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Massachusetts Puts a Price on Carbon

The Massachusetts State Senate made history last month by passing landmark carbon pricing legislation. The bill (S.2545-An Act to Promote a Clean Energy Future) includes a key carbon pricing provision that allows Massachusetts to regain state leadership on climate policy by establishing a market-based mechanism to reduce carbon emissions.

In environmental law and policy, market-based instruments (MBIs) are policy instruments that use markets, price and other economic variables to provide incentives for polluters to reduce or eliminate negative environmental externalities. The market- based mechanism in the bill would specifically target emissions in the transportation sector, which accounts for more than 40 percent of carbon pollution in Massachusetts. It would also reduce those caused by heating fuels, which account for another one-third of carbon pollution.

The bill also contains a number of other proposals to achieve a clean energy future in Massachusetts including expansion of the state’s renewable energy portfolio (RPS) by 3 percent per year and a complete removal of net metering caps. Complementing carbon pricing, these two policies would expand demand for renewable energy.

The bill has widespread support from the business community, civic advocates and environmental associations. Last fall, more than 100 business leaders urged Governor Baker to take action this legislative session, and just last week businesses representing multiple sectors met state lawmakers to advocate for carbon pricing in S.2545.

If passed, this would make Massachusetts the first state to establish such a policy in the United States. Additionally, if the bill becomes law by the end of the session, it would require the Governor to implement a market-based mechanism no later than December 31, 2020.


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