Portland officials on Thursday unveiled a new proposal that seeks to tax major greenhouse gas producers and air polluters in the city to help combat climate change.
Large manufacturers, hospitals and colleges and universities would pay most of the tax championed by the Bureau of Planning and Sustainability, documents show. City officials estimate it would raise more than $10 million a year.
The proposal, which the City Council won’t take up until next year, comes as Portland seeks to achieve ambitious climate goals over the next several years.
The tax would be the first of its kind anywhere in the nation. It’s sure to face strong opposition from powerful business groups and industries that employee thousands of people.
“We are in a climate crisis,” said Andrea Durbin, director of the city’s planning bureau. “We need to act like it.”
Under a draft proposal of the plan, facilities in Portland that produce 2,500 metric tons or more of carbon a year would be required to pay a fee of $25 per carbon ton annually beginning as early as January 2021. The base fee would be $62,500.
Additionally, the city would impose an annual surcharge ranging from $15,000 to $40,000 on entities that are identified as “major sources” of air pollution under the Clean Air Act or required to obtain air contaminant permits from the Oregon Department of Environmental Quality.
Health care facilities that fall under either category, however, would be exempt from paying such fees until January 2022 due to the financial strain they face from the coronavirus pandemic, officials said.
Based on those criteria, the city estimates the plan would ultimately generate $11.3 million a year from about 88 businesses, hospitals and colleges in Portland. That money would flow into a pair of newly created funds dedicated to reducing fossil fuel emissions and improving air quality.
Planning bureau officials said they began exploring potential revenue streams for such initiatives soon after the City Council declared a climate emergency for Portland at the end of June. The declaration set a new goal of slashing carbon emissions by at least 50% of the city’s 1990 levels in the next 10 years.
Recent figures from the planning bureau show Portland’s current carbon emissions to be about only 20% below its 1990 levels.
“That’s driving the need for more accelerated action,” said Kyle Diesner, the city’s climate action plan coordinator.
The city’s proposal follows Oregon lawmakers’ failed efforts to levy statewide carbon fees, with bills to establish a cap-and-trade policy killed by successive Republican legislative walkouts in 2019 and 2020.
Portland may prove friendlier territory. But the city’s manufacturing sector, struggling during the pandemic, is poised to fiercely oppose the city’s initiative. Oregon has lost 16,700 manufacturing jobs over the past year.
“The city’s proposal is ill-conceived and creates an additional, unnecessary regulatory environment,” Precision Castparts said in a written statement. It would pay more than $600,000 annually under the new fee structure.
Oregon is among the most manufacturing intensive states in the nation, owing to its long history in forest products and some of the lowest business taxes in the nation. Relatively little of that production takes place within Portland’s city limits, however.
Precision Castparts operates around the world and has production facilities inside Portland and just outside the city. The largest company based in Portland, it plans to eliminate 40% of its global work force by the end of the year.
“Significant tax or fee increases would factor into future decisions related to our operations in Portland,” the company said.
Evraz North America would pay more than $2.7 million annually, according to the city’s fee estimate, more than any other company.
Formerly Oregon Steel, which operated in Portland from 1928 until its 2007 sale, Evraz buys steel slab and rolls it into plates on a riverfront site in North Portland opposite Sauvie Island.
Evraz employed close to 700 last year but has roughly half that many people working in Portland now, undercut by President Donald Trump’s trade wars and by reduced demand during the pandemic. The company, headquartered in London, said Thursday it cannot comment until it has seen a specific policy proposal.
A number of Portland hospitals would face six-figure bills under the city’s proposal. Oregon Health & Science University, the city’s largest employer, would pay nearly $750,000 annually, according to city estimates based on carbon emissions from 2019.
OHSU said most of its carbon emissions come from a natural gas plant that provides hot water and runs sterilization equipment for 27 buildings on its Marquam Hill campus. The school said its apparently high carbon emissions result from the fact that its plant is centralized; if it had standalone boilers like a school district, OHSU said only five of its buildings would generate reportable emissions.
The university said it doesn’t know enough about Portland’s proposal to comment, but said it is committed to combatting climate change. OHSU said it supported the carbon tax proposal before the Oregon Legislature earlier this year and will buy three-quarters of its power from carbon-free sources next year.
The city’s new proposal comes two years after voters approved a tax on large Portland retailers to pay for clean energy projects and jobs geared toward the city’s historically marginalized communities.
Revenue from the retail surcharge, which the city estimates will generate between $40 million and $60 million a year, is earmarked for a program called the Portland Clean Energy Community Benefits Fund, which distributes grants to nonprofit groups.
The first round of grant money from that fund won’t be distributed until next year.
Durbin said the planning bureau will be seeking public comment on the new greenhouse gas and air quality proposal through December. The City Council is not expected to take up the legislation until the beginning of next year.
“As with any complex issue, we need to think creatively if we are going to make progress on tackling the climate crisis and our city’s greenhouse gas reduction goals,” said Commissioner Jo Ann Hardesty, who oversees the planning bureau. “Any robust climate policy needs, and more importantly, benefits from public engagement, so I look forward to hearing from our communities during this public comment period.”
Mayor Ted Wheeler indicated that he’s in favor of the plan.
“I support aggressive action on our climate action goals, particularly air quality. And I support the goal of this proposal,” Wheeler said. “I believe once people learn about and help shape this proposal — including hospitals, universities, and other businesses — that there will be an opportunity to move forward with broad community support.”
