September 22, 2017

Whitehouse, Sanders Push New England Grid Operator to Study Benefits of Carbon Pricing

Carbon pricing could reduce carbon emissions while keeping electricity prices stable

Washington, DC – Today, Senators Sheldon Whitehouse (D-RI) and Bernie Sanders (I-VT) called on New England’s electric grid operator, ISO New England, to study ways to incorporate a price on carbon pollution into the region’s energy markets.  ISO New England is already doing good work incorporating sound climate policies into its energy markets through the Integrating Markets and Public Policy (IMAPP) process, the Senators write.  Now it should join other states in considering carbon pricing as a means to reduce carbon emissions while keeping electricity prices stable.

“Outside of New England, other grid operators have been exploring ways to incorporate carbon pricing into their energy markets,” Whitehouse and Sanders write. “As the use of carbon pricing continues to spread at the state level, we have an opportunity through IMAPP to explore its potential.”

The Senators point to a report commissioned by New York’s grid operator showing how carbon pricing could be a boost in achieving the state’s climate goals.  The New York study found that returning revenue from a carbon fee to customers would result in virtually no net increase in costs to consumers.  The report concluded that carbon pricing in the energy market could help significantly reduce the state’s emissions.

New York’s grid operator is not alone in turning to carbon pricing, the Senators note.  Public utilities in Colorado and Minnesota are now measuring the cost of the long-term damage done by carbon dioxide emissions, known as the “social cost of carbon,” in their review of new projects.  Courts have increasingly turned to the social cost of carbon as a valid way to account for the effects of climate change in legal proceedings.  Companies are also using carbon pricing in their own accounting; the Washington Post reports that 1,200 global businesses either have adopted or are adopting a carbon price in some form. 

A year ago, Whitehouse led Rhode Island’s congressional delegation in writing to the Federal Energy Regulatory Commission to applaud the start of the IMAPP process.  Currently, ISO-NE rules do not substantially integrate state climate policies—like Northeastern states’ Regional Greenhouse Gas Initiative—that aim to reduce states’ dependence on carbon-intensive fuels and speed transition to renewables.  Nor do ISO-NE rules account for the true, long-term benefits of carbon-free fuels through policies like higher rates for renewables.

Full text of the Senator’s letter is below.  A PDF copy is available here.

September 20, 2017

Gordon van Welie

President and CEO

ISO New England

One Sullivan Road

Holyoke, MA 01040

Dear Mr. van Welie:

We write to commend your engagement in the integrating markets and public policy (IMAPP) process, through which the New England states are working to better integrate climate change policies into our local energy markets.

Outside of New England, other grid operators have been exploring ways to incorporate carbon pricing into their energy markets.  In particular, the New York Independent System Operator (NYISO) commissioned an outside group to study the effects of adding a carbon price into the energy market.  The recent NYISO report found that such a policy could help the state meet its climate change policies goals.  It also found that rebating collected revenues to customers would result in minimal net cost effects.[1]

The NYISO report builds off recent decisions by Minnesota and Colorado Public Utility Commissions that supported the use of social cost of carbon estimates in evaluating potential infrastructure projects.[2]   These PUC rulings were consistent with recent court decisions in this area.  In 2014, a federal district judge in Colorado faulted the Bureau of Land Management (BLM) for failing to account for greenhouse gas emissions when it approved an Arch Coal Inc. mine expansion in the Gunnison National Forest.[3]  The court ordered BLM to justify its decision to omit the social cost of carbon from its process.  Then, in 2016, the U.S. Court of Appeals for the 7th Circuit concluded that pricing carbon externalities through a social cost of carbon is a valid tool for use in a regulatory cost-benefit analysis.[4] 

As the use of carbon pricing continues to spread at the state level, we have an opportunity through IMAPP to explore its potential.  A recent legal analysis concluded that the Federal Energy Regulatory Commission (FERC) should have “justifiable and defensible” authority under Section 205 of the Federal Power Act to approve an IMAPP proposal related to adding carbon externalities into the New England energy market.[5]  FERC may also have the authority to require a carbon adder because the change could help maintain system adequacy and reliability.  In addition, the current system may discriminate against carbon-free resources in the absence of a carbon price.[6]  Given the progress in other states, we request that the ISO work to commission a similar report to the one released by NYISO.  

Thank you for your attention to this matter.  We look forward to your continued work in this area. 


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Meaghan McCabe, (202) 224-2921