Report

Lessons from Integrated Resource Planning and Carbon Trading for Integrating Carbon Adders into Wholesale Electricity Markets

Summary

This paper draws on previous research on environmental adder policies and the social cost of carbon to offer lessons for the design of electricity sector carbon adder policies.

Key Findings

  • Historically, adders have been included as “shadow” prices in electricity-sector planning but revenue was not collected.
  • Current proposals would charge the adder price and recycle the revenue. The use of revenue shapes the policies’ outcomes.
  • Adders in the electricity sector improve incentives but are not a substitute for more comprehensive economy-wide climate policies.