Regional Grid Operators Consider a Price on Carbon

Regulations proposed by EPA under Section 111(d) of the Clean Air Act for the control of greenhouse gas (GHG) emissions from existing sources would require States to meet assigned GHG reduction targets by deadlines set forth in the proposed regulations. States can either submit individual plans for meeting those reductions or participate in regional plans. The operators of two of the largest electricity grids in the country are evaluating whether to approach the targets regionally within their territories by, among other things, studying whether imposing a price on GHG emissions within the region might be the most efficient way to achieve the GHG reductions.

The Midcontinent Independent System Operator, responsible for the Midwest, published a study on September 17 that concluded that using a multi-state Regional Transmission Organization (RTO) approach for compliance with the 111(d) regulations would be less costly than sub-regional or state-by-state approaches. The RTO approach involved setting a system-wide price on GHG emissions.

Meanwhile, the Organization of PJM States, states within the territory of PJM, whose territory includes the largest electricity demand in the country, has asked PJM to model several compliance options, including a system-wide price on GHG emissions, in addition to a state-by-state approach, and the cost of business as usual without the 111(d) reduction requirements.

EPA’s proposed 111(d) regulations are still open for public comment after EPA extended the comment deadline.  For more information on the proposed 111(d) regulations, for assistance with comments on the proposed regulations, or for information on GHG controls generally, contact Steve O’Day or Phillip Hoover.

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