Legislature publishes final text of S.2564, including strong carbon pricing provision

The final language of Massachusetts Senate Bill 2564 (formerly S.2545 and S.2302), “An Act to Promote a Clean Energy Future,” provides several options to institute carbon pricing, which it calls “market-based mechanisms.” The mechanisms would cover fossil fuel use in transportation, commercial, industrial and residential buildings, as well as industrial processes.

If passed by the House and signed by the Governor, S.2564 would make Massachusetts the first state to provide an option for direct pricing of carbon pollution, and the second state, after California, to have economy-wide pricing of CO2 emissions from fossil fuels (with electricity covered by RGGI).

Due to an amendment restoring wording from before the bill hit the Ways & Means Committee, it requires that the state set a GHG emission limit for 2030 that is at least 43 percent below the 1990 and a limit for 2040 that is at least 62 percent below 1990. Both figures would keep Massachusetts on track to hit the long-term legal requirement of at least an 80 percent cut by 2050. The limits must be set by January 1st of 2021 for both 2030 and 2040, although I suspect the date for 2040 is an error that might yet be changed.

Critically, while no specific CO2 prices or emissions caps are given for the market-based mechanisms, the bill requires that they “maximize the ability of the commonwealth to achieve the greenhouse gas emissions limits established pursuant to this chapter.” This gives us confidence that the mechanisms will be strong, unless the state can find other methods of meeting the limits.

The bill gives four options for the type of mechanism: annually declining emissions limits;

“exchanges, banking, credits and other transactions” (which sounds like cap-and-trade); a regional program that yields the same emissions limit; or “a system of charges or exactions.”

In comparison to the stand-alone carbon pollution pricing bills from Senator Mike Barrett, S.1821, and H.1726 from Representative Jennifer Benson, the bill says little about how the revenue would be used. For people, it requires that the market-based mechanisms “be designed to minimize disproportionate impacts on low-income households.”

Due to a late amendment from Senator Hinds, it also requires that impacts be mitigated on manufacturers and other employers “at risk of serious negative impacts” – language similar to that in both S.1821 and H.1726. S.1821 was “revenue-neutral,” returning all the money to households and employers; while H.1726 would use 20 percent of the revenue for a Green Infrastructure Fund that would provide grants to municipal governments.

Coverage of the mechanisms would be phased in on different sectors of the economy: transportation by the end of 2020, commercial buildings and industry the end of 2021, and residential buildings the end of 2022.

Moreover, the Secretary of Energy and Environmental Affairs is required to issue a 2050 emissions reduction plan that “shall describe in detail the commonwealth’s actions and methods for achieving the 2030, 2040 and 2050 emissions limit.”

The omnibus clean energy bill includes a number of other important provisions, including ones to triple the annual expansion rate of the renewable portfolio standard, eliminate the cap on “net metering” for solar facilities, make access to ownership of solar panels far more equitable, set an ambitious target for the number of electric vehicles on the road in Massachusetts, promote storage systems for electricity, increase the number of air quality monitoring stations, require the Department of Public Utilities to determine whether proposals for new gas pipeline capacity are in the public interest, and more. I will leave it to others, or a future article, to describe these provisions in detail and tell us their significance.