Oregon transportation package talks now include new cap-and-trade program

SALEM, Ore. — Lawmakers in Salem are aiming to pass a major transportation package by the end of the current legislative session, and while a full bill has yet to emerge, a progress report published on Thursday reveals some significant new ideas under discussion — most notably, another attempt at a legislative version of a cap-and-trade program.

The idea is to place an upper limit on the state’s carbon emissions and ratchet it down over time, while allowing businesses to buy and sell portions of their emission budgets to create a market for carbon allowances. It’s also sometimes called cap-and-invest, referring to climate change mitigation efforts that would be funded by revenue from the program.

Oregon’s previous cap-and-trade bill was famously stymied by Republican walkouts in 2019 and 2020, and the concept hasn’t resurfaced in the legislature until now. Former Gov. Kate Brown sought to create a version of the program through executive action instead, and the resulting Climate Protection Plan took effect this year after a lengthy court challenge.

Legislative leaders posted a draft budget framework for the transportation package in early April, essentially a bullet-point list of revenue measures, including a gas tax hike and a host of other new or increased vehicle-related fees that would bring in about $1.9 billion per biennium, 90% of which would go into the State Highway Fund for road maintenance. 

The framework featured some eye-catching ideas — including finally pulling the trigger on the state’s long-simmering pay-per-mile plan and adding what would essentially be a 1% sales tax in all but name on new car purchases — but there was no mention of cap-and-trade.

But at the bottom of Thursday’s progress report, a new bullet-point list outlines a few “additional policy changes and funding mechanisms” that have been added to the conversation, including “DEQ wind-down of emissions testing” and “replace the current Climate Protection Program with a market-based emissions reduction program, linking to other West Coast markets.”

The DEQ testing piece wouldn’t mean an end to all DEQ testing statewide, according to Connor Radnovich, communications director for the Oregon Senate President’s Office. There are parts of the state where more than 90% of vehicles pass, raising questions about whether it’s practical to continue testing there, but the exact scope of the reduction is still under discussion.

As for cap-and-trade, the proposal under discussion now is not a direct revival of the 2019 legislation, Radnovich said, primarily because the regional cap-and-trade landscape has shifted dramatically due to Washington State’s cap-and-invest law, which passed in 2021 and took effect in 2023. The legislative conversation this time around is closely focused on Washington’s law, he said, and would be aimed at having Oregon join the Washington and California markets.

Revenue from the program would go toward a variety of uses, according to the progress report, including the State Highway Fund for “core operations and major projects,” wildfire mitigation and prevention work, community-based climate programs and efforts to reduce emissions by improving pedestrian safety, public transit and rail transportation options.

The report was sent to legislative leaders by Sen. Chris Gorsek and Rep. Susan McClain, who co-chair the Joint Committee on Transportation Reinvestment — which was created last week and has all the same members as the regular Joint Committee on Transportation. The new committee was necessary to give lawmakers more time for negotiations and a public review process for the package, according to Radnovich, because it’s not bound by the same deadlines as the regular committee.

The memo states that draft policy language will be coming soon for legislative and public review, with negotiations wrapping up “in the weeks ahead,” although it doesn’t offer an exact timeline. The final version of the transportation package will need to pass by June 29, the constitutionally-mandated deadline to end the session.

The advocacy group Move Oregon Forward condemned the news about the cap-and-trade discussion in a news release Thursday, particularly the idea that some of the revenue could go to the State Highway Fund and major road projects, calling the idea “cap and pave” and asserting that it would “hijack Oregon’s climate programs.”

The April framework drew criticism from Republican state lawmakers, who claimed they’d been shut out of the drafting process and released an outline for an alternative approach that focused on cutting spending at the Oregon Department of Transportation rather than raising taxes or fees to bring in revenue.

Republican leaders followed up on Wednesday with another bill outline that would redirect about $186 million from climate initiatives and passenger rail service toward road maintenance. It would also take half the revenue from the payroll tax that funds TriMet and other public transit agencies and use it to create a tax credit for truckers for two years, then move all payroll tax revenue into the State Highway Fund.

It would also aim to shake things up with a series of administrative changes at ODOT, including the creation of a Major Projects Office and Major Projects Committee, with required quarterly and annual reports from the office to the committee about the status of all big-budget projects. 

The transportation package talks come at a time when ODOT is facing increased scrutiny from state lawmakers amid chronic budget shortages and cost overruns on major projects. Legislators ordered an independent managerial review of ODOT earlier this year and are scheduled to discuss the results at a hearing on Tuesday.