Electricity Markets and the Social Project of Decarbonization

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Decarbonization is the process of converting our economy from one that runs predominantly on energy derived from fossil fuels to one that runs almost exclusively on clean, carbon-free energy. If pursued on the scale that experts believe necessary to prevent dangerous climate change, the infrastructure changes required to decarbonize the United States will have significant social and cultural implications. States aggressively pursuing decarbonization have adopted policies reflecting their understanding that decarbonization is a social project implicating numerous value choices. Various state decarbonization policies combine the aim of decarbonization with job promotion, economic development, income redistribution, urban revitalization, open-space preservation, and the continuation of traditional livelihoods.

These multifaceted state climate policies are multiplying in the Trump era, as federal alternatives recede. But variegated state policies present a challenge to the smooth functioning of U.S. electricity markets, which operate across states to supply least-cost power on a region-wide basis. To address this friction, regulators at the federal and state levels are considering a novel solution: Perhaps these markets should incorporate the aim of decarbonization rather than leaving this job for the states. There is a clear argument in favor of such reforms — they would allow states to accomplish decarbonization at lower cost while protecting electricity markets from distortionary state policies.

Nevertheless, this Article questions the widespread enthusiasm for using regional electricity markets, rather than states, as the primary drivers of decarbonization. Rather than accounting for the social and cultural values at stake in decarbonization, the process of integrating decarbonization into electricity markets prioritizes the aim of least-cost decarbonization above all else — thus rejecting states’ more capacious understandings of the goals of decarbonization. Moreover, regional electricity markets are quasi-private, complexly structured membership organizations, which operate under federal oversight and provide limited formal channels for state input. Consequently, if regional electricity markets become the primary locus of decarbonization policy, states will have given away a rich set of policy tools for publicly, creatively, and flexibly managing the trajectory of decarbonization. Understanding decarbonization as a social project thus provides new stakes in the otherwise technocratic debate over electricity markets and climate change, highlighting the importance of maintaining the public voice in critical decisions made around how to decarbonize.