Carbon pricing is a strategy being utilized by some Western states to achieve clean energy policy goals. This has been done primarily through cap and trade programs or applying a tax directly on emissions. When employing this strategy, there are potentially significant benefits from participation in larger markets. Given that different carbon emission reduction policies and programs are developing in the West on a state-by-state basis, Western states may be interested in how to link with other programs to gain the benefits of a larger carbon market. This paper provides an overview of the policy environment in the West, describes different types of linking and the potential benefits and challenges; and explores how program design choices can affect market outcomes. It culminates in next steps that policy makers and regulators can take to further investigate this option.
This work was accomplished through a Idaho-WIEB State Energy Planning (SEP) project funded by the U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy, to foster regional and state energy planning in the West and identify opportunities for multi-state or region-wide collaborations to address emerging energy issues.