Issue BriefAPRIL 2005

EFFECTS OF GLOBAL WARMING ON THE STATE OF OREGON

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• More frequent heat waves• Less reliable water

supplies• Los Angeles summer heat

in Portland• Reduced snow for ski

industry• Reduced hydroelectric

power capacity

CLIMACLIMACLIMACLIMACLIMATETETETETESTEWARDSHIP ACTSTEWARDSHIP ACTSTEWARDSHIP ACTSTEWARDSHIP ACTSTEWARDSHIP ACT

• Cap and Trade• Similar program reduced

acid rain by 50% at 1/10the estimated cost

• Lowest cost solution• Protects rural electric

co-ops

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• $250 billion benefits atcost of $150 billion

• 500,000 new jobs by2015

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The vast majority of the world’s leading scientists now agreethat human activities may lead to substantial impacts on theglobal climate. Consensus estimates warn of an average increasein temperatures of between 2 and 10 degrees Celsius over thenext century, leading to more severe drought, rising sea levels,shifting seasons and increased cases of disease.

In Oregon, this could leadto a number of problems.Projections show tempera-ture increases of 4-5 degreesyear-round. These highertemperatures and more fre-quent heat waves could in-crease heat-related deathsand illnesses from insect-borne diseases like malariaand West Nile virus. Whilemalaria is rare in the stateand West Nile has yet to appear, average summer tempera-tures in Portland are only 5 degrees lower than Los Angeles,where West Nile has been detected. With a four-degree in-crease in summer temperatures, increased heat waves couldcontribute to a 150% increase in heat-related deaths.

With substantial agricultural resources, Oregon is particu-larly sensitive to variations in the weather and water condi-tions. Runoff is highly variable in the state and summer flowsare often low. Projected changes in temperatures and precipi-tation patterns, particularly reductions in winter snow packand earlier spring snow melt, could result in increased flowsin winter and decreased flows in summer. While the statemakes considerable use of reservoirs, capacity limitations mayresult in lower summer water supplies, reducing the volumesthat could be reliably supplied for hydroelectric, agriculturaland other uses.

Salmon would suffer under lower summer stream volumesand higher temperatures, while warmer and drier summerswould increase the fire risk for the state’s forests and putsubstantial pressure on the $3.5 billion agricultural industry.

THETHETHETHETHE “CLIMA “CLIMA “CLIMA “CLIMA “CLIMATETETETETE STEWSTEWSTEWSTEWSTEWARDARDARDARDARDSHIP ACT”SHIP ACT”SHIP ACT”SHIP ACT”SHIP ACT”

The Climate Stewardship Act (CSA), introduced in the Sen-ate by Senators McCain and Lieberman, and in the House byRepresentatives Gilchrest and Olver, is based on a similarand highly successful program implemented by the Clean

Air Act that has led to largereductions in rain-causingpollution with a minimumof economic costs. The Actwould create a market-based cap-and-trade systemto reduce emissions of car-bon dioxide and other heat-trapping gases from electric-ity generators and otherlarge industrial and commercial sources, covering 85% ofthe nation’s emissions.

Under a cap-and-trade system, a fixed number of emissionsallowances (permits) are distributed to emitters. One permitallows the holder to emit one metric ton of CO2 or an equiva-lent amount of other gases. Companies that can run theirbusiness without using all their allowances can sell theirsurplus to companies whose actual emissions exceed theirallowances. Under such a system, emissions are reduced bythose who can do so at the lowest cost, thus minimizingeconomic impacts. Cap-and-trade systems, such as the oneproposed in the Act, make reducing pollution a potentialsource of profit for companies, giving them an incentive todevise new and even cheaper ways to cut their emissions.

Beginning in 2010, the CSA would cap emissions at their2000 levels. However, emissions could increase up to 15%beyond the cap if companies purchase offsets from othersources, such as “sequestration” credits from farms whichincrease carbon storage in soils and vegetation.

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Estimates show that the ben-efits of the CSA would out-weigh its costs by a ratio ap-proaching 2:1. While theAct’s provisions would im-pose about $150 billion (netpresent value) in emissionsreduction costs nation-wide,it would generate $250 billion worth of benefits in the formof increased energy efficiency, reduced energy expendituresand economic growth through 2025. Nationwide, the Actwould create over 500,000 jobs by 2015. Our analysis of thejob impacts is based on research from the Tellus institute, anonprofit research and consulting organization(www.tellus.org), which studied the effect of the Act’s cap-and-trade program as well as energy efficiency and other tech-

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• Net increase of 6,600jobs by 2015

• Substantial wind powerpotential, even more thanhydroelectric production

• Consumers save throughenergy efficiency im-provements

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• Increased demand foragricultural products,carbon sequestration andfarm methane reductions.

• Wind energy could produce43 billion kilowatt hours/year

nology incentive programsthat would be fundedthrough the Act.

Like the nation as a whole,a preliminary analysisshows that the impacts forOregon are also largelypositive. By 2015, 6,600new jobs would be createdover a business-as-usual approach, growing to almost 10,400new jobs by 2025. The gains would be spread throughout thestate’s economy, and while the utility sector could suffer somejob losses statewide, these would be more than offset else-where through growth in construction, metals and other in-dustries. Oregon stands to gain in a number of additionalways. For example, the CSA would allow covered entities tobuy emissions allowances from forest and agricultural car-bon sinks, which could provide an economic boost to thestate’s agricultural and forestry sectors. Oregon also has abun-dant resources for celluosic ethanol. Comprised mainly ofagricultural and forestry wastes, this could yield as much as500 million gallons per year, more than enough to blendevery gallon of gasoline sold in the state in 2000. By promot-ing the use of cleaner energy sources, the CSA would notonly help provide clean air for Oregon’s metropolitan areaswithout risking water contamination from chemicals likeMTBE, but would also boost the state economy by fosteringgrowth in these and other clean energy industries.

Nationally, not all sectors of the economy would benefit. Re-ducing CO2 and other emissions would require reduced useof fossil fuels, leading to economic contraction in those sec-tors. Increasing energy efficiency, while providing substan-tial benefits to both residential and commercial energy con-sumers, leads to reduced demand for electricity, posing somecosts on that sector as well. Overall, however, these costs aremore than offset by gains in other sectors, like construction,which would see a substantial increase in demand for newprojects spurred by the increased implementation of renew-able energy and energy-efficient technologies. The manufac-turing sector would also see increased employment with in-creased demand for energy-efficient machinery and renew-able energy components like wind turbines.

Oregon consumers also stand to benefit from the CSA. Theenergy efficiency provisions included in the Act will gener-ate substantial savings in the form of reduced energy expen-ditures. While energy prices will increase moderately as aresult of the pollution reduction requirements in the Act,these costs will be offset by reduced consumption and rebatesof revenue raised by allowance sales. Energy savings for house-holds and businesses free up substantial resources that can be

reinvested in state and local economies.

There are other benefits as well. For example, Portland Gasand Electric has already instituted programs in the state toconvert dairy herd waste into energy. Not only would theCSA increase demand forrenewable energy, makingsuch programs more prof-itable, but the reduction inmethane emissions wouldcreate an additional sourceof revenues for dairy farm-ers, as they would be ableto sell the reduction cred-its to covered sources. The Act would accelerate programssuch as these, providing the state both with cleaner energysources and new sources of income.

While Oregon currently takes advantage of its substantialhydroelectric capacity, the state also has significant wind energyresources, with 260 megawatts of installed capacity. Oregonranks 23rd in the country for wind potential, or about 43billion kilowatt hours. That is more than the state currentlyproduces from hydroelectric sources and could have suppliedover 80% of state electricity demand in 2000.

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As the CSA is debated, a handful of naysayers will undoubtedlyclaim that doing anything to reduce global warming pollutionwill be economically disastrous. A close look at these dire pre-dictions will reveal that they have little merit. For example, oneis based on a six-year-old study of the Kyoto Protocol, a substan-tially different proposal than the CSA.

Studies predicting economic disaster from environmental pro-tection invariably underestimate the ability of American busi-nesses to innovate to solve new problems. When the Clean AirAct Amendments were debated in 1990, industry lobbyists pre-dicted that the law would turn America into a third rate eco-nomic power. Not only have businesses survived the Clean AirAct, but we have thrived. Climate change is a problem thatneeds to be addressed. Our leaders need to have confidence inour ability to innovate.