The biggest action on pricing carbon isn’t in Congress these days – but @FERC. The agency took a final round of comments today on whether/how carbon-pricing should happen in regional power markets. Let’s check in on that, shall we? [thread]

@FERC’s proceeding basically asks: As a workaround to the national policy vacuum, can the agency reflect state-level actions up through the regional markets the feds regulate?

Short answer: Yes. Indeed, it’s already happening. These power markets run auctions, and power plants’ bids into those auctions include their anticipated cost of complying with local regulations, including for CO2. Ipso facto, there’s a carbon price! (Shhhh!)

So can @FERC do more? Possibly, in two ways: Controlling “leakage” created by local carbon prices, and/or setting up a regional marketplace for a trade in clean energy.

First, on leakage. One of the weird things about state carbon pricing is that it can actually *increase* emissions, by constraining emissions from power generation in one state and in so doing shifting production to another state that doesn’t price carbon.

Because of this problem, if the status quo holds, state carbon-pricing policies in the nation’s largest competitive market, @PJM, could end up *increasing* emissions! Crazy. That’s what you get when your approach isn’t national and economywide, folks.

. @FERC’s role here could be to “price carbon at the border” or otherwise re-order markets for states that want their consumers’ electricity to reflect a carbon constraint. That’s very tricky. It can end up looking like blue states using @FERC to regulate red states.

2nd option: clean-energy markets. This is a more plausible approach. It would involve @FERC setting up one or more regional markets for states to voluntarily buy the credits associated with Clean Electricity Standards, which have become the “go-to” in power sector climate policy.

The regional Clean Electricity Standard approach lets states decide on the amount of clean energy they want and the maximum price they’re willing to pay, and then competition between suppliers constrains that price while maximizing quantity.

The big hang-up here likely involves states’ willingness to procure a standardized clean-energy product (instead of their favorite lobbyist’s particular widget), and skepticism about the feds.

While @FERC should stand pat on a market that allows a truly competitive trade in clean energy, it can do things that allow states to meaningfully participate in the governance of these markets.

The avenue to state-federal cooperation is the biggest piece of @nrgenergy's comments in @FERC’s proceeding today. Hope you’ll give them a read. https://www.nrg.com/assets/documents/energy-policy/NRG%20Reply%20Comments%20to%20FERC%20Focus%20on%20Carbon%20Pricing,%20the%20Need%20for%20a%20Market%20in%20Clean%20Energy%20Credits,%20and%20State-Federal%20Governance%20Models.pdf