Trade Group Backs Principle of Power Market Carbon Pricing

(January 15, 2020) — A U.S. trade group representing large natural gas suppliers has come out in favor of a carbon price as a key method of reducing carbon emissions in power markets now, and enabling drastic cuts or eliminating emissions in the future, reports S&P Global Platts. The position, which the Natural Gas Supply Association (NGSA) announced Dec. 3, comes as an increasing number of states are adopting ambitious carbon-reduction goals and renewable portfolio standards. In the move to show the gas industry can remain part of decarbonizing energy markets, NGSA stopped short of laying out a detailed plan, but is backing the high-level principle of a carbon pricing model, broadly applied to all emitting sectors and across broad geographic areas.

“We believe that we are the first national gas trade association to support placing a price on carbon, but we’re likely not going to be the last,” said Dena Wiggins, NGSA president and CEO. The position was adopted unanimously among association members and did not receive pushback from within the group since the member companies want to be part of the conversation about how to move toward a lower-carbon energy future, she added.

The group will make a case for carbon pricing in states and organized wholesale markets, according to Wiggins. As many individual states are designing plans to reduce emissions, “we are urging those state policymakers to incorporate a price on carbon in their plans,” she said. “We ask only that carbon pricing be applied in an even-handed way across all energy resources and technologies.” NGSA also wants proceeds from carbon fees to flow back to communities and households affected by the resulting increased energy costs.

As part of its package, the association wants to scrap “conflicting or duplicative regulations and subsidies previously used to drive carbon reduction,” a step the group contends is needed to keep competitive energy markets fair for all resources. NGSA has previously opposed zero-emissions credits for nuclear power in states such as New York.

The position the association announced is not necessarily surprising, given that some of its larger producer members previously have been on record supporting a carbon price, notes S&P Global Platts. NGSA members include BP, Cabot, Chevron, ConocoPhillips, EQT, Equinor Natural Gas, ExxonMobil, Kalnin Ventures, Shell Energy North America, Southwestern Energy, Tenaska, and Total Gas & Power North America. Anadarko Petroleum, which has merged with Occidental Petroleum, will drop off the list in 2020.

The NGSA action comes as carbon taxes are out of favor with parts of the environmental movement, which prefers stricter controls such as renewable energy mandates. Nonetheless, carbon pricing is a live issue in New York where the Independent System Operator (ISO) is preparing to file a proposal with the Federal Energy Regulatory Commission to embed a carbon price into its power plant dispatch system, should the ISO garner support from stakeholders and the state.

Meanwhile, the PJM Interconnection, a regional transmission organization that coordinates the movement of wholesale electricity in all or parts of Delaware, Illinois, Indiana, Kentucky, Maryland, Michigan, New Jersey, North Carolina, Ohio, Pennsylvania, Tennessee, Virginia, West Virginia, and the District of Columbia, is still in earlier stages, studying the impact of carbon pricing scenarios on its markets, along with border adjustments between regions.

As New York wrestles with how it will reconcile resource adequacy goals with the state’s ambitious emissions-reduction objectives, NGSA has commented in favor of carbon pricing at the New York Public Service Commission. A carbon-pricing framework is the most effective way to maintain a competitive market structure, meet environmental goals, and ensure sufficient resources are available to help integrate renewables and support grid reliability in a cost-effective manner, the association said in recent comments. NGSA also argues that carbon pricing would eliminate tensions that have emerged between federal and state policies related to electricity.

(SOURCE: The Weekly Propane Newsletter, January 13, 2020, available by subscription)