EPA carbon rule could trim voluntary REC demand

by Stephanie Tsao
Argus Media

Washington, 20 October (Argus) — Federal regulations for CO2 emissions from power plants could curb demand for voluntary renewable energy certificates (RECs).

If states need to claim more emissions reductions for compliance with the US Environmental Protection Agency's (EPA) Clean Power, demand in the voluntary market could drop.

"I think the biggest factor in terms of how the Clean Power Plan might affect demand in the voluntary markets is the loss of what we call ‘regulatory surplus,' " said Todd Jones, senior manager of policy and climate change programs at the Center for Resource Solutions (CRS), during a panel discussion at the Renewable Energy Markets 2015 conference in Arlington, Virginia.

Regulatory surplus includes emissions cuts beyond that required by current programs that could result from renewable energy displacing fossil fuel generation. Those cuts would no longer be considered surplus if they are counted toward compliance with the Clean Power Plan. Jones authored a white paper on the subject CRS released on 16 October.

CRS manages the Green-e program, the largest program for voluntary RECs that businesses and individuals can buy to meet sustainability programs and other goals.

The Clean Power Plan could lead to new opportunities for REC trading as states update their policies in response to the rules. This could open new markets and create demand for solar power in southeastern states that have "pretty tight" targets, SunEdison director of federal policy Katherine Hamilton said. 

Renewable energy tracking systems may also need modification to account for a new compliance instrument known as an emission rate credit (ERC), which would be used in states that choose to meet CO2 rate targets, measured in lb/MWh, under the Clean Power Plan. States can also choose to meet a mass-based target, which is overall emissions measured in short tons.

Jones said there is a silver lining for voluntary RECs if states design their compliance plans to set aside ERCs or allowances to account for the benefits of voluntary purchases of renewable energy. The set-aside, similar to an element of the Regional Greenhouse Gas Initiative carbon market in the northeast US, could maintain demand for voluntary RECs.

The Clean Power Plan, which the EPA finalized on 3 August, sets CO2 targets targets for states to achieve by 2030. States have until September 2016 to submit initial compliance plans to EPA, with final plans due by September 2018.

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