New York Value of Carbon Calculation of Benefits Issue

I have been trying to get involved and stay involved in the Climate Leadership and Community Protection Act (CLCPA) implementation process over the past year.  There are many pieces and parts to this process so keeping track of everything much less providing comments is difficult for stakeholders and New York agency staff.  I readily admit that agency staff also have a challenge keeping track of all the components and deciding priorities for what needs to be addressed and when.  This post documents one particular issue that I have raised and the lack of response.

I have written extensively on implementation of the CLCPA closely because its implementation affects my future as a New Yorker.  I have described the law in general, evaluated its feasibility, estimated costs, described supporting regulations, listed the scoping plan strategies, summarized some of the meetings and complained that its advocates constantly confuse weather and climate.  The opinions expressed in this post do not reflect the position of any of my previous employers or any other company I have been associated with, these comments are mine alone.

Background

One key component is the New York State guidance document Establishing a Value of Carbon, Guidelines for Use by State Agencies (the “Guidance”).  My particular concern is that the Guidance includes a recommendation how to estimate emission reduction benefits for the strategies that will be used to justify costs.  I believe that the guidance approach is wrong because it applies the social cost multiple times for an emission reduction.  As documented earlier, I sent an email to the DEC Climate Office explaining that the example they used to estimate emission reduction benefits claims that the value of carbon should be calculated for each year.  However, the standard damages approach value is the net present benefit of reducing carbon dioxide emissions by one ton because the calculation methodology estimates benefits out to 2300.  It is incorrect to claim credits for those benefits more than once.

I did not get any response for a couple of weeks and so I mentioned it as part of the article’s description of a general lack of responsiveness to comments on the CLCPA.  Soon after publishing the article I did get a response.  Dr. Suzanne Hagel said that it was “really useful” and that it would be raised with others as they “develop the accounting for the Scoping Plan”.  She went on to say that “I expect that we will be making additional updates to the Value of Carbon guidance and this would be one update that could be addressed”.

Problems

On February 26, 2021 the integration analysis technical resources that will be used to develop the scoping plan for the CLCPA were updated:

They describe the inputs and assumptions for the economy wide analysis of energy supply, energy demand and other aspects of the economy affected by the CLCPA.   My problem is that in the following Cost Accounting Philosophy from the Draft Inputs and Assumptions Summary it notes that “Value of avoided GHG emissions will be calculated based on guidance developed by DEC”. 

My concern is that if the error I identified is not corrected then the integration analysis work will have to be revised.  It is better to get this cleared up sooner rather than later so I sent an email suggesting that this issue should be addressed now.  After waiting two weeks for a response, I prepared this article.

Since the time I sent the email I found another report that uses the guidance as written, that is to say wrong.  A new report “The Fossil Fuel End Game, A frontline vision to retire New York City’s peaker plants by 2030” is “the first detailed strategic and policy road map to retire and replace an entire city’s fossil-fuel peaker power plants”. The report also “highlights the alarming economic, environmental, and social costs of New York City’s existing peaker plants”.  Those calculated costs use the Value of Carbon guidance as published and incorrectly claim social benefits every year for the carbon dioxide reductions proposed.  Over 88% of the purported economic impact of peaker plants in New York City is accounted for by the incorrect emission reduction benefits methodology.

Discussion

In my experience if I find something directly contradicting regulatory guidance, I get second opinions.  In this case, I documented contact with Dr. Richard Tol, Professor of the Economics of Climate Change at Vrije Universiteit Amsterdam and a Professor of Economics at the University of Sussex who has direct experience estimating the value of carbon or social cost of carbon (SCC).  He graciously responded and explained that “The SCC should not be compared to life-time savings or life-time costs (unless the project life is one year).”  I also checked with colleagues who supported my arguments.  I have not mentioned it to DEC but I even went so far as to contact an acquaintance at Resources for the Future about the recommended methodology and after a couple of email exchanges he also agreed that, in this context, it is incorrect to claim GHG emission reduction credits annually.  My point is that I am confident that the proposed methodology is incorrect and must be changed.

Conclusion

I would like to think that all the work I do to provide meaningful comments is appreciated by agency staff.  One way to show that appreciation would be to acknowledge receipt of comments and respond to the issue raised if there is a time sensitivity.  Unquestionably, in many cases the response is likely to be thank you but we disagree.  As long as the record shows my comment and their response explaining why they disagree the public stakeholder process is working.

Once in a while however a real problem is identified.  It is disappointing and not in the best interests of the stakeholders when problems are not addressed in a timely fashion.  In this instance this issue needs to be resolved sooner rather than later so that the consultants responsible for the integration analysis don’t end up having to re-do analyses and documentation so there is a time sensitivity concern.  In addition, every analysis that incorporates the incorrect guidance includes an error that reduces the credibility of the analysis and could affect the recommendations.  Hopefully I will be able to update this post soon to note that the issue has been addressed.

Author: rogercaiazza

I am a meteorologist (BS and MS degrees), was certified as a consulting meteorologist and have worked in the air quality industry for over 40 years. I author two blogs. Environmental staff in any industry have to be pragmatic balancing risks and benefits and (https://pragmaticenvironmentalistofnewyork.blog/) reflects that outlook. The second blog addresses the New York State Reforming the Energy Vision initiative (https://reformingtheenergyvisioninconvenienttruths.wordpress.com). Any of my comments on the web or posts on my blogs are my opinion only. In no way do they reflect the position of any of my past employers or any company I was associated with.

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