Incorporating Wind Generation in Cap and Trade Programs

Cap and trade programs are increasingly being used to reduce emissions from electricity generation in the United States. Cap and trade programs primarily target emitting generators, but programs have also included renewable generators, such as wind generators. States cite several reasons why they have considered the policy option of including renewable generators in cap and trade programs: toprovide an incentive for lower-emitting generation, to achieve emissions reductions in non-capped pollutants, and to gain local economic benefits associated with renewable energy projects. The U.S. Environmental Protection Agency also notes these rationales for considering this policy alternative, and the National Association of Regulatory Commissioners (NARUC) passed a resolution supporting theinclusion of renewable energy in cap and trade programs. This report explores why states consider this policy option, what participation could mean for wind generators, and how wind generation can most effectively be included in state, federal, and regional cap and trade programs.