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35 Pace Envtl. L. Rev. 1 (2017)

handle is hein.journals/penv35 and id is 1 raw text is: ARTICLE Carbon Pricing in New York ISO Markets: Federal and State Issues JUSTIN GUNDLACH & ROMANY WEBB* EXECUTIVE SUMMARY New York's Clean Energy Standard (CES), adopted in Au- gust 2016, aims to steer the state's electricity sector away from car- bon-intensive generation sources. It supports low-carbon alterna- tives by requiring retail electricity suppliers to purchase credits, the proceeds from which are paid to renewable and nuclear generators. Recognizing that this will affect the operation of wholesale electric- ity markets, New York's electric transmission grid operator (the New York Independent System Operator or NYISO) has com- menced a review to assess possible means of incorporating the cost of carbon emissions into market prices. This Article explores two approaches to carbon pricing in NYISO markets: the first would involve NYISO adopting a carbon price of its own initiative with a view to improving the operation of wholesale electricity markets (Approach 1), while the second would involve adoption of a carbon price designed to reflect and harmonize state-level policies aimed at reducing electricity sector emissions (Approach 2). Under either approach, NYISO would adopt a per megawatt hour carbon price and use it to establish a fee for each generating unit, consistent with its emissions profile. This fee would be added to the prices generators bid into the wholesale * Associate Research Scholars at Columbia Law School and Climate Law Fel- lows at the Sabin Center for Climate Change Law. The authors would like to thank Michael Gerrard, the Andrew Sabin Professor of Professional Prac- tice at Columbia Law School and Faculty Director of the Sabin Center for Climate Change Law, for his helpful advice and guidance in the drafting of this paper. We also thank Michael Burger, Executive Director of the Sabin Center for Climate Change Law, and Ari Peskoe, Senior Fellow in Electricity Law at the Harvard Law School Environmental Law Program Policy Initia- tive, for their insightful comments on an early draft of this paper. 1

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