Aligning NYISO's Carbon Pricing with Existing Climate Policy

Abstract

States across the Northeast and Mid-Atlantic have implemented particularly ambitious policies to deploy clean energy and reduce carbon dioxide (CO2) emissions from the electric sector. These policies create a challenge for the region's electric grid operators, who must oversee the achievement of clean energy and climate targets while ensuring grid reliability and maintaining cost-effective electric service. To harmonize those objectives, three of the region’s grid operators have considered incorporating the cost of CO2 emissions into their competitive wholesale electricity markets. This project examines the effects of the carbon pricing policy proposed by NYISO (New York's grid operator) and offers recommendations on how such a policy could be designed to maximize low-cost emissions reductions and help to achieve the state's existing climate and clean energy objectives.