Late last week the Federal Energy Regulatory Commission (FERC) issued a policy statement on carbon pricing in organized wholesale markets.
FERC, currently led by Chairman Richard Glick, regulates the transmission and wholesale sale of electricity and natural gas, as well as the transportation of oil by pipeline in interstate commerce.
The policy statement provides guidance to power markets seeking to address carbon emissions within their pricing programs under section 205 of the Federal Power Act. It does not directly impose a carbon price, but rather confirms the power market’s ability to propose a tariff which the commission will evaluate.
Twelve states now have some version of carbon pricing, and several states are considering pricing schemes. Various entities, including regional grid operators, are examining ways to incorporate state-determined carbon prices into wholesale electricity markets.
The statement does not indicate a preference for carbon pricing over any other state policy. It affirms that whether and how a state chooses to address greenhouse gas emissions is a matter exclusively within that state’s jurisdiction. FERC commissioners approved the statement in October 2020 after a technical conference on carbon pricing where executives agreed that the commission could account for carbon pricing as tariffs from grid operators.
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