The Cost of Climate Pollution

Minnesota PUC Requires SCC Use for Utilities

WMinnesota Electric Power Sector January 2018

• Application

  Externalities in PUC proceedings (various)

• Date

  January 2018

• Details

  Minnesota Public Utilities Commission issued an order that finalized carbon cost estimates that utilities are required to use when planning for new projects. The commission will use these values in evaluating and selecting resource options in all commission proceedings, including resource planning and other resource acquisition or diversification proceedings.

• SCC Value(s)

  9.05 - $43.06 per short ton of CO2e, based on IWG SCC (Minnesota had previously used $0.44 to $4.53.)

• Reference

  MPUC E-999/CI-14-643

• Legal Authority

  The Minnesota Public Utilities Commission is statutorily mandated to consider externalities for all proceedings. 2023 version available here.

• Litigation

  According to the Administrative Law Judge who reviewed the case “the Commission adopt[ing] the [IWG’s] Federal Social Cost of Carbon [is] reasonable and the best available measure to determine the environmental cost of CO2, establishing a range of values including the 2.5 percent, 3.0 percent, and 5 percent discount rates . . . .” The decision to use the federal IWG modeling, with some adjustments, 1 was recently adopted by the Commission, and the Minnesota PUC will use a range of $9.05 to $43.06 per short ton by 2020.

• Commentary

  Minnesota was one of the first states to formalize a cost of carbon for use in state-level decisionmaking.

• Updates

  • January 2018: Minnesota Large Industrial Group filed a petition for reconsideration of MN’s new externalities estimates

1.  In particular, Minnesota has decided to adjust the IWG’s estimates by using a range between the IWG’s “central” 3-percent estimate and a lower bound that uses a 5-percent discount rate and a shortened timeline of 100 years. See Andrew Moratzka, MN PUC Establishes New Environmental Costs for Use in All Proceedings, Renewable+Law Blog (July 27, 2017); In the Matter of the Further Investigation into Environmental and Socioeconomic Costs Under Minnesota Statutes Section 216B.24422, Subdivision 3. ORDER UPDATING ENVIRONMENTAL COST VALUES. Docket No. E-999/I-14-643 (Jan. 2018). Contrary to the Minnesota PUC’s approach, uncertainty does not support shortening the time horizon for the SCC. See Iliana Paul et al., Institute for Policy Integrity, The Social Costs of Greenhouse Gases and State Policy 20 (2017), available here. ↩︎

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