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Carbon Pricing in PJM: Are State Policies at Risk?

Carbon Pricing in PJM: Are State Policies at Risk?

Stakeholders in PJM may decide on Thursday to initiate a process to study and potentially price CO2 emissions in its energy market.

PJM, the regional grid operator for parts of the Midwest and the Mid-Atlantic, includes some of the most coal-heavy U.S. states along with states with CO2 policies. The proposed stakeholder process would investigate how a pricing mechanism could leverage the markets to select the least-cost zero or low emissions resources in the states that have CO2 policies while reducing crossborder impacts between states.

Such a process would provide a forum for much needed detailed discussion and analysis on what could be a critical link between CO2 emissions policies and efficient markets, writes Jennifer Chen, senior counsel at Duke's Nicholas Institute for Environmental Policy Solutions, in Greentech Media. However, key stakeholders have been concerned that pricing CO2 in PJM could take carbon regulation out of state control.

While the mechanism discussed is commonly referred to as “carbon pricing,” it’s only intended to bring a CO2 price established by another entity into the market. This distinction suggests sensible differentiated roles for environmental regulators, legislatures, and the Federal Energy Regulatory Commission (FERC), which oversees PJM.