In the spring of 2021, the New York state Senate introduced the Climate and Community Investment Act (CCIA). Coming on the heels of the Texas energy debacle one might think that New York politicians would not propose any changes to energy and environmental laws until the causes of that disaster were understood or would at least make implementation contingent upon feasibility studies to determine if the ambitious goals of this legislation don’t risk a similar outcome in New York. This post on the proposed amendment to Article 19 is one of a series of posts about this legislation. Posts to date include an overview, summaries of the climate pollution fee and legislative findings, and a description of the Climate and Community Investment Authority.
I have written extensively about implementation of the Climate Leadership and Community Protection Act (CLCPA) because I believe it will adversely affect affordability and reliability as well as create more environmental harm than good. The CCIA will make those impacts worse. 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.
The sponsor memo for this proposed regulation lists specific provisions in the proposed legislation. I prepared an annotated version of the draft bill that includes internal links to the sections of the bill corresponding to those provisions. The summary of Senate Bill S4264A states:
Enacts the climate and community investment act; prioritizes the allocation of public investments in disadvantaged communities; addresses climate change challenges through the expansion and growth of clean and renewable energy sources; adopts best value requirements for the solicitation, evaluation and award of renewable energy projects; establishes a community just transition program; establishes a climate pollution fee and a household and small business energy rebate; and creates the climate and community investment authority.
Value of Pollution and Mitigation Program
This post describes the proposed amendment to Article 19 of the Environmental Conservation Law that adds a new title: Value of Pollution and Mitigation Program. The title includes the following sections: methodology and valuation of pollution price index, implementation of fees, allocation of revenues,
inventory, transportation pollution, and reporting. I will address each in turn.
The first section specifies a methodology for developing a pollution price index. A year after the effective date of the law the Climate and Community Investment Authority is required to develop a social cost index and methodology for regulated pollutants. The Authority is supposed to consider, at a minimum: “(a) public health impacts, including but not limited to: loss of life, loss of welfare, and employment impacts; (b) impacts to public and private property, including agricultural property; (c) impacts to ecosystems and the ability of ecosystems to provide ecosystem services; and (d) the full life-cycle of impacts”.
This apparently has its roots in the social cost of carbon approach to valuing social costs. There are issues with this. In the first place, while there is no equivalent Federal pollution social price index, the National Ambient Air Quality Standards in the Clean Air Act address health and welfare impacts. I believe that aside from the full life cycle of impacts requirement, these considerations are covered by the existing Clean Air Act process. In addition, to do this right requires a significant investment of resources to attract the subject matter experts necessary to develop a defensible index.
The next section implements fees based on the social cost indices developed in the previous section. New York already has a fee on regulated pollutants which are used to fund the Title V permitting process among other programs. It is not clear to me whether the legislation proposes to levy fees on sources not currently required to report detailed emissions reports. Note that as New York pollution has fallen the money necessary to maintain the permitting programs has become inadequate to cover those costs.
The revenues generated by the fee are allocated to more than the Title V permitting program. The proposed legislation states that “forty percent of funds shall go to the environmental justice office of the authority; twenty percent of funds shall go to expanding, operating and maintaining the New York state Title V emissions inventory within the department; twenty percent of funds shall go to expanding, operating and maintaining air quality monitoring, including ambient air quality monitoring and point source monitoring within the department; and twenty percent of funds shall be allocated at the discretion of the authority, based on the needs of the authority”. The proposal specifically states that “No funds shall be allocated to fund police, prisons or related infrastructure.” The annual per ton fee is established under 6 NYCRR 482-2. As of January 1, 2020 the fee per ton emitted ranges between $60 and $90 depending on the total emissions of the source. If the revenues provide equivalent funding for the Title V program, then the overall rates would be five times higher.
In my post on the Climate and Community Investment Authority I included some estimates of the revenues expected from this law and necessary to implement the CLCPA. According to this article, New York “will need an annual investment of about $31 billion per year in combined private and public spending to bring CO2 emissions down to 100 million tons by 2030, a 2017 study by economists at the University of Massachusetts-Amherst found. That equates to two percent of the state GDP. At a recent hearing a figure of $15 billion a year in revenues was mentioned. WHAM reports that the carbon tax alone would bring in $2.3 billion a year. According to the 2019 Title V emission inventory there were 41,084,926 tons of CO2 emitted and at $55 per ton that matches the news report. However, the total air emissions excluding CO2 in the 2019 Title V inventory are only 79,082 tons. The largest Title V permit fee is $90 per ton and that regulation caps the total tons. Note that 79,082 tons times $90 is $35.6 million, far short of the $15 billion. Therefore, in order to reach the $15 billion estimate the cost per ton of air pollutants would have to be $161,104 per ton. I conclude that I have no idea what the revenues will be other than “a lot”.
In order to implement the fees affected sources have to report their emissions. The Title V program already has an emissions reporting system in place. The proposed law defines “Regulated air contaminant” as the following:
a. oxides of nitrogen;
b. volatile organic compounds;
c. sulfur dioxide;
e. carbon monoxide;
f. any class I or II substance subject to a standard promulgated pursuant to section 7671 of the Act;
g. any other air contaminant for which a national ambient air quality standard has been promulgated; or
h. any air contaminant that is regulated under section 7411 or 7412 (b) and (c) of the Act and which the commissioner has listed in regulation. The department may use emergency rulemaking pursuant to subdivision six of section two hundred two of the state administrative procedure act if necessary, in order to timely list such air contaminants.
While most of the major pollutants are already included in the existing inventory, I am not sure that it includes them all. One final note – DEC issues three types of air permits that have different reporting requirements. The naïve response is that not requiring reports is a loophole that subjects citizens of the state to undue risk. The reality is that there are so many small sources with so few total emissions that the time and effort necessary to report and process is unnecessary because there is no adverse risk.
There also is a provision in the law to “make the Title V emissions inventory more accessible to the public including, but not limited to, taking action to release the related data, analysis and assumptions of agency websites.” Frankly until I researched this post, I was not aware that the data were available but a quick internet search found the Title V emissions inventory data which fulfills the criterion for a publicly available inventory. The analysis and assumptions criteria are more difficult to address. I was responsible for submitting the emission statements and did the analysis because I had the background to do it. It was the one reporting task that I dreaded every year because documenting the analysis and assumptions was tedious and difficult to do in sufficient detail so that the Department of Environmental Conservation (DEC) technical staff could understand how my numbers were derived. This legal requirement reminds me of managers who would request information from different people until they got the answer they wanted or understood. Unless the emissions are directly measured at a source, emissions are estimated by multiplying an activity factor (e.g., the amount of the substance used) times an Environmental Protection Agency emission factor (derived from emissions testing programs). Is there really a need for the public to have that level of detail available? Isn’t sufficient to rely on the technical staff at the DEC to review the submitted documentation and confirm that the submittals are reasonable?
This title also addressed transportation pollution. In addition to my experience developing emission factors and using stationary source emission inventories, I also worked with transportation emissions. The transportation pollution aspects of this section entirely replicate the EPA Clean Air Act process apparently because the authors don’t like the current situation. I have sympathy for their concerns because I believe that in urban areas transportation sources are the primary source of air pollution. However, at the end of the day I doubt that this legislation can do anymore than what DEC is currently doing. There has been a long history of California attempting to impose stricter emission limits than the national levels and continuous litigation and settlement to resolve the differences. It could end up with car companies simply not offering cars in New York because of state limits and then the issue becomes one of enforcement at the borders to keep non-compliant cars out.
There also is a reporting requirement to document the implementation of the policies. The report must address reduction effectiveness of the fees, an overview of social benefits, compliance costs, and administrative costs, whether the fees are “equitable, minimize costs and maximize the total benefits to the state”, and include recommendations for policy changes and future regulatory actions. I agree that these are appropriate requirements but believe that it would be appropriate to do a feasibility report before implementing the requirements. I don’t think that any added costs to energy can ever be “equitable” because energy use is inelastic and extra costs will always disproportionally impact those least able to pay the most. A transparent and unbiased feasibility study could very well find other flaws that indicate that this agenda-driven is poor policy. In my opinion, many of the “wish list” components of this law would not stand up to scrutiny.
The social costs of pollution mandate included in the legislation is a naïve requirement. I believe that the authors heard about social costs someplace, thought it sounds good, believe it probably can be used to their advantage so they threw it into the regulation even though they don’t understand it fully. I believe the concept, if not the jargon, is already included in the Clean Air Act. The National Ambient Air Quality Standards are established based on health and welfare impacts at levels designed to protect the public. The rationale for this mandate comes back to the authors’ belief that existing air quality regulations don’t give us the answer we want so we will make up our own regulations.
The social costs approach is also included because it justifies the need for a pollution fee. Dr. Steven McKitrick evaluated carbon pricing policies in Canada that are the template for this approach. He explained that “a beneficial outcome is not guaranteed” because certain rules must be observed in order for social cost pricing to reduce emissions without unduly hurting the economy. He believes that social cost pricing only works in the absence of any other emission regulations. “If pricing is layered on top of an emission-regulating regime already in place (such as emission caps or feed-in-tariff programs), it will not only fail to produce the desired effects in terms of emission rationing, it will have distortionary effects that cause disproportionate damage in the economy.” As I explained before, nearly everything in this legislation replicates existing programs with established emission limits. The only exception is changing the pollutant fees to a flat fee to one indexed to a social cost parameter.
Ultimately, the Value of Pollution and Mitigation Program section of the CCIA replicates many aspects of existing programs in the Clean Air Act and New York regulations. I think the authors don’t fully understand existing regulations or don’t care because they are not getting the answer they want which is zero impacts. This law will impose reporting burdens and added costs to any sources that emit anything to the atmosphere and major commitments by NY agencies to implement a new regulatory reporting system. I believe that those burdens are all redundant because existing programs address their concerns. I also think that the authors do not understand the magnitude of the effort needed to develop air pollution social cost indices or that their plan will not work as they expect.