FERC may let states set carbon prices
WASHINGTON — The Federal Energy Regulatory Commission proposed a new rule Thursday encouraging state and regional power regulators to set a price on carbon emissions as a way to accelerate the development of clean energy.
The move comes as states nationwide move to address climate change, adopting carbon pricing and other schemes to lower their emissions, in response to a stalemate on the issue in the federal government.
“(Power market regulators) should have confidence that those proposals will be not be a dead letter on our doorstep, confidence that we recognize the benefits that such proposals, if properly designed, could bring to our markets,” Chairman Neil Chatterjee, a Republican appointed by President Donald Trump, said in a statement. “Today’s proposal also puts down a marker signaling that this commission encourages efforts to develop wholesale market rules that incorporate a state-determined carbon price.”
The move follows a conference last month in which FERC heard hours of testimony from regulators and analysts about the legal and economic ramifications of FERC’s decision making on state carbon pricing. FERC is seemingly taking the mantle from Congress, which has not seriously considered legislation controlling greenhouse gas emissions in more than a decade.
On Tuesday FERC effectively upped the ante, telling state regulators that FERC would not stand in their way in setting carbon taxes or fees to reduce emissions.
“There was a lot of concern among the states about going down this pathway because it would be dead on arrival at FERC,” said Devin Hartman, director of energy and environ
mental policy at the R Street Institute, a conservative think tank advocating for clean energy. “Theywere asking, ‘Arewe going to spend millions of dollars doing analysis and all the man hours on something that has zero chance from the beginning?’ And FERC has said it’s worth
your while.”
The decision to put forward the policy change was supported by Chatterjee and Commissioner Richard Glick, a Democrat. Commissioner James Danly, another Republican, dissented on parts of the proposal.
Chatterjee made clear that FERC was not setting a national carbon price, simply acknowledging states’ right to do so. But it was also an effort to promote
fuel-neutral carbon pricing schemes supported by many oil companies, as opposed to subsidies and other polices that favor one source of energy over another.
“When it comes to our markets,” Chatterjee said, “fuel-neutral carbon pricing stands in stark contrast to other state policy tools, like subsidies, which can amount to hidden costs that degrade market efficiency and
skew price signals, ultimately hurting the consumer.”
FERC, in a controversial decision late last year, ruled that wind turbines, solar systems and nuclear plants that receive state subsidies promoting clean energy can be assessed a surcharge when bidding into PJM, the country’s largest power market.