Oregon Journalism Project: DEQ makes long-awaited announcement on controversial climate program

But the Oregon Department of Environmental Quality is nonetheless moving full speed ahead with the implementation of the program.

On July 9, the agency identified the nonprofit it has chosen to distribute the billions of dollars that industrial consumers expect the CPP to generate.

At a meeting of the Environmental Quality Commission in Astoria, DEQ director Leah Feldon announced that CALSTART, based in Pasadena, California, will serve as the Community Climate Investment entity for the program.

That means CALSTART will serve as a conduit for the money that flows from polluters to community groups around the state affected by climate change.

Under the CPP, which previous Gov. Kate Brown enacted via executive order in 2020, Oregon must reduce emissions by 90% from 2017–19 levels by 2050. Consumers of liquid fuels, propane and natural gas must steadily reduce their emissions every year. If they fail to meet annual targets, they can offset their excess emissions by purchasing Community Climate Investment credits. Each credit offsets a ton of carbon emissions.

While climate programs in other states use a market-based mechanism for setting a price on carbon emissions, Oregon’s does not. Instead, DEQ simply sets a price for the credits — this year, it’s $136 per ton.

That price is significantly higher than the most recent auction prices for carbon credits in California ($28.81 per ton) and Washington ($64.56 per ton).

The money Oregon’s program raises (which unlike industry groups, DEQ has not quantified) will not go to the state, as in California and Washington, but will instead be managed by a nonprofit. That’s a sore point in Salem.

Lawmakers in both parties would rather control the money themselves, but because the Climate Protection Program originated as an executive order, rather than legislation, they don’t have any oversight authority. Instead, it will fall to DEQ to make sure the nonprofit — CALSTART — directs the money to projects that reduce emissions effectively.

Since Brown created the CPP in 2020, industrial fuel suppliers and consumers have been unhappy. Critics argue Oregon’s higher carbon price will penalize the state’s businesses and consumers. DEQ and environmental groups disagree, contending the state will distribute enough compliance credits at no cost to offset Oregon’s higher price.

Oregon’s three natural gas suppliers, led by NW Natural, industrial customer groups, and some labor unions are currently suing DEQ in the Oregon Court of Appeals over the Climate Protection Program.

Last month, the Prosperity Council recommended that the state boost Oregon’s economy by scrapping the Climate Protection Program and replacing it with an emission reductions approach similar to those in neighboring states.

In response, Kotek said at a June 25 press conference she stood ready to work with the Legislature on such a concept: “When we look at Washington and California, they both have market-based programs—we need to align with them.”

Meanwhile, the governor’s stance is not slowing DEQ down. The agency is moving forward with CALSTART, which has experience with emissions reduction programs in other states. The nonprofit has enjoyed explosive growth in recent years, with revenues growing from $59 million in 2019, according to its tax returns, to nearly $500 million last year.

The vast majority of the money CALSTART collects gets passed through to partners who do the actual work, implementing projects to reduce emissions. (CALSTART did not immediately respond to a request for comment.)

DEQ hopes to finalize a contract with CALSTART by the end of the year.