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Calling out the cavalry

Photo Credit: PAMPLIN MEDIA GROUP: JONATHAN HOUSE  - Henry Paulson, George W. Bushs treasury secretary, urged major state action to address climate change at the Portland City Club. As Congress dawdles while the planet warms, business leaders are stepping up to urge major action to avert climate change.

Henry “Hank” Paulson, the former Goldman Sachs CEO and treasury secretary under President George W. Bush, addressed the Portland City Club last month after publicly calling for a tax on carbon emissions that cause global warming.

Timed with Paulson’s visit, more than 70 local companies issued a joint Oregon Business Climate Declaration, calling on the state to lead the way.

But it remains to be seen if Oregon — a state that prides itself on environmental leadership — can retain those bragging rights on the climate-change front.

Most analysts say the environmental cost of greenhouse gas emissions must be built into the price of fossil fuels to achieve the magnitude of needed changes. Most favor either a surcharge for burning fossil fuels — a carbon tax — or a cap-and-trade system, which limits and reduces greenhouse gas emissions while using market incentives to encourage private-sector innovations.

Angus Duncan, chairman of the Oregon Global Warming Commission, says momentum for a cap-and-trade system fizzled here when the economy tanked. But now he sees signs the effort can be rekindled, especially since the Obama administration proposed reduced carbon emissions from power plants, and putting the onus on states to make it happen. 

Some environmentalists hope business leaders can prod politicians, especially Republicans, to support bold reforms.

“There are now new messengers talking about the risks of doing nothing about climate change,” says Andrea Durbin, the Oregon Environmental Council executive director, who helped organize the Oregon Business Climate Declaration. 

One of those messengers is Paulson, a Republican who likens inaction on climate change to those who stood by while the subprime loan fiasco and housing “credit bubble” led to a near-collapse of the U.S. financial system. At a time when many GOP politicians deny the Earth is warming or that humans bear any blame, Paulson argues that limited-government advocates are being shortsighted. Much more government intervention will be required to address future climate-related upheavals, such as rising ocean levels, he argues, if more isn’t done to prevent those. 

Learning from others

Oregon political leaders now can learn from bold initiatives launched on the West and East coasts, Durbin says.

British Columbia started levying a carbon tax in 2008. Since then, per-capita consumption of fossil fuels covered by the tax has fallen 16.1 percent, while fuel consumption in the rest of Canada has grown, says Stewart Elgie, director of the University of Ottawa’s Environment Institute.

Economic growth in British Columbia has “slightly outpaced the rest of Canada” since the carbon tax was imposed, Elgie says.

California launched a statewide cap-and-trade system in January 2013, so it’s still too early to draw many conclusions.

“Everything that I’ve seen of their cap-and-trade program is that it’s working, that it’s not disrupting their economy,” Duncan says. “Energy prices didn’t spike.”

California’s system achieved a “smooth launch and viability in its first year,” the Environmental Defense Fund wrote in a one-year review. “California’s program is serving as a model for the rest of the world,” the group noted.

The nation’s oldest cap-and-trade system for carbon emissions, launched six years ago by the Regional Greenhouse Gas Initiative, is now operating in nine Northeast states. Those states have reduced carbon emissions more than other U.S. states, but there’s disagreement on how much of that is due to the cap-and-trade system.

Those states did emerge from the recession earlier and in better economic shape than most other states, Duncan says.

Carbon tax here?

Duncan would prefer a cap-and-trade system in Oregon, but there’s more momentum here for a carbon tax.

A 2013 study by the Northwest Economic Research Center at Portland State University found a carbon tax could help the state collect more revenue. Perhaps more importantly, given the political difficulty of raising taxes here, substituting a carbon tax for other taxes would diversify the state’s revenue stream. That’s a “holy grail” in the state Capitol, because the state’s reliance on income taxes leads to deep cuts to schools and state programs during recessions, when more people are out of work.

“The revenue potential is what makes the conversation around the carbon tax so interesting,” Durbin says.

But a carbon tax could disproportionately harm lower-income people, carbon-dependent industries and certain regions of the state.

The Oregon Legislature last year approved $200,000 for a second PSU study. Researchers are trying to figure out how to avoid “winners and losers” from a carbon tax, and will present their findings this fall.

Gov. John Kitzhaber, now seeking a record fourth term, is promising to lead another effort to reform the state’s unstable tax system.

But recent polls show a sales tax “going down in flames,” says state Rep. Vicki Berger, R-Salem. She suspects Kitzhaber doesn’t want to champion a carbon tax now and threaten his re-election campaign, but eventually will pursue one because it has broader appeal, especially among environmentalists.

Berger, a leading Republican moderate, says climate change is a grave threat and humans bear much of the blame. However, she’s skeptical a carbon tax is a viable solution here.

California and British Columbia enacted their programs “by fiat,” Berger says. “That won’t fly in Oregon.”

She worries lawmakers might settle for a small carbon tax that wouldn’t make a serious dent in greenhouse gas emissions. But if the tax is big enough to shift people’s energy use, that would mean a major hike in the gas tax. “If it is, that will be on the ballot in a heartbeat,” Berger says, and it won’t fare well.

“The carbon tax sounds great until you start imposing it on people,” Berger says.

As an alternative, Berger suggests greater state efforts to promote solar and wind energy and thus drive down the costs.

State Sen. Brian Boquist, R-Dallas, another independent-minded GOP lawmaker, agreed to support funding for the carbon tax study — angering fellow Republicans — but says he “is in the ‘no’ camp of disbelievers.”

The British Columbia tax disproportionately hit some industries, such as cement makers, and caused them to leave the province, Boquist says. He fears the same could happen with an Oregon carbon tax, but wanted to see an independent study of the idea. “I could be wrong,” he says.

It’s unclear what impact the Oregon Business Climate Declaration will have. Signers include Nike, Adidas, Umpqua Bank, Moda and Mt. Hood Meadows Ski Resorts.

Boquist was unimpressed. “Most of the list looks like companies jumping on board for marketing reasons,” Boquist says.

Hopefully, executives in the group will convince their peers to join them, says Dave Tragethon, spokesman for Mt. Hood Meadows, which is highly vulnerable to global warming. “My fear is that those companies that have signed it, we’re basically preaching to the choir,” Tragethon says.

Duncan hopes skeptics will come around once they recognize a basic economic truth.

“It’s a question of high costs to control carbon or higher costs to deal with the effects of failing to control carbon.”

Steve Law can be reached at 503-546-5139 or stevelaw@portland

tribune.com. Follow me on Twitter: twitter.com/SteveLawTrib