Agenda Packet 2-11-19 Joint Work Session

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entit y might acquire allowances issued in state auction, acquire allowances from other entities in a secondary market, receive a distribution of free allowances from the state, or acquire certified carbon offsets from projects in sectors outside of the cap for a portion of their compliance obligation. Oregon may elect to link its program to the Western Climate Initiative (WCI), comprised of California and the Canadian provinces British Columbia, Manitoba, Ontario, and Quebec. Linkage to the WCI would provide access to a larger carbon market and is expected to support allowance price stability, lower compliance costs, create more flexible carbon reduction options, and streamline compliance for entities operating in multiple jurisdictions. An important policy issue to be addressed is the concept of ‘leakage’; a term defined as the movement of emissions, economic activity and jobs from a jurisdiction regulating GHG emissions to a jurisdiction not regulating GHG emissions. Leakage creates local economic harm without any broader GHG emission reductions. A pr imary strategy Oregon is expected to use to address leakage would be the free allocation of allowances to “Energy Intensive Trade Exposed” (EITE) entities on an output basis to mitigate cost shock to these entities while still providing an economic incentive to reduce GHG emissions. The bill would also have a price containment reserve that releases allowances when prices exceed a specified level, as well as a hard price ceiling. It is anticipated that the Clean Jobs Bill will include strategies to mitigate potential financial impacts on vulnerable communities, including lower-income and rural communities, communities of color, and Tribes. This would be achieved primarily through the reinvestment of proceeds from allowance auctions, known as revenue recycling. Without revenue recycling, the cost to electric ratepayers of meeting an 80 percent reduction target effectively doubles, for example. Recommendation None at this time. This will be a complex and critically important piece of legislation that both EWEB and City of Eugene staff will track closely as it’s introduced and debated. February 11, 2019, Joint Work Session - Item 1