Time to put a price on carbon

To cut emissions, bold action needed

MASSACHUSETTS HAS BEEN A CASE STUDY for the positive relationship between economic growth, renewable energy procurement, and greenhouse gas (GHG) emissions reduction. As a leading state on climate change policy, Massachusetts set bold greenhouse gas emission reduction targets, while supporting strong energy efficiency programs and a robust renewable energy procurement strategy. While this has made Massachusetts the nation’s leading state on progressive climate policy, the policies in place will not be enough to reach the state’s own mandates on greenhouse gas reductions. Currently the State House is debating an important renewable energy procurement bill focused on offshore wind and hydroelectric power. Solar legislation that passed in April left many unanswered questions, and left the growing solar industry in the state looking for clearer answers. The current “omnibus” legislation voted on by the House continues this patchwork approach, providing lukewarm support to a promising offshore wind industry, while not going far enough to make Massachusetts offshore wind as cost-competitive as it could be.

There are two crucial flaws in the current approach to reaching long-term emissions reduction: general market uncertainty and a lack of focus on the transportation sector, which at 40 percent represents a significant component of the Commonwealth’s GHG emissions. A cleaner and much simpler solution to both problems is to put an economy-wide cost on GHG emissions in the state, thereby providing incentives to all market participants to reduce such emissions and shift towards cleaner technologies.

As we await final language from the State House, both the House and Senate versions of the energy bill create a strong starting framework but will undoubtedly continue the sluggish transition of the energy sector. This cautious approach to renewable energy development has led to only minor increases to unnecessary solar net metering caps in this session, with no clarity on the SREC incentive program and an unhealthy obsession with the cost of solar without taking full account of its tremendous benefits. Unfortunately, a similar fate seems to await the promising offshore wind industry, poised to develop some of the most productive wind resources in the world, fortuitously just off the coast of Massachusetts. These areas have already been federally approved for offshore wind, but by undersizing the amount of the resulting electricity that Massachusetts utilities will be required to purchase, the legislation threatens to create market-dampening uncertainty, which will, paradoxically, lead to higher than necessary prices for the resulting electricity.

Under the Global Warming Solutions Act, we have developed an emissions reduction mandate for 2020 and 2050. As we get closer to these dates, many are starting to blow the whistle on the fact that our current approach will not allow us to reach the respective 20 percent and 80 percent reduction targets. While the current patchwork approach has reduced emissions and has begun to transition the economy towards renewable energy and greater efficiency, it is simply not doing it fast enough to reach these targets. The legislative process continues to deal with this challenge as it struggles to keep pace with technological developments and continued public demand for a more robust response to climate change. As the clean tech and renewable energy sectors grow across the state, slight increases in the net metering caps, procurement carve outs, and the Renewable Portfolio Standard (RPS) have encouraged but not stabilized these necessary industries.

Carbon pricing can address both of these challenges and must be considered in any policy legislation which aims at reducing emissions in the Commonwealth. Carbon pricing can support future market certainty for our growing energy sector by leveling the playing field for less carbon intensive development. Carbon pricing also opens the door to secondary and complementary markets which continue to grow as a part of the state’s clean tech sector.

The electricity sector has always and will continue to be the low hanging fruit for emissions reductions. Through energy efficiency and renewables procurement, there are still many opportunities to further reduce our emissions. However, we need a framework in place to begin to deal with more difficult sectors. An economy-wide carbon price will put in place a meaningful signal for accountability on the remaining large sources of emissions in the state.

Meet the Author

Michael Green

Executive director, Climate Action Business Association
The Commonwealth already has a vehicle for reducing our emissions and setting targets through the Global Warming Solutions Act. Creating a clearer framework for carbon pricing within the through the law will put the state on a new road for emission reductions. A continued approach of patch work policy will not work for meeting our emission mandates. It will, however, guarantee that state policy makers will continue to have to focus on ways to reduce our economy-wide emissions by only dealing with a quickly diminishing emissions source. This will not solve what remains a serious challenge for those who are serious about reaching our climate goals in Massachusetts. The Commonwealth already has a vehicle for reducing our emissions and setting targets through the Global Warming Solutions Act.

Michael Green is executive director of Climate Action Business Association.