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California-first Offset Policy Endangers Cap and Trade Legality | Scorcher

Published: July 10, 2017 by Editorial Team

Peter Weisberg, The Climate Trust
Weekly Policy and Finance Update – July 10, 2017

“California-first” offset policy endangers cap and trade legality and the state’s climate leadership.

Current discussions in Sacramento to extend the cap and trade system past 2020 are considering significantly reducing the usage of offsets and requiring half of these offsets to be generated in California. We believe the proposed lowered, out-of-state offset limit would be satisfied by projects that have already been developed and financed – effectively killing new investment in forestry or agricultural greenhouse gas mitigation, and the price signal that California’s carbon market has sent to land-use projects throughout the United States.

As Oregon residents, we are deeply concerned that this California-oriented proposal will reverse momentum for our state to implement a cap and trade system within the Western Climate Initiative framework. Last week, 33 legislators from the Oregon Senate and House introduced a Oregon cap and trade bill, SB 1070, that includes an 8% offset limit and does not discriminate against out-of-Oregon reductions. We’re concerned that this potentially protectionist California policy proposal could cause Oregon to turn inwards as well.

Nico van Aelstyn of Sheppard Mullin warned that, if adopted, this California provision would be vulnerable to a “credible constitutional challenge,” as its facial discrimination against out of state offsets likely violates the dormant Commerce Clause doctrine. “The last time the Cap-and-Trade program was presented with such a challenge – the auctions case –it sparked a crisis that endangered the entire program, as we had four “failed” auctions in a row,” van Aelstyn writes. “Why invite another constitutional challenge by including such facially unconstitutional language?”

Research and Resources

Oregon Carbon Pricing Bill Introduced by Bicameral Legislators
Senator Michael Dembrow and Representative Ken Helm, Oregon Legislature, July 6, 2017

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Image credit: Flickr/Bemep