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Carbon pricing discussion with Natural Gas Supply Association President Dena Wiggins

22 November 2020 Kevin Adler

In December 2019, the Natural Gas Supply Association (NGSA) became the first North American oil and gas trade association to publicly support a price on carbon. Since that time, momentum has increased across the political spectrum, as well as within the energy industry, for market-based carbon solutions. In this Q&A in November 2020, IHS Markit talks with Dena Wiggins, president of NGSA, about the natural gas industry's role in carbon reduction.

IHS: Does NGSA have a preferred form of carbon pricing?

Wiggins. We're just not there yet as an association. Our statement last year was really at the 60,000-foot level, and that's where we are. Our members are grappling with the details -- what's the mechanism? what's the price? There are probably thousands of details and follow-up questions to consider. We're focused on trying to play the ball as it lies.

Beyond: What led to NGSA's statement last year?

Wiggins: Here's how we came to this situation. Our tagline is "Markets Matter," and it really is more than a tagline, it is fundamental to what NGSA is and the policies that we pursue. If you roll back the clock a couple of years, various states and even cities were looking at…implementing policies that preference one fuel over another. These were zero-emission credits programs, subsidized nuclear power, and so on. They are antithetical to our market-based approach; we do want the fair opportunity to compete for market share. We viewed all of those efforts as attempts by legislators or regulators to put their thumb on the scale in preference of one fuel over another.

So, when the New York [Independent System Operator] began to look into whether it should implement a price on carbon, we decided to study the issue. Well, that's a market mechanism, and so when we talked to our members…we found a pretty widespread consensus that an economy-wide price on carbon is an appropriate mechanism…[to transition to] a lower carbon energy future. We took the pragmatic approach that if a price on carbon was developed, and it was appropriate and was the right price, it would, hopefully, convince states and other regulatory bodies that other types of subsidy programs are not necessary. That's why I say we're playing the ball where it lies.

IHS: In September, the Federal Energy Regulatory Commission (FERC) held a technical conference with stakeholders from industry and government to discuss whether it should get involved in approving carbon price mechanisms for the power industry that it regulates. Can you discuss the driver for that event?

Wiggins: We and many other industry groups asked for the technical conference on this, and we were pleased that FERC made the decision to hold it. Conversations had been going on in RTOs)] and ISOs [which manage regional power networks in the US] … and there was some skepticism among them that a price on carbon was something that FERC would even entertain. ISOs and RTOs were concerned that they might go through the entire, very lengthy stakeholder process and get to a proposal for a price on carbon, but would FERC even look at it? We thought it would be helpful to have this conversation at FERC.

IHS: You were a participant in the FERC technical conference. What's your view of the discussion and the outcome so far?

Wiggins: I thought it was an interesting conversation and that it was helpful. For the most part, the people who spoke did a good job of not staking out extreme positions. The draft policy statement [which was issued by FERC a few weeks later] is a positive step forward. Now, we're working through the FERC process.

IHS: Can you summarize the draft policy statement? What signal do you think it's sending to the power industry and other stakeholders?

Wiggins: FERC's proposed policy statement sends a clear signal to RTOs, ISOs, states and other key stakeholders that carbon pricing proposals are on the table as a way to reach emissions goals. This is an important signal to regional and state policymakers as they grapple with the best approach and gives them much greater clarity and certainty.

IHS: What about federal legislation instead of RTOs and ISOs submitting regional plans to FERC?

Wiggins: Next year, if there is a legislative angle, we'll have to see where we are with it. Right now, with an election and the end of a congressional session approaching, FERC is where the action is. The focus for us right now is on the power markets and if FERC could support at least more conversations on shaping a price on carbon.

IHS: Agreed that Congress isn't doing anything right now. But at least nine bills have been introduced in the current session on carbon pricing. Do you see that development, as well as others, as an indicator of a growth in interest nationally since NGSA's announcement late last year?

Wiggins: Yes. There was a report recently by Resources for the Future, "Climate Insights 2020: Opinion in the States," in which a fairly large percentage of Americans say they favor carbon taxes or cap-and-trade to address global warming. That to me denotes that there is some widespread interest. It just seems to be something that is a topic of conversation. I don't know why exactly, except that a piecemeal approach of subsidizing and picking among fuels, and having a legislative or regulatory body do that, is seen as problematic. Setting a price on carbon is perhaps in the long term a better approach because it preserves the consumer benefits that come with competitive markets while reducing emissions very effectively. [Editor's note: The RFF survey breaks down data state-by-state, and the lowest levels of support for a national cap-and-trade program are 47% in Nevada and 48% in Utah; even energy states such as Oklahoma, Pennsylvania and Texas are above 50% in support.]

IHS: The issue of a price on carbon, of course, emerges from concerns about global warming. How does the natural gas industry and the utilities that it supplies think about this issue?

Wiggins: If you put the reliability and affordability pieces of the puzzle in this conversation, one of the things I've been concerned about is states, localities, counties, and cities with really aggressive goals for 100% renewables or 95% renewables.… Sometimes those features are not part of the conversation - and I think they need to be. I think we need to figure out how to reach climate goals while keeping the lights on and the air conditioning on -- and while still keeping it affordable. The practical must be married with aggressive climate goals.

That's why natural gas has a role to play in the future. I do think that in a market environment, we are a good partner with renewables because we can firm up intermittent resources. I know there's a lot of attention on battery storage - and it's great that it's being looked at - but again, for now we have to address our needs with the technology that we have today.

Posted 22 November 2020 by Kevin Adler, Editor, Energy and Natural Resources Group, IHS Markit

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