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Updated Cost of Carbon in Minnesota

Published July 28, 2017

On Thursday, the Minnesota Public Utilities Commission voted 3-2 in favor of raising the cost of air pollutants from power plants: carbon dioxide, nitrogen oxides, sulfur dioxide, and particulate pollution. The value receiving the most attention is the updated social cost of carbon emissions, increasing to a range of $9.05 to $43.06 per short ton beginning in 2020. Customers do not pay for the cost of pollution on their utility bills, but these pollutants do have costs on society through health and environmental damages. The updated social costs will factor into determining whether natural gas, wind, solar or other energy sources are the most cost-effective resource when a utility is adding new electricity generation to their system.

The deliberations at the PUC brought in parties from around the state with a stake in this decision from investor-owned utilities such as Xcel and Minnesota Power, cooperative utilities, and environmental groups. Each proposed their own cost of carbon value that would play an important role in deciding the state’s energy future. This begs the question: what is the social cost of carbon, and how will it affect consumers in Minnesota?

What is the Social Cost of Carbon?

The social cost of carbon attempts to put a value on the climate impacts created by a ton of carbon emissions. The social cost of carbon includes a variety of potential damages including health and environmental deterioration, agricultural productivity, and damage caused by more severe weather patterns. Using various models, analysts can estimate a present value of the costs associated with climate change.

Minnesota was one of the first states to implement a social cost of carbon back in the ‘90s, with the federal social cost of carbon following in 2009. Minnesota’s current valuation is a range of $0.44 to $4.53 per ton of carbon emissions. The federal standard ranges from $11 to $56 per ton. This most recent decision saw the Department of Commerce and environmental groups proposing Minnesota adopt a social cost of carbon in line with the federal standard, while utilities have provided their own evaluations that are below the federal cost. For example, Xcel has proposed a social cost of carbon ranging from $12.13 to $41.40 per short ton.

The social cost of carbon estimates the monetary cost of future carbon emissions that uses a discount rate to compare those costs in today’s dollars. The discount rate essentially works opposite of an interest rate. It calculates how much money would need to be invested today to cover the damages in the future. The reason we see a range in the value is due to the variety of discount rates and time periods used in the modeling. Most models use a 2.5%, 3%, and 5% discount rate to account for a variety of potential future scenarios. The lower the discount rate, the higher the present value of the social cost of carbon value will be. Similarly, including damages for a longer period will increase the social cost of carbon.

It is the many different assumptions that are made in these models that create uncertainty when estimating the social cost of carbon. The uncertainty surrounding the appropriate costs to include or the future response to those costs such as technological change provides plenty of room for debate. In Thursday’s decision, regulators opted to eliminate the 2.5% discount rate from the calculation and estimated damages through the year 2100 for a lower estimate and again through the year 2300 for a higher estimate. The federal standard includes the 2.5% discount rate and includes a longer time period for damages to accumulate which is why we see a higher federal cost.

How is the Social Cost of Carbon used?

Most importantly, consumers will not see a new item on their bills to pay for the social cost of carbon. What the updated social cost of carbon could impact is where our electricity comes from, since Minnesota takes these values into consideration on utility resource planning. The higher cost of carbon emissions will impact the cost-competitiveness of natural gas plants when compared to carbon-free generation such as wind, solar, and nuclear. The cost of carbon will play an important role as coal and nuclear plants are no longer a cost-competitive option and will need to be replaced in the coming decades.

The new social cost of carbon provides a more comprehensive assessment for regulators and utilities when determining the best sources of electricity. This updated value will assist utilities with the transition to a cleaner energy portfolio and consumers will notice the benefits from reduced health and environmental costs that are created by the pollutants in electricity generation from fossil fuels.

Author: Ben Bratrud

One Response to "Updated Cost of Carbon in Minnesota"

  1. Amber Manthey Posted on June 10, 2022 at 9:59 pm

    Amber Dawn Manthey
    553 Mendota St Apt#1
    Saint Paul, Mn 55106
    20th May 2022
    Some way shape or form.
    I sent this to you, with my thoughts
    You can help, or maybe, it can help you?
    Positively,* for your work, your home.
    Or maybe just, so you know.
    Dear Mr. & Ms. Reader,
    Science is the root of humanity’s Discoveries, scientifically proven is just test after test showing the same results or very similar results.
    So….. science has shown that both the classes of cannabis plants can positively change our world on every level of life? Then why not now?
    The only thing that went wrong is the North American government bestowed upon the world the power to say no, and outlawed the growth and use of this amazing medicinal plant.
    Before I start, I want you to know that hemp and pot are two different plants in the same family. pot gets people who smoke it stoned, hemp even if smoked will not, get you high’, maybe give you a headache? The two plants are similar yet have a different chemical compounds. So pot has THC hemp doesn’t or if it does so minimal couldn’t get a person “High’.
    Both plants are masters at co2 sequestration (in take), an 02 (air) output, So that means it’s a natural option , to get some of the atmospheric carbon dioxide recaptured. clean , fast, carbon dioxide capture and storage……
    A storage because when it grows the captured co2 is permanently bonded with the plants fibers, so it continues to pull in co2 and put out o2 until it’s returned to the earth,
    it doesn’t re-release when processed, only when returned to the soil it then will start the decaying process and break down releasing the captured carbon slowly both to the soil and air. But is 100% biodegradable.
    Cannabis both hemp and pot are carbon sinks, with the capability of pulling in 100x the co2 a tree can over its entire lifetime.
    To sequester one ton of atmospheric carbon dioxide=
    ***A tree_= 40 to 100 years (compounded)***
    ***1 acre of hemp_= 128 days or 4’ tall. ***
    Not just this but also pulls toxins from the dirt so we can grow better foods with more nutrients and yield more bountiful crops.
    This idea I have can retrofit every existing home to be more livable, healthier, and stronger. All naturally.
    If used for a blown-in home reinstallation and mixed with lime for a binder would naturally make the structure
    ***fire retardant*** giving the fire department( the bravest people ever) a few more seconds to save a life, I hope,
    ***moisture repellent*** if used in just an attic could do so much for a structure. no molds will /can grow and make families sick,
    *** strong as steel,*** maybe stronger so with the storms that are getting more intense could stand up against the winds waters tornadoes hurricanes tsunamis,
    then still stand and last over 100 years,
    and my favorite part is
    **** more energy-efficient*** saving energy, by less consumption cutting the demands of our already depleted natural resources.
    Hemp naturally keeps the temp comfortable and liveable.
    Also can
    make the home’s indoor air cleaner because like I said it can still uptake carbon and put out air, it’s like putting an air purifier in the walls that don’t need to be serviced or plugged in …ever ..I’m trying to help the kids, they need a tomorrow, to grow up into.
    that’s not full of pollution and problems.
    Everyone can point out a problem, but no one seems to know?
    won’t just give us a solution.
    North America should be pumping drinkable water around the world and giving this oil crap a rest,
    (does anyone ever think the world makes oil for a reason?) Maybe it keeps us in orbit around the sun delicately in balance?
    Freely answering, freely sharing, giving, to a stranger for free!
    That’s what I just did!
    This information is priceless. This information will be a major game-changer, one day. when everyone knows what you’ve just learned. I hope it’s before the ocean gets spotted and white. It’s going to acidify before our eyes…
    I hope it’s before the trees get too many leaves, and their branches break under their own weight. ( that means the tree is trying to hold oxygen in to use at night when it needs to breath ) that is when our air is no good anymore, the sun will touch the earth so direct nothing will grow it will brown. Our world is going in a bad horrible direction, with weather events we know are changing because of man and how we live,
    This is a way we can help reverse what mankind has done and what we are doing,
    this is an innovation for the nations globally we can change global warming
    (have you ever held your hand over a boiling pot?)
    ( What did you think would happen when our water keeps evaporating and raining. )
    It’s just baby steps, but big ones . with little changes. How we live now.
    This information to me is worthless because I have no means to utilize it in any way shape or form because I’m poor. I don’t know how to talk to people out loud because I’m very shy. So I’m writing this letter.
    I’m giving you info that’s priceless, but yet can make you millions of dollars.
    this information,
    I’ve learned over my life thus far, I Peaced together….information I found searched for over the years, as a student or professor wrought their hard work in a thesis.
    or findings of a study.
    The subject a person worked on over their life, a life they dedicated to science. Of learning. and their studies findings shared and also given hypothesis or ponderance upon .all correct, by science, but forgotten due to “outlaws’ (keep up at the end of this letter theirs a test….)
    But really,.
    4 all our little ones.
    I give this letter in hope that people, the readers I’ve sent this to.
    will help each other.
    We as a species need to show our love,
    As a kind, we need to start showing how kind we can be to one another. show more love, be kind, and give.
    (hope also someone gives back cuz everyone loves money)
    (((“I like money?”!))) It’s lovely.
    We can, together, clean up our mess.

    Please feel free to contact me with any questions or share your own thoughts on the subject.
    I have many thoughts on ways, we can change just little things with big impacts. I see we can positively change our world for all life here, but nobody seems to care about anything no more.
    We Are so consumed with consumerism, no one seems to realize that we are the cause of our own demise,
    We wonder where covid-19 came from?
    Today’s atmospheric carbon levels are the highest ever on record over the past 800,000 years.
    We run around all the other life on earth, like we’re all alone, killing fish with a bomb, and letting oil lines run their sickness threw our life-giving water, we know that we don’t live forever, we know that everything we have stays here? But still don’t really care to share nor give?
    I love everyone ! so here……. From Amber Dawn Manthey

    Your Name belongs here.

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