1. Regulating Carbon Dioxide Emissions Sam Sadler Taking the Lead: State Innovations to Reduce Greenhouse Gases National Governors Association Washington, DC March 1, 2002

2.  The context for energy facility siting in Oregon.  What the CO 2 standard requires.  Successful experience regulating CO 2 emissions and purchasing offsets. Outline

3.  Siting Council is a 7-member citizens’ board, which is appointed by the Governor and confirmed by the Senate.  Ensures that new energy facilities are safe and environmentally acceptable.  Assess the compliance of energy facilities with its standards and other laws.  Provides a unified decision-making process. Oregon’s Energy Facility Siting Council

4. In 1997, Oregon passed a law to limit net CO 2 emissions from base-load gas plants to 0.70 lbs. CO 2 /kWh net electric output.  In 1999, the Siting Council applied the initial standard to other new energy facilities.  In 2000, the Siting Council revised the standard for base-load gas plants to 0.675 lbs. CO 2 /kWh.  Currently in rulemaking to apply that standard to other new energy facilities. Oregon’s Carbon Dioxide Emissions Standard

5. New facilities can meet the standard in four ways:  Reduce emissions by building high- efficiency plants.  Provide cogeneration that offsets fossil fuels at a manufacturing plant.  Invest directly in projects that offset CO 2 emissions with Siting Council approval.  Pay a “qualified organization” 85 cents per short ton of excess CO 2 —the “monetary path.” CO 2 Emissions Standard

6. Monetary Path: Independent party purchases offsets  Payment relieves developer from any further obligation or liability for offsets, but also separates ownership.  For a new 550 to 600 megawatt combined- cycle natural gas-fired power plant, including supplemental duct-firing, payments range from $8 to $10 million.  Monetary path is about 0.3 - 0.4% of the present value of construction and operating costs. CO 2 Emissions Standard

7. Independent, non-profit organization that may receive funds from developers via the monetary path. Qualified Organization  Statutory requirements:  Structure of 7-member board.  Direct CO 2 offsets from future projects.  At least 80% of funds must go to CO 2 offsets; up to 20 % may go to administration.  “Best efforts” in purchasing offsets, but no direct link to the tons required of the developer.

8. The Climate Trust  The Trust has contracts for $1 million in projects to offset about 940,000 short tons of CO 2.  Average cost of first portfolio: $1.27 per short ton/CO 2  The Trust has is now evaluating proposals for about $6 million in offset projects. The Climate Trust is the only qualified organization to date. It purchases CO 2 offsets and retires them.

9. The Climate Trust  Internet-based carpool coordination in Portland metro area.  Landfill gas-to-electricity with CO 2 recovery.  Innovative financing of Oregon wind power.  NW forest preservation for Lummi Indian Tribe.  Tropical rainforest preserve reforestation with native trees in Ecuador. . First Portfolio, using 86% of offset funds:

10. www.climatetrust.org The Climate Trust  Seattle City Light  250,000 metric ton solicitation  Other greenhouse gases  Conducted along with monetary path solicitation  Other private businesses Climate Trust Partnerships

11.  2001: New legislative initiatives.  Temporary energy generating facilities exempted from all Council standards except CO 2.  Voluntary carbon sequestration registry in the Dept. of Forestry.  Three percent “public benefits” charge effective March 1, 2002, to support energy efficiency and renewable resource projects. Recent Legislation

12. Regulating CO 2 emissions has not hindered new- plant construction activity. Since 1997:  Two plants have been constructed.  Two plants are under construction.  Two plants will begin construction soon.  Eight plants are in the permitting process.  If all these were built, it would more than double Oregon’s generating capacity. Limiting CO 2 Emissions

13. All developers have chosen the monetary path.  Developers must provide a bond or letter of credit for the full amount of offset funds before beginning construction, along with cash for selection and contracting funds.  The Climate Trust can draw down full amount when it negotiates first contract.  The Siting Council continues to refine the process through rules and site certificate conditions. Implementation

14.  Adopting the CO 2 standard was the result of policies that laid a foundation of strong citizen support for state and local actions to address climate change.  Oregon has shown that states can regulate greenhouse gas emissions without harming the economy.  Relying on the market to supply offsets adds flexibility for the successful implementation of the CO 2 standard. Observations:

15. Sam Sadler Senior Analyst 503.373.1034 samuel.r.sadler@state.or.us Oregon Office of Energy 625 Marion Street NE Salem, OR 97301-3737 503.373.7806 fax www.energy.state.or.us click on “Facility Siting” then “Oregon’s Carbon Dioxide Standard.” For more information: