New Issue Brief: Options for Issuing Emissions Allowances in a Pennsylvania Carbon Pricing Policy

Date

Oct. 22, 2019

News Type

Press Release

WASHINGTON, DC—Resources for the Future (RFF) yesterday released the second of two issue briefs analyzing the impacts of pricing carbon in Pennsylvania. The issue briefs were released following news earlier this month that Governor Tom Wolf signed an executive order that put Pennsylvania on a path to joining the Regional Greenhouse Gas Initiative (RGGI).

In the issue brief, “Options for Issuing Emissions Allowances in a Pennsylvania Carbon Pricing Policy,” the authors expand on their previous work by focusing in more detail on a Pennsylvania carbon cap that is linked with RGGI. Linking the state program with RGGI can lower total costs, insulate the allowance markets from shocks due to local events, and amplify the climate policy signal of Pennsylvania’s decision to cap emissions on the national stage.

The study looks at multiple carbon cap revenue use options, as well as the interaction between the carbon cap and existing renewable technology policies in Pennsylvania and neighboring states. The authors find that the carbon cap successfully decreases Pennsylvania and US electricity emissions by increasing nuclear and renewable generation and decreasing gas generation, all without noticeably changing electricity prices.

Additionally, they find that using carbon revenue to increase energy efficiency and reduce consumer bills actually reduces expenditures on electricity. Carbon revenues can also be used as a production incentive for in-state electricity generators, leading to an increase in Pennsylvania exports above business as usual, and can be targeted towards low- or non-emitting electricity generators to further decrease Pennsylvania and US emissions.

The carbon cap can increase the amount of renewable generation within Pennsylvania above what would be required by the state’s current Alternative Energy Portfolio Standard (AEPS). However, if Pennsylvania were to drop its AEPS—even while implementing a carbon cap—renewable generation would fall outside of the state, yielding a net loss in renewables.

The issue brief is based on work by Dallas Burtraw, Maya Domeshek, Anthony Paul, and Paul Picciano, using RFF’s Haiku electricity market model.

This research was supported by the Sierra Club and by RFF’s Energy and Climate Program. All findings are the responsibility of the authors.

Resources for the Future (RFF) is an independent, nonprofit research institution in Washington, DC. Its mission is to improve environmental, energy, and natural resource decisions through impartial economic research and policy engagement. RFF is committed to being the most widely trusted source of research insights and policy solutions leading to a healthy environment and a thriving economy.

Unless otherwise stated, the views expressed here are those of the individual authors and may differ from those of other RFF experts, its officers, or its directors. RFF does not take positions on specific legislative proposals.

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