NYS Carbon Pricing Initiative Page

New York has goals to substantially reduce CO2 emissions. The State Energy Plan has a goal to reduce economy-wide greenhouse gas emissions 40% by 2030 and 80% by 2050, relative to 1990 levels. As part of this goal there are Renewable Energy Credits (RECs) and Zero-Emission Credits (ZECs) which are intended to subsidize non-CO2 emitting sources. However, these are difficult to implement so a carbon-pricing initiative is being considered. The Brattle Group prepared an analysis to determine whether incorporating a state policy defined cost of carbon in the wholesale market would improve the overall efficiency of the New York Independent System Operator (NYISO) energy and capacity markets.

The theory of carbon pricing is discussed in a Brattle presentation. It could internalize environmental costs and foster competition to meet energy and environmental goals cost effectively by putting a price on carbon dioxide emissions in the wholesale market. The plan is to set a cost of carbon and add that charge to the wholesale price so that CO2 emitters pay for their societal impacts. However, the devil is in the details and there are few critical voices participating in the process.

I am motivated to submit comments and prepare these blog posts on the carbon pricing initiative so that there is at least one unaffiliated stakeholder whose primary interest is low rates that has an understanding of the basis of the rationale for a carbon price and understands some of the complexities associated with implementing such a program. New York State energy planning is trying to choose between many expensive policy options like pricing carbon in the electric sector while at the same time attempting to understand which one (or what mix) will be the least expensive and have the fewest negative impacts on the existing system. If they make a good pick then state ratepayers spend the least amount of a lot of money, but if they get it wrong we will be left with lots of negative outcomes and even higher costs for a long time.

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