The Climate Leadership and Community Protection Act (Climate Act) establishes a “Net Zero” target by 2050 whereby greenhouse gas emissions in New York will be reduced as much as possible and any remaining emissions offset by sequestering carbon. The underlying premise of the Climate Act was that transitioning the New York energy system to Net-Zero by 2050 was only a matter of political will. As a result, the greenhouse gas emissions targets were chosen without doing a detailed engineering analysis to determine how it might work, whether the technology is available for it to work, and how much it could cost. This post discusses the State’s first description of cost.
I have written extensively on implementation of the Climate Act because I believe the ambitions for a zero-emissions economy outstrip available technology such that it will adversely affect reliability and affordability, risk safety, affect lifestyles, will have worse impacts on the environment than the purported effects of climate change in New York, and cannot measurably affect global warming when implemented. 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 Climate Action Council is responsible for preparing the Scoping Plan that will “achieve the State’s bold clean energy and climate agenda”. Starting in the fall of 2020 seven advisory panels developed recommended strategies to meet the targets that were presented to the Climate Action Council in the spring of 2021. Those recommendations were translated into specific policy options in an integration analysis by the New York State Energy Research and Development Authority (NYSERDA) and its consultants. An overview of the results of this integration analysis were presented to the Climate Action Council at two October meetings and has since been updated. This analysis forms the basis of the draft Scoping Plan that is supposed to be released to the public at the end of the year.
The integration analysis models the complete New York energy sector. The modeling includes a reference case that projects how the economy and energy sector will evolve out to 2050 in the absence of any Climate Act policies or mandates. The following slide lists the four mitigation scenarios that were developed to compare with the reference case. Societal costs are available in Integration Analysis – Benefits and Costs Presentation on the resources section of the Climate Act webpage for scenarios 2 and 3.
Previously I wrote about my first impression of the costs and benefits presented, followed up with documentation of the proposed costs, and, more recently, I described how Climate Act cost to consumers has become a topic of discussion for the Climate Action Council. The authors of the Scoping Plan have argued that they cannot estimate specific costs to consumers, including ratepayer impacts. At this point the revised staff draft Scoping Plan will make it clear that as specific policies are developed that they will include an assessment of ratepayer or consumer impacts as early as possible. In the meantime, this post updates the values I calculated in my documentation of the proposed costs post in the expectation that consumer cost impact information will be absent in the Scoping Plan.
The Integration Analysis – Benefits and Costs Presentation has several slides that discuss costs. The slides explain that the “Incremental costs in all scenarios are primarily driven by investments in buildings and the electricity system”. The results presented are net costs that “offset total costs with avoided fossil fuel expenditures due to efficiency and fuel-switching relative to the Reference Case”. According to the authors they were able to analyze what the incremental cost would be to society. For example, they estimated the cost to replace a oil-fired furnace with a heat pump, determined the number of oil-fired furnaces that need to be replaced to meet the emission targets, and then multiplied the two numbers to get the direct costs. Their analysis did something similar for every energy-related aspect of society.
The first cost slide lists the net direct cost for Scenario 2: “Strategic use of low carbon fuels” as $340 billion and Scenario 3: “Accelerated transition away from combustion” as $280 billion. As an aside, note that the Climate Act Resources page documents the key results, drivers, and assumptions for the Integration Analysis. However, to the best of my knowledge, the costs numbers are not documented in those resources.
The breakdown of the Scenario 2 costs in the next slide states that the net direct costs in the early years are “on the order of $10 billion per year, equivalent to 0.6% of GSP in 2030” and that in the later years are “on the order of $50 billion per year, equivalent to 2.0% of GSP in 2050”.
The breakdown of the Scenario 3 costs in the next slide states that the net direct costs in the early years are “on the order of $10 billion per year, equivalent to 0.7% of GSP in 2030” and that in the later years are “on the order of $50 billion per year, equivalent to 2.0% of GSP in 2050”. Recall that the Scenario 2 total cost was $340 billion and the Scenario 3 cost was $280 billion. My impression is that the detailed breakdown for Scenario 2 would therefore be greater than the breakdown for Scenario 3 but in 2030 the equivalent Gross State Product (GSP) value is greater for Scenario 3. Without additional documentation it is impossible to speculate about what is going on.
Costs to New Yorkers
I cannot relate to numbers as a percentage of GSP or how a number as large as $10 billion per year relates to the state. One simple way to think about it is to divide those costs by the number of people in the state to determine a cost per person. The Integration Analysis Key Drivers and Outputs spreadsheet GSP tab lists values used for the GSP and population from 1990 to 2050. I divided the $10 billion in 2030 and $50 billion in 2050 values by the population for those years to get an annual cost per New York resident. Dividing that value by 12 gives a monthly number per person and multiplying by four gets a monthly value for a family of four. The net direct cost for the scenarios works out to $167 per month in 2030 and $807 per month in 2050 for a family of four.
On October 26,2021, the AP-NORC Center and the Energy Policy Institute at the University of Chicago (EPIC) released the results of a survey that claimed that a majority of Americans regard climate change as a problem of “high importance”. It also included survey questions asking whether respondents would support, oppose, or neither support or oppose a law that imposed “a fee on carbon to combat climate change”. The survey question asked “If the law passed, it would increase the average amount your household pays each month for energy, including electricity, heating gas, and gasoline or diesel for your car by a total of X dollars per month” where respondents were randomly assigned a $1, $10, $20, $40, $75, or $100 cost increase. For a $1 per month increase, 45% would support, 30% would oppose, and 25% would neither support or oppose. For a $100 per month increase, 20% would support, 62% would oppose, and 18% would neither support or oppose.
The Integration Analysis lists societal net direct costs for all aspects of the Climate Act transition to Net-zero. Those costs include changes to the energy system, including electricity, heating gas, and gasoline or diesel for your car, as well as all the other changes needed for the transition such as switching homes to all electric. I can only conclude that $167 per month for a family of four in the early years of the Climate Act would be opposed by an even greater margin than the 62% opposed in the survey and that the $807 per month cost increase would be opposed by a much greater margin.
It gets worse. The societal net direct costs only include money spent for the transition technology and operating expenses. In order to convert societal costs to direct costs to consumers you have to determine how to distribute those costs through, for example: ratepayer programs, State tax credits or incentives or Federal government support. No matter how the costs are distributed, each approach adds transactional costs and inefficiencies not reflected in the total societal cost.
But that’s not all because when politicians get involved with money bad things generally get worse. For example, consider New York Senate Bill S4264A, better known as the Climate & Community Investment Act (CCIA) which explicitly is designed to provide funding for the Climate Act by establishing a fee on greenhouse gas emissions. It was proposed last year, failed to pass, and is up for consideration in this legislative session. I did several articles earlier this year and recently wrote another one about the fee structure. Unfortunately, I never wrote about the distribution of proceeds. Briefly, the proposed law would set up the Climate and Community Investment Authority which would itself add administrative cost. The Authority would establish the Community Just Transition Fund for 33% of the fees collected, the Climate Jobs and Infrastructure Fund for 30% of the fees collected, the Low-income and Small Business and Household Energy Rebate Fund for 30% of the fees collected, and the Worker and Community Assurance Fund for 7% of the funds collected after the first year. Assuming that all of the money in the Climate Jobs Infrastructure Fund and the Community Just Transition Fund go to the expenses estimated necessary for the transition, over a third of the money collected does not. If the CCIA were the only mechanism to pay for the Climate Act costs, then the $167 per month in 2030 shoots up to $265 a month and in 2050 the cost is over $1,200 a month due to the CCIA funding mandates.
New York State is going to test Roger Pielke’s Iron Law of Climate: “While people are often willing to pay some price for achieving climate objectives, that willingness has its limits”. I have never seen a public opinion survey that contradicts the AP-NORC Center and EPIC survey that found that the majority of people oppose a law that imposes a monthly cost to a household of four of $100. The surveys usually don’t ask about costs higher than that. It is reasonable to assume when all the costs are accounted for the Climate Act transition that costs will be more than double the highest value in the survey. Ideally it would be great to have a refined estimate of the consumer cost burden. However, it is clear even using the societal costs that they would be too large for most New Yorkers.