Summary of the program and how this program will affect your facility

The Climate Protection Program (CPP) is a program intended to reduce Greenhouse Gas (GHG) emissions across the state from anthropogenic or human caused sources, setting limits and an enforceable declining “Cap” on GHG emissions covered in Oregon. The goal of the program is to limit GHGs emitted in the state to show a 90% reduction by 2050 from the baseline of 2017-2019. The initial CPP launched in 2022 but was later invalidated through the Oregon court of appeals in December 2023. The rulemaking progress started again in 2024 and the new CPP is codified under OAR Chapter 340 Division 273, adopted in November 2024.

There are three paths to a facility or company being a regulated entity under the program:

1. Fuel suppliers including natural gas utilities and local fuel distribution companies;
2. Energy-Intensive Trade Exposed Industry (EITE) sources – EITE industry types can be seen in OAR 340-273-9000 Table 7, and have covered emissions over 15,000 metric tons of CO₂ (MT CO₂e) or more in a year since 2020;
3. Direct natural gas (DNG) sources. DNG sources are stationary sources in non-EITE industry sectors that use natural gas from a source that is not a local distribution company. These sources would also emit 15,000 MT CO₂e or more annually.

Each of these regulated entities is required to reduce their emissions over time. Fuel suppliers will be subject to the reductions in 2025. A list of covered fuel suppliers in 2025 is available on the DEQ website. Generally, fuel suppliers are in this list if their covered emissions exceed 100,000 MT CO₂e since 2020. This limit declines to 50,000 MT CO₂e in the years of 2025-2028 with coverage starting in 2028, and from 2028 onwards, the limit will be 25,000 MT CO₂e per year to be a covered fuel supplier. The table below shows the declining cap on all covered entities in the program.

CPP Declining Cap on covered entities

Source
Free compliance instruments will be distributed to regulated entities based on their 2017-2019 emissions, where one metric ton of carbon is equal to one compliance instrument. For every two-year period, the number of compliance instruments distributed will decline according to the set cap for that compliance period.

DNG and EITE sources will not need to obtain emission compliance instruments under the program until the 2028-2029 compliance period. Rulemaking is still ongoing to determine the carbon intensity targets for both DNG and EITE sources. OAR 340-273-9000 Table 8 shows that EITE and DNG sources have an ultimate reduction target down to 0.45 of their original emissions versus the 90% target reduction statewide. These rules may be adjusted going forward for these sources. Covered DNG and EITE sources for 2025 can be found on Oregon DEQ’s website.

How do Facilities Comply?

CPP permits will need to be in place for covered entities to emit greenhouse gases. Permit applications are due by April 15 in the year after they become covered. Facilities will report emissions through DEQ’s GHG gas reporting program under OAR chapter 340 division 215.

There are opportunities for companies to purchase community climate investment (CCI) credits in lieu of compliance instruments. The funds from these credits will go towards third parties that reduce greenhouse gases, with a focus on environmental justice communities. CCI credits can make up to 15-20% of the compliance obligation. There is also a chance for companies to bank unused compliance instruments for future use in compliance periods or trade them with other covered entities. This part of the program resembles more traditional cap and trade GHG regulations. More details can be found in OAR 340-273-0500 and OAR 340-273-0510.

Note that for covered entities, covered emissions are specifically for anthropogenic sources. Examples of emissions that are not covered are biomass-derived sources, emissions from fuels for aviation, or emissions from petroleum and natural gas systems covered under CFR part 98 subpart W. Emissions from an air contamination source that is operated with an interstate natural gas pipeline and is operating under the Federal Energy Regulatory Commission (FERC) would not be covered. Some examples of biomass-derived sources include biomethane, biodiesel, renewable diesel, renewable propane, woody biomass, and ethanol.

How should Facilities prepare?

Facilities should be aware of the rules and regulations associated with CPP, to understand if they classify as a covered entity and to consider how they might reduce greenhouse gases over time. While some processes may be easier to replace or eliminate, it will take ingenuity to balance how to eventually reduce emissions by 90% by 2050. A multipronged approach involving facility replacements, some use of CCI credits, and banking emissions may be needed. Key approaches may be choosing to switch to a lower emission fuel or a biomass-derived fuel which are not a covered emission under the rule. Facilities that will be a covered entity under the DNG and EITE categories can also choose to participate in future rulemaking that will be used to establish carbon intensity targets.

Alternatively, when making adjustments with CPP in mind, note that these same changes could increase emissions considered under other Oregon compliance programs and have implications for compliance with National Ambient Air Quality Standards (NAAQS) or Cleaner Air Oregon (CAO).

If you have questions on how CPP will impact your facility, how to apply for permits, or want to strategize on methods to meet the programs limits in the future, please reach out to Trinity Consultants. Trinity are experts in air quality permitting in Oregon and have experience working with different sustainability programs in many States.

The Oregon Trinity Office is located in Portland and has a variety of consultants who can help with CPP applicability to your facility as well as strategizing on how a facility will comply with CPP in the future. If you would like to discuss CPP or any other items related to environmental permitting and compliance in Oregon please contact Trintiy’s Portland office or call 503.713.5550.