Carbon Free New York May 26 2020 Letter to the Governor

“Carbon Free New York” is a coalition of organizations who believe “implementing the NYISO carbon pricing proposal in a timely and efficient manner and incorporating the cost of carbon into the electricity sector, New York will align its wholesale electricity markets with its public policy objectives to decarbonize the electricity sector as set forth in the Climate Leadership Community Protection Act (CLCPA)”.  Under the heading of not letting any crisis go to waste they recently sent a letter to NY Forward Advisory Board and Governor Cuomo on Carbon Pricing For COVID-19 Economic Recovery Efforts linking the COVID pandemic and the climate change crisis and suggesting that the NYISO carbon pricing proposal will “give New York a tool to kickstart its health and economic recovery efforts”.  I disagree.  I previously explained that this coalition does not understand the ramifications of carbon pricing,

I first became involved with pollution trading programs nearly 30 years ago and have been involved in the Regional Greenhouse Gas Initiative (RGGI) carbon pricing program since it was being developed in 2003.  During that time, I analyzed effects of these programs on operations and was responsible for compliance planning and reporting.  I write about the issues related to the energy and environmental interface from the viewpoint of staff people who have to deal with implementing these programs.  I have followed the New York State Independent System Operator (NYISO) carbon pricing initiative since its inception and my work on that program is the primary basis for this summary.  I am retired now and these comments represent my personal opinions only.

Health impact link

According to the letter:

Our most vulnerable populations, such as seniors and low-income communities of color, are already disproportionately affected by climate-influenced health issues and face the most exposure to dirty air due to their proximity to fossil fuel power plants. Now, these underlying respiratory issues have allowed COVID to impact these very people with pre-existing health conditions the hardest, showing just how important reducing pollution and improving air quality are to protecting public health, especially in times of crisis. In addition to protecting public health and addressing the disastrous and irrevocable effects of climate change, we also need solutions to reboot New York’s economy in the aftermath of COVID with more than 1.9 million New Yorkers having to file for unemployment insurance claims, according to the state Labor Department.

I believe the claim that there is a link between air pollution and COVID is based on a nationwide study from Harvard T.H. Chan School of Public Health that claims that people with COVID-19 who live in U.S. regions with high levels of air pollution are more likely to die from the disease than people who live in less polluted areas.  However, the paper was not peer-reviewed and the initial claim that people in areas with high levels of pollution are 15% more likely to die was clarified on April 24: “We have revised our finding as that an increase of 1 μg/m3 in PM2.5 is associated with an 8% increase in the COVID-19 death rate.”  I recently looked at PM2.5 data in New York City and found that the latest available three-year average (2016-2018) at the Botanical Garden site in New York City is 8.1 µg/m³ which represents a 38% decrease since 2005-2007 and is 85% lower than the average of the last three years of Chinese PM2.5 annual average data.  If the Harvard health impact effects model is correct it should show significant differences in mortality between China and New York City.  Until then I am unimpressed.

Investments

The letter makes the claim that NYISO’s carbon policy will be efficient:

The attendant goals of the CLCPA are more important than ever as we begin the process of preparing for a post-COVID-19 economic recovery. NYISO’s carbon pricing plan advances these objectives by providing New York with an essential tool to restart the economy and build it back cleaner and stronger than ever. Pricing the social cost of carbon within New York’s electricity markets will align our environmental and public health interests––while simultaneously jump-starting the economy at a very timely moment.

In tandem with New York’s broad CLCPA implementation, NYISO’s carbon pricing proposal will support investments in green jobs and accelerate the build-out of renewable energy infrastructure, putting thousands back to work while safeguarding the health of our environment. At a time when the state has limited resources, carbon pricing offers a consistent mechanism to incentivize carbon-free energy production and clean energy job creation and business growth. Leveraging the power of markets, NYISO’s carbon pricing proposal ensures the most efficient utilization of public resources to achieve the CLCPA goals.

In my previous post on Carbon Free New York I showed that New York’s investments are anything but efficient.  Historical results show that making investments at a cost per ton less than the social cost of carbon metric that is supposed to estimate the future damage cost impacts of a ton of CO2 emitted today is difficult even when the tax proceeds are directly invested.  According to the letter, the NYISO carbon pricing proposal will “charge those who produce carbon-intensive electricity and reward those who produce carbon-free electricity”.  In other words, reductions in carbon-intensive electricity will occur indirectly.  Moreover, rewarding the coalition members for their carbon-free electricity is another term for a windfall profit on top of all the other subsidies they already receive.

Reality

The letter justifies the need for bold leadership by making the following claim:

New York accounts for one out of every 230 tons of energy-related carbon dioxide (CO2) emitted anywhere in the world. With the CLCPA’s mandate to achieve carbon-free electricity by 2040, 70 percent renewable generation by 2030 and a net-zero carbon economy by 2050, incorporating the social cost of carbon into New York’s energy markets is the most efficient and affordable approach to reaching these goals, while protecting public health and rebuilding the state’s green economy. This is a moment for bold leadership.

Frankly, that number caught my attention because it seemed like a bigger fraction that I expected.  I checked out the data and found that the number was reasonable -my estimates were that New York has an even bigger contribution.  However, there is more to the story.  The New York State Energy Development Authority (NYSERDA) Greenhouse Gas Inventory 1990-2016 report contains a detailed inventory of historical greenhouse gas emission data from 1990-2016 for New York State’s energy and non-energy sectors.  I found global energy sector CO2 emissions data for 1990 to 2019 at the International Energy Agency (IEA). In the New York Energy-Related CO2 Emissions Relative to the World’s CO2 Emissions table I combined NYSERDA data and IEA for common years to estimate how New York emissions were accounted for since 1990.  The NYSERDA summary lists energy-related GHG emissions that include CH4 and N2O.  In order to directly compare with the IEA CO2 data, I assumed that the fraction of CO2 in the total GHG emissions would equal the average of the 2015 and 2016 data I had on hand.  EIA lists their data in Gt and NYSERDA in MMt.  I list the EIA data for two categories, advanced economies and the rest of the world and then total them and covert to MMt.  The NYS tons out of every global ton simply is the Global total divided by the NYS total.  In 2016 this methodology predicts that in 2016 New York accounted for one out of every 191 tons of energy-related CO2 emitted anywhere in the world.  Close enough to the letter’s number for this application.

There are two aspects of the trend of the energy-related CO2 emissions numbers that have to be addressed.  Between 1990 and 2016 NYS emissions dropped 17%, global advanced economies emissions increased 3%, global rest of the world economies emissions increased 124%, and global total energy-related CO2 emissions increased 57%.  Clearly world-wide emissions are increasing because many countries are using more energy.  While some may decry that, the fact is that World Bank World Development Indicators over this time frame show that the world has become healthier and wealthier. The World Development Indicators table lists selected parameters. The world mortality rate, for children under five dropped from 93.2 to 38.6 (per 1,000 live births) between 1990 and 2018.  The life expectancy at birth increased from 58.1 to 61.2 total years between 1990 and 2018.  The world’s PM2.5 mean annual exposure dropped 1.1 (µg/m³) between 1990 and 2017.  Finally, the world’s gross domestic product increased from $8.8 billion to $31 billion.

The trend in New York State emission sources is another aspect of note.  Table A-1. GHG Emissions by Sector, in Patterns and Trends – New York State Energy Profiles: 2002-2016,  lists emission reductions from 1990 to 2016.  Overall GHG emissions have dropped 18.5%, 37.9 MMt.  Four sectors have reduced emissions: the residential sector is down 9.8% or 3.4 MMt, the commercial sector is down 22.2% or 5.9 MMt, the industrial sector is down 48.9% or 9.8 MMt and electric generation is down 56% or 35.3 MMt.  On the other hand, transportation has increased 24.2% or 14.4 MMt and imported electricity has increased 120% albeit only 2.1 MMt.

The letter claims “this is a time for bold leadership”.  I believe that the industrial emissions have gone down because manufacturing in New York is shutting down and in my previous post on this coalition I explained that electric sector emissions have gone down mainly because of fuel switching to natural gas.  State “leadership” had nothing to do with historical reductions and it can be argued relative to natural gas that they occurred despite Cuomo’s “leadership”.  Natural gas became the cheaper fuel alternative because of fracking technological improvements but the State has banned that technology.

 Conclusion

I believe that there is a tendency for those who do not have a strong case to argue louder.   In my first post  I charitably argued that the coalition just did not understand carbon pricing.  The hyperbole and exaggerations in this letter suggest that they are aware that the case for a carbon pricing scheme in a single sector in a limited area is tenuous at best, despite the attractiveness of the theory.  This letter raises the ante and invokes a tenuous link between the real problem of COVID-19 and the NYISO carbon pricing proposal.

The fact is that New York State is in trouble because of the economic consequences of the COVID-19 response and it is not clear we can afford the cost of this program.  The proposed carbon pricing scheme increases the cost of electricity by incorporating the social cost of carbon.  Generators who emit carbon dioxide will pay that cost and those revenues are supposed to be returned to consumers.  However, the carbon price will increase the prices paid to the members of the Carbon Free New York coalition and that money will not be returned to the consumer.  It is supposed to “support investments in green jobs and accelerate the build-out of renewable energy infrastructure, putting thousands back to work while safeguarding the health of our environment”.  Cynic that I am, I doubt that much of the additional profits made by the coalition will actually be invested as they claim.

My work has shown that carbon pricing proposals have practical limitations and that if you want to reduce emissions direct investments are more effective.  Nothing in the letter or on the Carbon Free New York website prove otherwise.