On October 15, 2020, the Federal Energy Regulatory Commission (FERC) issued a proposed policy statement saying the Commission is willing to consider grid operator’s requests to set a carbon price.[1] The proposed policy statement also asserts that FERC has authority over regional market rules incorporating a state-determined carbon price because it fits under FERC’s jurisdiction over wholesale rates under the Federal Power Act (FPA). However, FERC acknowledged that whether the carbon pricing rules proposed in any particular FPA section 205 filing fall under FERC jurisdiction will be based on the specifics of that filing. Stakeholders now have 30 days to comment on the proposal.

FERC’s proposed policy statement—led by Republican FERC Chairman Neil Chatterjee and Democratic Commissioner Richard Glick—follows the September 30, 2020 technical conference where expert panelists identified a diverse range of benefits from state-determined carbon pricing including the development of technology-neutral, transparent price signals within the markets and providing market certainty to support investment. The panelists also largely defended FERC’s authority to address carbon pricing proposals from grid operators. Currently, states are leading in efforts to address climate change by adopting policies to reduce their greenhouse gas emissions. 11 states have some version of carbon pricing, and other entities like regional market operators are examining the benefits of this approach.

[1] https://www.ferc.gov/news-events/news/ferc-proposes-policy-statement-state-determined-carbon-pricing-wholesale-markets