provide equity in those areas.

At this time OACD does not have a single recommended scenario as there are many details that still need to be considered in developing a complete program. A mix of the tools and policies included in DEQ’s three scenarios appears viable. It is difficult to evaluate costs associated with the different scenarios until more detail is known and the cost modeling is performed. It is difficult to evaluate equity of the different scenarios until details of how the programs would directly affect different industries and communities is more defined. To evaluate the emissions goal under each of the scenarios is difficult until accompanied with actual projections of the emission reduction rates and end points that are achieved.

OACD is concerned with scenario 3 in which there would likely be limited opportunities for incentivizing carbon sequestration on natural and working lands. There is also concern over scenario 1 due to the missed opportunity for in-state compliance options. Given that compliance options on working lands are emerging, it might be worthwhile to consider allowing out of state compliance options initially and then modifying the program over time to bring compliance options back into Oregon. Thank you for the opportunity to provide input.

Sincerely,

Jan Lee, OACD Executive Director Stan Dean, OACD Advocacy Chair

79 December 4, 2020

Colin McConnaha Nicole Singh Office of Greenhouse Gas Programs Oregon Department of Environmental Quality RE: Preliminary Comments to Cap-and-Reduce Program Design Elements

Dear Colin and Nicole:

Thank you for the opportunity for the Oregon Fuel Association to provide comments to Oregon Department of Environmental Quality’s most recent cap-and-reduce or cap-and-trade policy scenarios.

The Oregon Fuels Association (OFA) is the voice of Oregon’s locally-owned fuel stations, fuel distributors and heating oil providers. OFA members are at the forefront of environmental stewardship within the industry and continue to make investments toward a cleaner, greener economy. In fact, Oregon’s locally owned fuel providers are leaders in the use of fuel blending and promoting the use of low carbon fuels and biofuels. We are dedicated to helping Oregon reduce emissions from fuels by at least 10 percent by 2025. These investments by our members have helped eliminate millions of tons of greenhouse gas emissions since the Clean Fuels Program was implemented in 2015.

At the outset, it is important to note that OFA members are not oil companies. We are multi-generational, family-owned local Oregon fuel distribution and retail businesses who employ hundreds of people in your communities and provide an essential good to Oregonians. Our customers include moms and dads driving to work, transit companies taking the elderly to doctors, emergency personnel responding to everyday tragedies, and businesses needing to move goods and services throughout our state. With thousands of employees, our members are proud of the work they do daily that helps keep the economy moving

As a leader in reducing the state’s greenhouse gas emissions, we are concerned with the current direction of DEQ’s proposals. Before the Rules Advisory Committee (RAC) begins, we feel it is necessary to raise several issues:

1. Federal solutions to reduce greenhouse gas emissions are superior to state-only policies. President-Elect Biden has made it clear that new climate policy will be an important part of his administration. This new administration has committed to aggressive federal action to reduce GHG emissions. By focusing on a more meaningful federal approach to regulating GHGs, we can reduce GHGs in a way that does not put Oregon businesses and our customers at a disadvantage.

80 2. DEQ needs to better articulate the goals of this new, novel, and complex program. Participants in the public meetings are confused, or at a minimum do not agree, on the foundational issue –where is the agency trying to go with this program. For instance, the Governor’s Executive Order 20-04 (EO) sets forth GHG reduction goals for the state that include many other agencies and programs. This rulemaking is only a piece of that emissions reduction puzzle. We believe emissions reductions can and should happen outside of this program. The three sectors called out in the EO are NOT intended to bear the entire burden of making all emissions reductions. A policy design should not anticipate or require that all reductions come from these sectors. Instead, DEQ should be clear in how it sets goals consistent with the EO to avoid further confusion.

3. DEQ does not have the authority to regulate importers of transportation fuels. We disagree with DEQ and the Oregon Department of Justice’s opinion that the agency can indirectly regulate emissions from vehicles by instead, targeting non-emitting businesses like our OFA members. In Washington, the Department of Ecology lost its case at the Washington Supreme Court because the court found that the agency does not have the authority to regulate fuel retailers and distributors that DO NOT directly emit GHGs. We believe that same issue could be part of a future litigation effort challenging a rule here in Oregon. Rather than attempt to indirectly regulate transportation emissions, DEQ has the authority under an existing pathway to reduce GHG emissions in the transportation sector via the CFP. We strongly believe that the CFP is the best approach. A new regulatory program that layers on top of existing programs will unnecessarily increase costs on Oregonians and depending on its design, may not actually reduce emissions from the transportation sector.

4. Increasing transportation costs is an equity issue. Not everyone can afford a Tesla. Not everyone can drive an EV, or buy a new, more efficient car. For that reason, there are many communities that need transportation fuels – affordable transportation fuels. The increased costs of transportation fuels will have a significant and negative impact on low-income populations. It is important that this be evaluated under an equity lens.

5. Transportation fuel considerations must include public safety. Transportation fuels – diesel and gasoline – are critical for public safety. There is no way around that fact today. And in fact, the slow growth of EVs will not change their importance in the foreseeable future. Even for those that can afford EVs and can use them (usually small, light-duty vehicles), the ability to use a vehicle during an emergency is critically important. This summer offered a prime example. Warming weather and drier conditions, as DEQ has repeatedly pointed out, are part of our future and we must plan accordingly. As seen in California, that can mean more electricity shut offs for public safety. When that happens, fuel retail stations can remain open if they have backup generators – which the state is helping provide. However, individual homeowners with EVs may not have access to generators – which run on fossil fuels. If a person with an EV lives in an area where electricity is shut off and a vehicle is not charged, they will be stranded. As a result, community members and public safety officials will continue to need affordable fossil fuels and convenient access to those fuels throughout Oregon. This consideration MUST be part of this rulemaking.

Thank you for your consideration. Please let us know if DEQ would like to discuss these comments and concerns. Best, Mike Freese Danelle Romain OFA Lobbyist OFA Lobbyist

81 To: Colin McConnaha Manager, Office of Greenhouse Gas Programs Oregon Department of Environmental Quality From: Oregon Wild and Beyond Toxics Date: 11/20/20 Re: Feedback on “Cap and Reduce” Workshops

As part of EO 20-04, both the Department of Environmental Quality (DEQ) and the Environmental Quality Commission (EQC) have been directed to jointly establish a cap and reduce program for GHG emissions with a potential carbon offsets component.

To that point, we believe that a direct incentive program for private landowners may be a better climate solution than an offset program. However, we recognize that a carbon offsets program within Oregon has the potential to provide financial support for forest protections on private lands. In Oregon, small forest owners have few options when it comes to restoring and protecting older forests on their property, as current tax and financial incentives are geared strongly towards short rotation logging as opposed to protecting valuable carbon stocks. Yet, while a carbon offset program holds promise as a climate solution, there are also several challenges that can undermine its effectiveness. As such, Oregon Wild and Beyond Toxics have several policy priorities we advise the board to take under consideration:

1) Any future carbon offset program policies must incorporate strong integrity mechanisms that do not enable the continuation of any toxic air or water pollution as a result of the offset program, with special consideration for communities of color and lower income areas that are already facing higher pollution burdens. 2) Forest offset projects must be durable and aim toward long-term storage — that is, they not only should sequester carbon, but also should be managed to withstand the stresses of a changing climate in the long-term. For example, forest projects should be managed for both species diversity and climate resilience, with an emphasis on natural forest composition. 3) Forest offset projects must be additional — that is, they must incentivize forest practices that are better for the climate than business-as-usual as opposed to rewarding people for current practices under the Oregon Forest Practices Act. Further, an offset program should incorporate requirements for credit replacement by forest owners for any intentional reversals (i.e., they must pay back the credits if they log or develop the offset project). 4) The carbon benefits of any projects must be quantifiable and verifiable, and therefore ODF must establish a working third party accountability program with the DEQ and the EQC with the capacity to ensure this. This program must account for industry-based

82 emissions, including emissions from fuel use in industry operations, emissions from road construction, soil and native vegetation disturbance during harvest operations, slash burning and transport of slash offsite, emissions from trucking in and spraying pesticides, and the estimated loss of carbon when a tree is harvested, transported, and processed into wood products. Approved offset transactions must be subject to third-party follow-up monitoring to ensure compliance over time, with substantial penalties sufficient to act as a deterrent to a party that violates their commitments. 5) An offset program should incorporate meaningful buffer accounts that are large enough to mitigate for natural processes that impact carbon sequestration, like wildfire. 6) Any offset program must be comprehensive, covering all carbon emitting sectors of the economy. An effective offset program must avoid leakage of GHG emissions in unregulated sectors.

In addition, DEQ should work closely with small family forest owners to ensure an open and transparent decision-making process. Any future offsets program should focus on privately owned lands, as there are few options for ensuring protections of these forests and they have significant potential in terms of carbon sequestration — data has shown that the carbon stocks on privately owned forests in western Oregon’s coast range are only a third of their ecological potential.1 Publicly owned forests are already, by law, held to higher standards for balancing multiple values and should therefore not be included in offset mechanisms.

1 Stephen Fain, Brian Kittler, Amira Chowyuk 2018. Managing Moist Forests of the Pacific Northwest United States for Climate Positive Outcomes. Forests. 10.3390/f9100618 https://www.mdpi.com/1999-4907/9/10/618

83 To: Green House Gas Rule Advisory Committee (GHG RAC) Oregon Department of Environmental Quality (DEQ)

From: Pacific Northwest Chapter of Institute of Scrap Recycling Industries (ISRI)

Re: Comments about the GHG Program

GHG RAC,

Thank you for the opportunity to provide comments regarding the rules and program you are developing with the intent of lowering Greenhouse Gas (GHG) emissions in Oregon. ISRI has always supported reducing GHG emissions by its members processing recyclable commodities, requiring much less energy and producing significantly lower emissions than raw material extraction and processing for the production of goods needed for everyday life.

As the RAC is aware, multiple programs already exist within DEQ to regulate air emissions – Air Contamination Discharge Permits, Title V Permitting, New Source Review, Hazardous Air Pollutant Program, Greenhouse Gas Reporting Program and Cleaner Air Oregon. These departments permit operations but also have the authority to require additional extra measures to lower emissions based on potential health risks to workers and the neighboring community. Many types of emissions and pollutants are evaluated by each department and include GHG’s.

Oregon has a second existing agency working to regulate worker safety, including emissions regulation, Oregon Occupation Health and Safety Administration (OHSA). OHSA focuses on job specific functions with the potential to emit emissions that can affect workers at a job site. If there is a potential for harmful emissions, an employer is regulated to take further action to protect its employees and continue to monitor safety to make sure the controls are effectively protecting their workforce.

Oregon is a leader in environmental stewardship around the world, which makes it a very attractive place to live. For example, electricity producers in Oregon have started to make investments in renewable energy that is demanded by the marketplace but also made goals to eliminate carbon-based energy consumption. They are doing both those things while simultaneously working alongside businesses to lower their energy consumption by awarding concessional tax breaks for certain investments made to improve high energy consuming systems.

We bring these topics and examples up because Oregon’s Cap and Reduce program must work hand in hand with business and existing state regulations to craft a program to better Oregon. ISRI supports the idea of improving the global climate. We also support a circular economy and

84 market driven change, which is requiring more recyclable materials in the goods we use every day. When this change is demanded in the marketplace, the cost consumers pay is dramatically less because businesses are competing against each other to earn the support and revenue from consumers.

If the RAC views equity as a key trait to the program design, it must be equitable to all parties, including employers. The option of adding another layer of regulation to businesses without offering any assistance to lower their GHG emissions will make it even more burdensome for businesses to operate in the state. The cost of over regulation will be passed onto the consumer causing the cost of goods to increase and some businesses will not have a way to pass on the cost because their sales are market driven, like many of the ISRI members. This could also have a detrimental impact to Oregon’s business community and deter from investments being made in the state by Oregon employers because the cost of doing business will be very high. Leading to lower tax revenue for the State to fund much needed programs and initiatives already in place.

ISRI wants to be supportive in the RAC’s efforts to lower GHG emissions in the state. ISRI believes recyclable commodities can play a key role in achieving those efforts by promoting recycling through industry and residential through educating Oregonians of what to recycle and how to properly recycle.

We appreciate the opportunity to comment and be supportive.

Best,

Sean Daoud PNW Chapter President

85 December 7, 2020

Colin McConnaha Manager, Office of GHG Programs Oregon Department of Environmental Quality

Subject: Comments on Cap & Reduce Illustrative Scenarios

Dear Colin, I want to thank DEQ for preparing these illustrative scenarios, and to you and your colleagues for another well-structured and productive discussion workshop. I have been doing this form of full-sector energy system policy analysis work for over 20 years at the national level in the US and over a dozen developing countries. Although the three scenarios that DEQ has identified are useful as an example of some of the policy trade-offs, the table of scenarios is structured like a typical Model Run Matrix and includes all the major policy parameters. I appreciate that DEQ clarified that the three illustrative scenarios were not proposed policy runs, in particular because such scenarios would provide an apples and oranges comparison because the strength of the Cap is different in each scenario. Therefore, my comments are more directed to how DEQ and the RAC should structure the upcoming policy runs. The typical climate policy analysis would look at the costs and benefits of the various compliance and trading policy options under a consistent GHG constraint (initial Cap level and slope). One or more alternate Cap scenarios would be used such that a set of policy runs would be modelled to allow trends to be identified. My recommendation would be to reduce the number of Policy Options by eliminating both the Compliance Instrument Distribution, which I believe should be adjusted regularly based on reported emissions data, and the Compliance Instrument Reserve, which I believe should be include in all options. The key Policy Options to be analyzed would be 1) Cap level & target, 2) Level of Trading (Allowed or Limited), and 3) Scope of Alternate compliance mechanism (ACM) allowed. The Cap level & target options should start by following the emission reductions goals stated in the Governor’s Executive Order. A more ambitious Cap level & target option should look to reduce all covered emissions to zeo byr 2 050, and would provide an incremental assessment of what additional investment and technology development would be needed. The Level of Trading could be Unlimited – allowing covered entities and third parties to buy and sell allowances freely, or Limited – in terms of allowing trades only between covered entities, or having prerequisites to allow trading. The Scope of Alternate compliance mechanism (ACM) allowed might have several options, but three are exemplified here: All – meaning use of existing registries and protocols, In-state only – meaning DEQ

86 This would result in a set of 13 model runs, a Baseline (or business-as-usual) scenario and 12 policy scenario as illustrated in the table below.

Cap level & target Strong Medium Level of Trade Allowed Allowed Limited Allowed Limited • All • All • All • All Type of Out-of-Scope • In-state Only • In-state Only • In-state Only • In-state Only ACMs • None • None • None • None

The model outputs from such scenario runs would provide critical comparative information, such as direct versus ACM emission reductions, incremental investment cost (compared to the Baseline scenario), incremental fuel expenditures, levels of new technology adoption in all covered sectors, and societal benefits from reduced GHG emissions and co-pollutants.

Sincerely,

Dr. Pat DeLaquil CEO, DecisionWare Group LLC (retired) 155 SE 16th Ct. Gresham, OR 97080-5362

87 To: ODEQ GHG reduction taskforce

From: Ralph M Cohen, PE

Subject: DEQ Illustrative Scenarios meeting comments (12/2/20)

Date: 12/9/20

Thank you for the opportunity to participate in the Cap and Reduce program. I am submitting these comments to document my response to the options in the scenarios presented at the meeting.

I am currently a part-time, independent engineering consultant/concerned citizen and for many years a senior facility design engineer in the semi-conductor industry. As a member of Professional Engineers of Oregon (PEO), I am keeping them apprised of the program proceedings, but views and comments I provide are strictly my own and have not been reviewed in advance or endorsed by PEO.

Comments in response to the scenarios presented

Understanding that these scenarios were only illustrative, I would select characteristics from each of the three scenario as my preferred scenario.

I looked at these scenarios primarily through my industrial design experience “filter” and what I thought was reasonably possible, trying to balance reduction against equity and cost with the following brief rationale:

Initial cap level –There should be an immediate goal to reduce GHG emission when the program starts.

Cap trajectory – There will be some start up time to plan and implement; setting an aggressive target the first year that can’t be met would likely send a bad signal to the public.

Basis for compliance instrument distribution – A mechanism with feedback and flexibility would seem more effective and realistic. Percentage reduction may not be even across industries as remediation lead times could be either long or variable for process changes resulting in some years with no reduction and subsequent years with significant reduction.

Ability to trade instruments – Trading would seem to make the program more effective and flexible as there may be surplus instruments available. The question and concern would be, how is the value of the instrument set and how are they traded?

Ability to use alternative compliance instruments – Striking a middle ground. There may be instances where direct reduction is not possible after some years of direct reduction or further reduction becomes too costly. An alternative compliance instrument may be the best solution provided the cost is high enough that it doesn’t become the preferred means of meeting the cap. Some earlier programs have been known to lose effectiveness by setting the alternative compliance instrument price too low.

Types of allowable alternative compliance options – Middle ground option, preferable to limit location to Oregon and even regionally selective to promote Equity.

Compliance instrument reserve – Provides some relief and flexibility in the system. The issuance of additional compliance instruments should be on an exception basis with stringent review.

88 The table below was presented in the ODEQ meeting material; I deleted descriptions under each scenario that I did not prefer:

Design elements: Scenario 1 Scenario 2 Scenario 3 Set based on a Initial cap level level lower than recently reported emissions Cap trajectory Less steep than Scenario 1 Initial distribution is a proportion of cap Basis for compliance based on recently instrument distribution reported emissions; proportion is regularly updated with new data and based on emissions reduction plans Ability to trade Yes; in certain instruments instances Ability to use alternative compliance Yes instruments DEQ-authorized Types of allowable protocols that reduce alternative compliance emissions and provide options co-benefits to Oregon communities, which may include in-scope emissions reductions Yes; set aside from Yes; set aside from Compliance instrument within the cap and within the cap and reserve accessible based on accessible based on certain criteria certain criteria

[END of COMMENTS]

89 Date: December 9, 2020

Re: Oregon Cap & Reduce Program Public Comments

To the DEQ Staff:

Thanks for the opportunity to review and provide feedback on DEQ’s proposed scoping scenarios for designing a GHG Cap and Reduce Program. Without insight into quantifiable metrics around cap stringency, rate of decline, etc., it is difficult for The Climate Trust (TCT) to comment on which program design choices best achieve the goals of equity, emissions and costs. As such are feedback focuses on design considerations for finding a balance among the three above primary goals for the Program.

Scenario 1 TCT recommends DEQ pursue scenario 1 as the best option for meeting the program goals of reducing inequalities, and emissions, while mitigating compliance costs. An ambitious emission reduction target sends a strong signal that Oregon takes mitigating GHG emissions seriously. Alternative compliance instruments can play a substantial role in mitigating costs. We are supportive of a Program that relies on the decade plus expertise of third-party offset project standards, as a source of alternative compliance mechanisms. States are leading the charge to address GHG emissions and there is a climate diplomacy benefit of allowing offsets from out of state projects. The existence of successful projects on the ground supplying alternative compliance credits to the Oregon Program offers a compelling case and economic rationale for other states to consider similar market-based GHG reduction programs. Such efforts are necessary if we are to make progress in addressing the global problem of GHG emissions. We also urge DEQ to purse a partial linkage agreement with the California Air Resources Board allowing for the retirement of California Carbon Offsets (CCOs) to comply with an Oregon Cap and Reduce Program. This would generate further costs savings as there are many entities with GHG compliance obligations in California that would be subject to an Oregon Program. It would also benefit Oregon-based California offset projects and encourage the adoption of additional Oregon-based California compliance projects. There are program design considerations DEQ can take under this scenario to protect and enhance positive equity outcomes. The DEQ can limit offset geography domestically or regionally. Eligible project types can also be limited to those project types with a strong potential for occurring in Oregon. Additionally, DEQ can take a tiered approach to ensure a compliance entity’s alternative compliance credit portfolio adheres to equity considerations. The DEQ could limit the extent to which out of state offsets can be used as alternative compliance credits. However, TCT suggests DEQ exempt out of state projects occurring in disadvantaged communities (e.g. forest projects on Native Indian Tribal lands) from a sub-usage limit as such projects address equity, but also emissions reduction ambition through climate diplomacy.

90 Scenario 2

TCT views Scenario 2 as a workable approach, but we have some concerns around emissions, cost, and equity consequences. This approach is less preferable because it is less ambitious in mitigating GHG emissions and the constraints on compliance flexibility could be substantial enough to make it very costly. It does not make sense to TCT to pursue Scenario 2 when it has the potential to reduce less emissions at a higher cost relative to Scenario 1.

We’re concerned that the approach of DEQ could have unintended equity consequences and limit the geographic dispersion of equity benefits from the Program across the state. For example, a Program that does not allow for natural and working lands alternative compliance projects could deny Native Indian Tribes and disadvantaged rural communities from seeing equity gains under the Program. We would also question DEQ’s capacity and expertise to design alternative compliance project natural and working lands protocols. Therefore, if DEQ pursues the Scenario 2 approach to designing a Program we strongly urge it to rely on third party standards in addition to any DEQ specific protocols it might want to create if such protocols don’t exist among any of the current standards bodies.

Scenario 3

We recommend DEQ not consider scenario 3 as a viable option. The direct regulation no flexibility approach will most likely generate the least amount of emission reductions, at the greatest cost, and it is questionable as to whether it will generate substantially greater equity benefits than scenarios 1 or 2. This is reflective of 1960s-1970s federal pollution control regulations, which were shown to be less effective than polices that introduced compliance flexibility. The initial example is the federal program to phase out lead in gasoline was unable to achieve its goal under a direct regulation no flexibility approach and it was only after compliance flexibility was allowed that regulated facilities were able completely phase out lead in gasoline.

Closing Thoughts Thank you once again for the opportunity to offer DEQ feedback on GHG Cap and Reduce Program design considerations. I appreciate the effort DEQ has undertaken this past year on workshops to inform design considerations and identify the three important goals of reducing emissions, mitigating costs, and ensuring equitable outcomes for disadvantaged communities. While our recommendation is that Scenario 1 best achieves these goals, it is important to note the scenario options need not be mutually exclusive.

For example, we see no reason for such a stark choice between the design options for alternative compliance credits between Scenarios 1 and 2.There are program design tools at DEQ’s disposal can use to fine tune the extent to which compliance flexibility is allowed to better balance the desirable equity, emissions reduction, and cost containment outcomes. Sincerely,

Sheldon Zakreski Executive Director The Climate Trust