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|Saturday, November 01, 2008|
Ready or not, The carbon market is coming to Oregon. Expect big winners — and big losers.
BY BEN JACKLET
Few people in the world, much less in Oregon, can match Mark Trexler’s experience navigating the carbon market.
The Western Climate Initiative, a collaboration between seven states and four Canadian provinces, is establishing a regional cap-and-trade system for facilities that emit more than 25,000 metric tons of carbon dioxide equivalent per year. Businesses and utilities will receive allowances for their emissions based on historical data, with the allowances decreasing over time. To comply, they will have to become more energy efficient, purchase carbon credits from other businesses, or pay for offset programs to store carbon or decrease its flow into the atmosphere. Businesses that exceed their emission reduction quotas will be able to bank their carbon allowances, or trade them as if they were oil or wheat futures.
Given what has happened on Wall Street over the past year, embracing a market-based solution to the global warming problem may not seem like the most prudent approach. But many experts consider it the most effective plan, especially since a carbon tax would likely be a political non-starter. Besides, carbon markets have a track record, albeit with mixed results. A regulated carbon market has existed in Europe since 2005 (crashing spectacularly early, but recovering steadily from there), and a less ambitious version launched in the northeastern United States in September. After eight years of federal inaction on climate change policy, both presidential candidates support a national program, but resistance will be strong.
The first facilities to be capped in Oregon were identified in a preliminary — and hotly contested — list compiled by the Department of Environmental Quality (DEQ). These 33 facilities emit the equivalent of a combined 12 million tons of carbon dioxide per year. Multiply that by the going rate on the European carbon market of $35 per ton, and you get a $420 million liability. Small wonder that the Association of Oregon Industries, which represents 1,650 companies employing 200,000 workers, is sounding alarms about increased outsourcing, job losses and plant closures. The price of electricity is expected to increase by about 30% because of cap and trade.
“The downside is awful,” says John Ledger, AOI’s vice president for energy and environmental affairs. “A lot of the companies that you see on the list are manufacturing facilities that provide good-paying jobs. Businesses that can’t afford these new costs would be forced to cut jobs or outsource. And power rates would go up for everyone.”
Not surprisingly, several businesses that made the DEQ’s list have protested that the emission estimates are inaccurate. Less predictably, the complaints have been split between those who believe their numbers are too high and those who argue their numbers are too low. Why would anyone want higher pollution numbers? The reason is important: The higher the emission allowance, the easier it will be to meet, and the greater advantage the business will have within the carbon market to meet quotas and trade allowances. This could lead to windfall profits for some and a volatile market for everyone else. In Europe, too many pollution allowances were handed out early and the market crashed once it became clear that there was little if any value to the thin air being traded.
To avoid a similar scenario, DEQ will implement a more precise emissions monitoring process starting in 2009. The improved data will lay the foundation for a sprawling new program with many details yet to be decided. Chief among the issues to be negotiated in the 2009 Legislature: how to distribute emission allowances (should they be auctioned or given away?) and how to differentiate valid carbon offset programs from scams.
Oregon is well positioned to benefit from the carbon market because its hydropower infrastructure results in fewer emissions and its vibrant clean tech sector is hungry for new opportunities. Major law firms such as Stoel Rives and investment firms such as Nth Power are emerging as experts in turning green initiatives into moneymakers, while SERA Architects, Gerding & Edlen and a host of other green-building specialists are leading a massive shift toward energy efficiency in the built environment. Dennis Wilde, a principal at Gerding & Edlen who leads the firm’s Sustainable Solutions spin-off, says he can foresee “net-zero” buildings that produce as much power as they use hitting the market within five to seven years.
Portland’s green-building boom resulted in part from public policy: state tax credits to encourage energy conservation and city codes to reduce greenhouse gas emissions. Not only has Portland met its early goals of reducing pollution, it has spurred the development of an industry with great market potential. One bright spot as the bottom has fallen out of the Portland housing market over the past year has been the growing sales of “green” homes. According to Sean Penrith, executive director of the Portland nonprofit Earth Advantage, certified sustainable homes sell for an average of $38 more per square foot than the market average, and spend fewer days on the market before selling.
Some of the biggest winners of the shift to a low-carbon future will be businesses that do not yet exist. One early adopter is Woodland Carbon Company, led by CEO Mike Gaudern. His goal as executive director of the Oregon Small Woodlands Association has been to help 70,000 small-scale timber-holding families to thrive, no easy task with timber prices stagnant and the housing market in a tailspin. His solution: carbon offsets.
Gaudern plans to collaborate with woodland owners to develop sustainable forestry projects to sell on the carbon market. By his calculations, a 3,000-acre project can yield about 10,000 tons of carbon dioxide-equivalent offsets. Multiply that by whatever the market determines CO2 is worth, (generally expected to be somewhere between $10 and $80 per ton, depending on global policies as the market develops), and you get some real potential for profits.
Friday, March 27, 2015
BY JOE CORTRIGHT
The CRC is a cautionary tale about how we plan for, finance and invest in transportation infrastructure.
Thursday, April 02, 2015
BY JACOB PALMER | DIGITAL NEWS EDITOR
Are mornings the most productive part of the day? We ask five successful executives how they get off to a good start.
Wednesday, April 01, 2015
BY LINDA BAKER
Leaders in Oregon's ag sector gathered this morning in Portland’s Coopers Hall winery/taproom to discuss the role of the region as an export gateway, impediments to exporting products and solutions to containerized shipping challenges.
Friday, February 20, 2015
BY JACOB PALMER | OB DIGITAL NEWS EDITOR
The ongoing labor disputes at the Port of Portland came to a head two weeks ago when Hanjin, the container port's largest client, notified its customers it would be ending its direct route to Oregon.
Wednesday, February 25, 2015
BY JASON NORRIS, CFA | OB GUEST BLOGGER
Pets.com, GeoCities, eToys, and WorldCom … blasts-from-the-past that all signify the late 1990s Internet bubble. Yet we believe the dynamics of the market, specifically in technology stocks, are much different today than it was during the late 1990s.
Friday, March 27, 2015
BY AMY MILSHTEIN
Damian Smith bets on changing himself — and Portland — through consulting.
Friday, February 20, 2015
BY APRIL STREETER | OB CONTRIBUTOR
Leslie Carlson channels the big idea.
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A new report highlights how Oregon bankers are giving back to their communities.
Since 1932 Tidewater Transportation & Terminals (operating as Tidewater Barge Lines and Tidewater Terminal Company) has operated a multicommodity transportation and terminal company based in Vancouver, Washington. The friendly expression on the company’s shipping containers reflects the attitude of about 330 safety and community-conscious employees but belies how complicated the barge business really is.
The Port of The Dalles has run marine facilities since the 1930s, but they are part of a larger mission to strengthen the local economy. They focus on regional economic development with a strong bent toward adding good-paying jobs in high tech, manufacturing and other industries.
Providing attendees with unique taste of the Northwest Reception.
CFM Strategic Communications turns 25 this year and is celebrating with a revamped website, special events for firm alumni and clients, a special-label wine and a list of 25 stories about its client work over the past quarter century.
The Atkinson Graduate School of Management at Willamette University has maintained its business accreditation by AACSB International—The Association to Advance Collegiate Schools of Business.