The Scoping Plan outline of implementation options for the Climate Leadership & Community Protection Act (Climate Act) suggested a market-based program as an economy-wide strategy. This effort is known as the New York Cap-and-Invest (NYCI) program. Last month I published an article describing the New York State Department of Environmental Conservation (DEC) and the New York Energy Research & Development Authority (NYSERDA) “proposed framework for guiding the allocation of these funds and identification of potential areas that could receive investments.” DEC and NYSERDA also posed a series of questions seeking public feedback. This article describes the comments I submitted in response.
I have followed the Climate Act since it was first proposed, submitted comments on the Climate Act implementation plan, and have written over 450 articles about New York’s net-zero transition. I worked on every market-based program from the start that affected electric generating facilities in New York including the Acid Rain Program, Regional Greenhouse Gas Initiative (RGGI), and several Nitrogen Oxide programs. I follow and write about the RGGI and New York carbon pricing initiatives so my background is particularly suited for tNYCI. The opinions expressed in this article do not reflect the position of any of my previous employers or any other organization I have been associated with, these comments are mine alone.
Overview
The Climate Act established a New York “Net Zero” target (85% reduction in GHG emissions and 15% offset of emissions) by 2050. It includes an interim 2030 reduction target of a 40% reduction by 2030. Two targets address the electric sector: 70% of the electricity must come from renewable energy by 2030 and all electricity must be generated by “zero-emissions” resources by 2040. The Climate Action Council (CAC) was responsible for preparing the Scoping Plan that outlined how to “achieve the State’s bold clean energy and climate agenda.” The Integration Analysis prepared by the New York State Energy Research and Development Authority (NYSERDA) and its consultants quantifies the impact of the electrification strategies. That material was used to develop the Draft Scoping Plan outline of strategies. After a year-long review, the Scoping Plan was finalized at the end of 2022. Since then, the State has been trying to implement the Scoping Plan recommendations through regulations, proceedings, and legislation.
Cap-and-Invest
The CAC’s Scoping Plan recommended a market-based economywide cap-and-invest program. The program works by setting an annual cap on the amount of greenhouse gas pollution that is permitted to be emitted in New York: “The declining cap ensures annual emissions are reduced, setting the state on a trajectory to meet our greenhouse gas emission reduction requirements of 40% by 2030, and at least 85% from 1990 levels by 2050, as mandated by the Climate Act.” In addition to the declining cap, it is supposed to limit potential costs to New Yorkers, invest proceeds in programs that drive emission reductions in an equitable manner, and maintain the competitiveness of New York businesses and industries. That is the theory, but I have doubts whether it will work and others do too.
Late last year DEC and NYSERDA released the pre-proposal outline of issues that included a long list of topics. The Agencies said that they were “seeking and appreciate any feedback provided on these pre-proposal program leanings to inform final decisions in the State’s stakeholder-driven process to develop these programs.” In a post describing my comments I provided additional background information and my concerns. In late June I described my letter to the editor of the Syracuse Post Standard that argued that the delays were primarily due to staffing issues. There has not been any substantive response to any comments submitted to date.
Comments
The request for comments asked for thoughts about how the auction proceeds should be invested. I think that they are putting the cart before the horse because no vetted path to zero emissions has been identified. In my comments I described the following tradeoff challenges that must be resolved if NYCI is to succeed.
Fundamentally, there are political thresholds that limit how much money can be raised by NYCI before the electorate rebels, but investments must be sufficient to fund emission reduction projects to achieve the aspirational Climate Act schedule. This has not been acknowledged in the NYCI implementation process. Danny Cullenward and David Victor’s book Making Climate Policy Work describe this problem. They note that the level of expenditures needed to implement the net-zero transition vastly exceeds the “funds that can be readily appropriated from market mechanisms”. That observation and the conclusion that New York is going to have to fund alternative technologies means that emission reduction investments should be a priority for NYCI revenues. However, there are competing priorities for funds including investments to advance equity and climate justice, funding for programs to reduce costs for those least able to afford higher energy prices, and funding to develop the new technology necessary for the zero-emissions electric grid.
These tradeoffs can only be resolved if there is a plan in place that is based on feasibility studies. Unfortunately, there is nothing in place that will provide that information in a timely manner. The sources that are responsible for compliance with NYCI have very few options for on-site control so must rely on somebody else to make the investments for zero-carbon emitting resources to displace their operations for emission reductions. The costs for those investments and market mechanisms for the required investments are unknown. In addition, it is acknowledged that to reach zero-emissions new technology must be developed and deployed. All these issues should be addressed before NYCI implementation continues.
Proponents of the cap-and-invest approach admire the NYCI feature that “ensures annual emissions are reduced”. However, the technological challenges of the transition must be resolved and adequate investments for the transition must be provided to achieve emission reductions. Furthermore, the NYCI allowance cap trajectory means that resolution of those issues is further constrained. If the displacement technologies are not deployed in a timely fashion, then the only compliance option left for the affected sources is to reduce or stop operations or cease sales of fossil fuels. That could result in an artificial energy shortage.
Conclusion
The Climate Act and the implementation programs thus far proposed are risky. I identified problems and tradeoffs that must be resolved before NYCI implementation continues. While there are some hints that the ramifications of an unreasonable and unachievable energy transition are becoming so evident that they cannot be ignored, those issues should be resolved before NYCI implementation continues. The NYCI program has a long way to go before New Yorkers can be assured that implementation will not do more harm than good.
Ultimately, any market-based program intended to reduce GHG emissions is a tax on CO2 emissions. Ron Clutz found a relevant political cartoon for a similar program in Canada that applies to NYCI.
Pragmatic Environmentalist of New York 