Energy regulators signal support for carbon pricing in electricity markets

Federal energy regulators have put forth a proposal that would accommodate state-set carbon pricing in regional electricity markets.

The Federal Energy Regulatory Commission (FERC) announced the bipartisan proposal in a press release Thursday. Text of the proposal has not yet been released.

Putting a price on carbon emissions raises the cost of energy from fossil fuels, which release carbon dioxide when burned. Renewable energy advocates are typically in favor of these carbon pricing policies because renewable power has to compete with fossil fuels in energy markets.

“As states actively seek to reduce greenhouse gas emissions within their regions, carbon pricing has emerged as an important, market-based tool that has wide support from across sectors,” FERC Chairman Neil Chatterjee said in a statement.

“The Commission is not an environmental regulator, but we may be called upon to review proposals that incorporate a state-determined state carbon price into these regional markets,” said Chatterjee, a Republican. “These rules could improve the efficiency and transparency of the organized wholesale markets by providing a market-based method to reduce GHG emissions.” 

William Boyd, a professor at the UCLA School of Law who teaches about energy law, said he believes the proposal could result in modest reductions of greenhouse gas emissions, but also that there is more that the commission can do.

“It’s good for FERC to send these signals to the states that they’re willing to work with them on this … but is carbon pricing through the [regional transmission organization] markets going to get us where we need to go in terms of decarbonizing the power sector? No, I don’t think so,” he said.