Incorporating state environmental policy goals into wholesale electricity markets

For the New York Independent System Operator (NYISO), we are currently evaluating options for implementing carbon pricing in the generation dispatch and settlement, with border adjustments to prevent “leakage” to other states. We are assessing economic efficiencies, emissions abatement, and customer costs compared to less market-oriented approaches. Our work includes evaluating customer cost impacts, and options for preventing leakage of emissions to other states. We also assess how such an approach supports the state’s objectives and interacts with the Regional Greenhouse Gas Initiative (RGGI) and other existing policy instruments.

Additionally, for a consortium of stakeholders in New England, we are currently developing market-based approaches to meeting states’ clean energy objectives, as part of the Integrating Markets and Public Policy (IMAPP) process. One idea we have developed that is gaining attention beyond New England is a proposed auction where candidate resources compete based on the amount of carbon emissions they will actually be able to displace.