• Mineral Royalties: Historical Uses and Justifications

    Governments and private landowners have collected royalties on mineral resources for centuries. When comprehensive measures to account for the environmental externalities of mineral extraction are politically or practically unavailable, federal and state governments may consider adjusting royalty rates as an expedient way to account for these externalities and benefit society. One key policy question that has not received attention, however, is whether a royalty rate can and should be manipulated in this way, assuming statutory discretion to do so.

    This article fills that gap by evaluating the argument for increasing federal or state fossil fuel royalty rates through historical, theoretical, and practical lenses. To that end, this article in turn considers the meaning of royalties, the economic justifications for royalties, the legislative history of the implementation of federal royalties, and the considerations that private landowners have relied upon in setting royalties. This article concludes that it would be appropriate for governments to adjust mineral royalty rates to account for negative externalities not otherwise addressed by regulation or to otherwise promote public welfare. Such use of royalties is consistent with the historical record. Royalties have been used as pragmatic policy tools from almost their inception, and federal and state governments have often exercised their existing statutory discretion to adjust mineral royalty rates to promote public welfare.

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  • Institute for Policy Integrity Comments to Colorado Public Utilities Commission on Electric Resource Planning

    The Colorado Public Utilities Commission is revising their electricity resource planning process. Our comments to the Commission suggest legal language for incorporating externalities, like the climate effects of greenhouse gas emissions, into the state’s electricity policy. We also explain why the Social Cost of Carbon, as developed by the federal government in 2016, is the best tool for incorporating the externalities of carbon emissions into policy.

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  • Institute for Policy Integrity Comments to New York State on Clean Energy Standards for Existing Generators

    New York State plans to provide support to some existing small hydro, wind, and biomass generation facilities at risk of closure, in order to prevent the state from backsliding on its ambitious clean energy goals. The New York Public Service Commission released a report on the Clean Energy Standard Tier 2 Maintenance program, which focuses on the criteria a generator should meet in order to receive financial support and how these payments should be determined.

    Our comments on the report encourage the Commission to harmonize these payments across all proposed review processes for Tier 2 generators. We also encourage the Commission to consider how the program will interact with other energy initiatives in the state, including a potential carbon charge on wholesale electricity markets and a program that values the environmental benefits of distributed energy resources. These changes would enhance the program’s economic efficiency and help ensure that the state meets its decarbonization goals.

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  • Institute for Policy Integrity Comments on Carbon Pricing in Wholesale Electricity Markets to New York

    Our comments to New York State Department of Public Service and New York Independent System Operator encourage the state to pursue carbon pricing, as it is the most economically efficient and technology-neutral way to internalize climate damages from greenhouse gases. We argue that the price used for carbon damages, the mechanisms to prevent emission leakage, and the allocation of revenue collected from emitting sources will all affect the level of emissions reductions the state can achieve through policy. The design of the program will determine its success in reducing emissions, and we encourage New York to consider carefully the benefits of different implementation plans.

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  • Institute for Policy Integrity Comments to the Public Utilities Commission of Nevada on the Social Cost of Carbon

    Nevada recently passed SB 65, a bill updating the state’s electricity planning process and boosting resources that provide economic and environmental benefits to the state. The Public Utilities Commission of Nevada subsequently held a series of formal and informal workshops and calls to shape the new regulation required under SB 65. We submitted joint comments with other stakeholders that included consensus language for several sections of the regulation. We also note in these comments that while stakeholders did come to an agreement on most issues, questions remain on how to define the social cost of carbon for the implementing regulation. Accordingly, we submitted supplemental comments to the PUC, discussing how the social cost of carbon is used by several other states, including in state electricity regulations and proceedings. We note that Colorado, Illinois, Maine, Minnesota, and New York use SCC estimates from the federal Interagency Working Group, and recommend that the Nevada PUC follow a similar approach.

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  • Institute for Policy Integrity Comments on the Work Plan of the New York Carbon Pricing Task Force

    The New York Independent Systems Operator (NYISO) and the New York Department of Public Service (DPS) recently began a joint effort to harmonize the state’s energy policies with the operation of wholesale markets, including by establishing a task force to discuss how to incorporate carbon pricing into the wholesale market. We recently submitted comments with a number of recommendations on how to ensure the task force’s work plan shapes the program in the most economically efficient and legally sound way. We suggested that price, revenue allocation, leakage, and harmonization with other state policies be included as topics in the work plan, among several others. We plan to continue to engage with this process over the next several months.

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  • Institute for Policy Integrity Comments on the Colorado Climate Plan update

    In July, Governor Hickenlooper issued Executive Order D2017-015, Supporting Colorado’s Clean Energy Transition, which called for an update to the 2015 Colorado Climate Plan. We took this opportunity to share our recent guide, The Social Cost of Greenhouse Gases and State Policy, along with a letter encouraging Colorado state agencies to use the social cost of carbon in all major regulatory, resource management, and electricity decisions with possible climate effects.

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  • Institute for Policy Integrity Comments on California’s Cap-and-Trade program

    This summer, California passed Assembly Bill 398, extending the state’s well-regarded cap-and-trade program until 2030. The California Air Resources Board held a public workshop on October 12, 2017, on implementing the provisions of AB 398. The Board requested feedback on a number of specific issues to aid it in finalizing the cap-and-trade regulations, including on setting a price ceiling for emissions allowances and unsold allowance allocation. In our comments to the Board, we focused on these two issues, making recommendations for developing regulations under AB 398 that help ARB fulfill its statutory mandates to take into account the externalities associated with greenhouse gas emissions and promote overall societal well-being. Specifically, we recommended that ARB should set the price ceiling for permits at least as high as the social cost of carbon (SCC) because setting a price ceiling below this threshold would fail to provide emitters with incentives that fully account for the value of avoided carbon dioxide releases. For similar reasons, we also suggested ARB preferentially allocate unsold allowances to the price containment reserve with the highest price.

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  • Institute for Policy Integrity Comments to Nevada’s Public Utilities Commission

    Nevada’s Senate Bill 65, passed in 2017, directs the state’s Public Utilities Commission to prioritize the sources of electricity that provide the greatest economic and environmental benefits, including considering the potential costs of carbon, when reviewing utilities’ resource plans. Our joint comments with Western Resource Advocates and the Environmental Defense Fund offer guidance to the Commission on how to evaluate the potential costs of carbon. Specifically, we recommend that the Commission should require the utilities’ resource plans to use the Social Cost of Carbon as developed by the federal government in 2016 to evaluate the potential costs of carbon associated with different electricity sources. We also submitted joint comments replying to stakeholder feedback, offering specific feedback on how the Commission can modify its regulations to accomplish the intent of the bill.

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  • The Social Cost of Greenhouse Gases and State Policy: A Frequently Asked Questions Guide

    States can benefit from using the social cost of greenhouse gases to aid in making rational policy decisions in a transparent manner. Many states are already using these metrics in their decisionmaking. This report provides information on several issues related to the social cost of greenhouse gases, including discount rates, time horizons, and the global nature of the estimate.

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