Cap and Trade or Cap and Cause Problems???

Oregon’s Forest Products Industry is possibly headed for a very uncomfortable debate in the upcoming 2019 session of the legislature. Senate President Peter Courtney, D-Salem, previously reluctant to adopt Carbon Cap and Trade legislation, has stated his intention to pass such a bill in 2019.

To demonstrate his commitment, Sen. Courtney has joined Speaker Tina Kotek, D-Portland, in chairing the Joint Committee on Carbon Reduction. The Committee has been meeting in preparation for Carbon legislation adoption in 2019 since the adjournment of the 2018 Short Session in March.

Carbon legislation means different things for the various sectors of the Forest Products Industry. Forest landowners see the opportunity for additional revenue from selling carbon allowances for growing forests to carbon dioxide emitters in Oregon and throughout North America.  The allowances can mitigate the Carbon dioxide emissions from forest product manufacturing.

Forest product manufacturers may be taxed for their carbon dioxide emissions. To avoid the fees they may be forced to curtail their operations to reduce emissions. One option is for manufacturers to purchase emission allowances from forestland owners who agree to restrict harvests on their own forestland.

Forest operators, like loggers, see the impending Cap and Trade legislation as more restrictions and increased taxes on diesel which is a critical component for converting forests to logs for mills. Expect to see manufacturers, loggers and forestland owners all seeking Cap and Trade specifications that protect their forestry interests. 

The forestry interests could lead to different stances on the Cap and Trade legislation. Landowners may choose to increase the harvest age of their forests to generate carbon credits. Recently much of Oregon’s private forestland has been transferred to Timber Investment Management Organizations and Real Estate Investment Trusts. These new landowners have investors with different financial objectives then Oregon’s traditional large forest landowners.

Most Oregon wood processing plants have adapted to the drastic curtailment of large logs from Federal Forest land since the 1990s. The small log processing mills can’t use large logs that would come from older trees which have carbon credits as their objective. Landowners must weigh the revenue from Carbon credits against the lower prices for their large logs.

Debates over the price of Carbon credits and the limits forest product manufacturers may be the theme of the negotiations over 2019 Cap and Trade legislation.