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Natural gas trade group backs principle of carbon pricing in power markets

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Natural gas trade group backs principle of carbon pricing in power markets

Highlights

Action as states grapple with ambitious carbon targets

Opposition to 'duplicative regulation,' other subsidies

Washington — A US trade group representing large natural gas suppliers came out in favor of a carbon price as a key method of reducing carbon emissions in power markets now and enabling drastic cuts or eliminating emissions in the future.

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The position, which the Natural Gas Supply Association announced Tuesday, comes as an increasing number of states are adopting ambitious carbon reduction goals and renewable portfolio standards, and the gas industry is striving to show it can remain part of decarbonizing energy markets.

NGSA is stopping short of laying out a detailed plan, but is backing the high-level principle of a carbon pricing model broadly applied to all emitting sectors and across broad geographic areas.

"We believe that we are the first national gas trade association to support placing a price on carbon, but we're likely not going to be the last," said Dena Wiggins, NGSA's president and CEO. The position was unanimous among NGSA members, and did not receive pushback within the group, as the companies want to be part of the conversation about how to move toward a lower carbon energy future, she said.

STARTING WITH STATES

The group will make a case for carbon pricing in states and organized wholesale markets, according to Wiggins.

As many individual states are designing plans to reduce emissions, "we are urging those state policymakers to incorporate a price on carbon in their plans," said Wiggins. "We ask only that carbon pricing be applied in an even-handed way across all energy resources and technologies." NGSA also wants proceeds from carbon fees to flow back to communities and households affected by increased costs.

As part of that package, NGSA wants to scrap "conflicting or duplicative regulations and subsidies previously used to drive carbon reduction," a step the group contends is needed to keep competitive energy markets fair for all resources. NGSA has previously opposed zero-emissions credits for nuclear power in states such as New York.

The position the group announced is not necessarily surprising, given that some of its large-producer members previously have been on record supporting a carbon price. NGSA members include BP, Cabot, Chevron, ConocoPhillips, EQT, Equinor Natural Gas, ExxonMobil, Kalnin Ventures, Shell Energy North America, Southwestern Energy, Tenaska and Total Gas & Power North America.

Anadarko Petroleum, which has merged with Occidental Petroleum, will drop off the list in 2020.

But the action comes as carbon taxes are out of favor with parts of the environmental movement that prefer stricter controls, such as renewable energy mandates.

NEW YORK POSITIONS

Carbon pricing is a live issue in New York, where the New York Independent System Operator is preparing to file a proposal with the Federal Energy Regulatory Commission to embed a carbon price into its power-plant-dispatch system, should the ISO garner support from stakeholders and the state. PJM Interconnection is still in earlier stages, studying the impact of carbon pricing scenarios on its markets along with border adjustments between regions.

As New York wrestles with how it will reconcile resource adequacy goals with the state's ambitious emissions reductions goals, NGSA has commented in favor of carbon pricing at the New York Public Service Commission. A carbon pricing framework is the most effective way to maintain a competitive market structure, meet environmental goals, and ensure sufficient resources are available to help integrate renewables and support grid reliability in a cost-effective manner, it said in recent comments.

NGSA also argues carbon pricing would eliminate tensions that have emerged between federal and state policies related to electricity.

-- Maya Weber, maya.weber@spglobal.com

-- Edited by Valarie Jackson, newsdesk@spglobal.com