On April 15, 2021, the FERC published a policy statement outlining how the agency will address market rules proposed by regional grid operators seeking to integrate a state-determined carbon price in organized wholesale electricity markets.
Carbon pricing has arisen as a key market-based tool in state measures to decrease greenhouse gas emissions, particularly in the electricity sector. Many states are considering joining the twelve states that currently impose some version of carbon pricing. Regional grid operators and other entities are exploring approaches to incorporating state-determined carbon prices into wholesale electricity markets.
Participants at the FERC’s September 2020 technical conference on carbon pricing recognized a range of possible benefits from integrating state-determined carbon pricing into the wholesale markets, in particular the development of technology-neutral, transparent price signals within the markets.
The policy statement:
- clarifies that wholesale market rules incorporating a state-determined carbon price can fall within the FERC’s jurisdiction under section 205 of the Federal Power Act (FPA)
- presents a framework for the FERC to exercise its jurisdiction when it reviews any future proposals under FPA section 205 while making clear that the FERC will evaluate any proposal based on the facts and circumstances presented in each proceeding
- while the policy statement does not indicate a partiality for carbon pricing over any other state policy, it asserts that a state chooses whether and/or how to address greenhouse gas emissions because it is deemed a matter exclusively within that state’s jurisdiction
The policy statement goes into effect immediately.
For more information, contact Craig Cano by phone at (202) 502-8680 or via email at mediadl@ferc.gov.
Sources:
FERC Issues Policy Statement on Carbon Pricing in Organized Wholesale Markets (ferc.gov)
