Republican and Democratic lawmakers in Oregon have been meeting in recent weeks to discuss the potential to collaborate on a climate policy that just seven years ago drove them apart, and drove some Senate Republicans across state lines.

A new bipartisan workgroup is negotiating the possibility of standing up a carbon cap-and-invest market in Oregon that could one day be part of a larger West Coast market, linking up with existing programs meant to reduce climate warming greenhouse gas emissions in California, Washington and Canada.

The conversation is driven by concerns from gas companies, and industries heavily reliant on them, that Oregon’s alternative, non-market-driven carbon tax and investment program — the Climate Protection Program — is too financially onerous on them, and that costs incurred by businesses will eventually be passed onto consumers, according to several members of the committee. Companies hoping to offset some emissions under Oregon’s nascent program are slated to pay about four to five times what companies in California pay right now for offsets under the state’s carbon market, and which fluctuates depending on demand.

But, Oregon does not charge companies per metric ton of pollution they cause up to the established limit, or cap, just for the offsets they buy after the cap has been surpassed. In California, most companies must pay per metric ton of pollution they cause up to the established cap, and also buy credits to offset emissions above the cap.

“I think both the business community and those that will be affected by the current CPP are open to seeing which program would be more conducive, or favorable, for Oregonians and ratepayers and taxpayers,” said state Sen. Mark Meek, D-Gladstone and one of the two centrist Democrats on the 10-member committee.

The group has met three times during the last month and is expected to meet weekly in the coming months, potentially bringing a proposal forward by the 2027 legislative session that begins in January. Gov. Tina Kotek’s prosperity council also recommended the Legislature repeal the Climate Protection Program and replace it with a market similar to California and Washington’s. Kotek’s Republican gubernatorial challenger, state Sen. Christine Drazan, has called for repealing the Climate Protection Program, but not offered any replacement.

Rep. Mark Owens, a centrist Republican from Crane also serving on the workgroup, said the lawmakers are all still learning about carbon markets. Owens, like Meek, said he was driven to the conversation by cost concerns of the Climate Protection Program from gas companies, including Oregon’s largest natural gas retailer NW Natural.

“I don’t even think we’re at that point of looking at (cap-and-invest) policy in ’27,” Owens said. “I think we’re looking at: can even the few of us that are in that room come together and say, ‘Hey, this is a good idea worth exploring.’”

Walking back the walk out

The Climate Protection Program — Oregon’s pseudo cap-and-invest program overseen not by the Legislature but by the Oregon Department of Environmental Quality and the Environmental Quality Commission — was stood up after a disastrous 2019 attempt to pass cap-and-invest at the Legislature.

Senate Republicans in opposition to the proposal, House Bill 2020, and insistent it would be overly burdensome to industry and to consumers, walked out of the state Capitol in Salem for more than a week to prevent a vote on the program, and several left the state entirely. Then-Gov. Kate Brown sent Oregon State Police after them.

After members of both parties killed the bill so legislative work could continue, and Senate Republicans threatened to walk out again in 2020 if the policy was reintroduced, Brown issued an executive order directing the Department of Environmental Quality to use its existing authority to regulate air pollution to adopt regulations on gas emissions.

That led to the creation of the Climate Protection Program in 2021, with pollution reduction targets, declining allowances or caps on how much pollution gas companies could create, and carbon-reduction projects — called Community Climate Investments — those companies could invest in to offset some of their pollution. A California-based nonprofit chooses those investments, and the Oregon Department of Environmental Quality, the Environmental Quality Commission and the governor oversee the program.

The program drew criticism and lawsuits from gas companies before it began. The companies argue there should be legislative oversight and that the cost per offset in Oregon’s program is unfair at about $129 per credit, as opposed to the roughly $30 per credit in California’s carbon market, driven by demand. NW Natural, the state’s largest natural gas utility, is suing the state over the Climate Protection Program, but was not opposed to the final version of House Bill 2020 that lawmakers considered seven years ago and would support a cap-and-invest market, spokesperson David Roy said.

The cost per credit in Oregon includes costs associated with running the program as well as audits on climate investments, according to DEQ officials, and is significantly less than the true “social cost of carbon” – the financial costs to taxpayers from natural disasters, paying for climate adaptation and the cost of losses and damages to natural resources and ecosystems resulting from each ton of planet-warming carbon released into the atmosphere. That’s closer to $185 per ton of carbon dioxide pollution, according to a 2022 study published in the journal Nature.

Financial motives

Republicans at the end of the 2025 session floated carbon credit revenues as a possible way to plug holes in the state’s transportation budget: an ongoing, underfunded ledger of bus, train, bridge and other infrastructure projects that continues to grow.

But directing carbon tax money to transportation projects is not the outcome the cap-and-invest workgroup is considering at this time, according to Sam West, a spokesperson for House Speaker Julie Fahey, D-Eugene. Instead, the conversation is about whether Oregon should join the new multi-government market that California, Washington and Quebec in Canada have agreed upon.

“The goal of those conversations has been to consider whether adopting a similar system in Oregon would be a better fit than our current Climate Protection Program to meet our state’s emission reduction goals while supporting our economy,” West said. “The workgroup discussions are not about whether a market-based system should be a funding source for transportation — they are about whether a market-based carbon system would be a good fit for Oregon at all and if so, what would that system look like.”

Carra Sahler, director and staff attorney at Lewis & Clark Law School’s Green Energy Institute, said discussion of abandoning the Climate Protection Program and standing up a new cap-and-invest program is “too little too late,” and would allow polluting companies to delay regulations that should have been enacted already. She said she’s concerned delaying regulations could be a goal of the gas companies attempting to persuade lawmakers to abandon the Climate Protection Program in favor of a market like those in California and Washington.

“We have a program that’s working. We simultaneously have a clean electricity law that’s working for our investor-owned utilities. We are driving down emissions in this state. We haven’t yet fully seen what, frankly, the Climate Protection Program can do, right? We haven’t seen the investments from the credits (called community climate investments) that can actually be made as investments in our cities and our towns,” she said. Those investments have been delayed due to lawsuits by NW Natural and others.

She added that she’s skeptical of the behind-the-scenes conversations gas companies such as NW Natural are having with the lawmakers who are meeting to revisit a possible cap-and-invest market.

“As a consumer, as a citizen, I would put a question mark on NW Natural’s engagement here,” she said.

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