How Do I Regulate Carbon Emissions? Let Me Count the Ways

While Congress considers climate change regulations, and states pursue regional cap and trade plans, it becomes apparent that the number of different ways to regulate carbon emissions is limited only by the creativity of those doing the regulating. Last week, the Minnesota Public Utilities Commission (PUC) issued a certificate of need for the construction of transmission lines necessary to carry power from a new coal-fired plant, known as Big Stone II, to be built in South Dakota.

The certificate of need includes several provisions affecting CO2 emissions by the utilities. It requires that an older coal plant be closed by 2018 (though of course there is an exception if the plant is needed). The new plant must be constructed to be “carbon capture retrofit ready.” Finally, and most notably, the certificate provides that Otter Tail Power, which is one of the utilities building the new plant and which, because it is located in Minnesota, is subject to the jurisdiction of the Minnesota PUC, may not recover CO2 emission control costs from the ratepayers to the extent those costs exceed $26/ton.

In fact, at this point, $26/ton seems like a high number. Environmental advocates had sought complete rejection of the certificate of need request and are not happy about the $26/ton cap. Nonetheless, the important story here is not the level at which the cap is set in this case. The important feature is the imposition of the cap as part of the certificate of need process. 

Today $26/ton. Tomorrow, who knows? Departments of public utilities could be the next front in the climate change battle.

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