The New York State Department of Environmental Conservation (DEC) and New York State Energy Research and Development Authority (NYSERDA) are hosting webinars designed “to inform the public and encourage written feedback during the initial phase of outreach” for New York’s proposed cap and invest program. When I get around to submitting my feedback one of my major themes will be the need to do a feasibility analysis to ensure that the resources necessary to enable the reductions required to meet the net-zero transition can be deployed as necessary. This post addresses this concern.
I have been following the Climate Leadership & Community Protection Act (Climate Act) since it was first proposed. I submitted comments on the Climate Act implementation plan and have written over 300 articles about New York’s net-zero transition. I have extensive experience with air pollution control theory, implementation, and evaluation having worked on every cap-and-trade program affecting electric generating facilities in New York including the Acid Rain Program, RGGI, and several Nitrogen Oxide programs since the inception of those programs. I follow and write about the RGGI cap and invest CO2 pollution control program so my background is particularly suited for this proposal. I have devoted a lot of time to the Climate Act because I believe the ambitions for a zero-emissions economy embodied in the Climate Act outstrip available renewable technology such that the net-zero transition will do more harm than good. 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.
Climate Act Background
The Climate Act established a New York “Net Zero” target (85% reduction and 15% offset of emissions) by 2050 and an interim 2030 target of a 40% reduction by 2030. The Climate Action Council is responsible for preparing the Scoping Plan that outlines how to “achieve the State’s bold clean energy and climate agenda.” In brief, that plan is to electrify everything possible and power the electric grid with zero-emissions generating resources by 2040. 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 write a Draft Scoping Plan. After a year-long review the Scoping Plan recommendations were finalized at the end of 2022. In 2023 the Scoping Plan recommendations are supposed to be implemented through regulation and legislation. The cap and invest initiative is one of those recommendations.
DEC and NYSERDA have developed an official website for cap and invest. It states:
An economywide Cap-and-Invest Program will establish a declining cap on greenhouse gas emissions, 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. Cap-and-Invest will ensure the state meets the greenhouse gas emission reduction requirements set forth in the Climate Leadership and Community Protection Act (Climate Act).
I have written other articles that provide background on NYCI. I recently posted a Commentary overview for the New York Cap & Invest (NYCI) program that was written for a non-technical audience. In late March I summarized my previous articles on the New York cap and invest proposal in a post designed to brief politicians about the proposal if you want more technical information. There also is a page that describes all my carbon pricing initiatives articles that includes a section listing articles about the New York Cap and Invest (NYCI) proceeding.
The Need for a Safety Valve
The NYCI implementation plan is to “Advance an economywide Cap-and-Invest Program that establishes a declining cap on greenhouse gas emissions, limits potential costs to economically vulnerable New Yorkers, invests proceeds in programs that drive emission reductions in an equitable manner, and maintains the competitiveness of New York industries.” In my opinion, the State has not considered that there will be significant consequences if the dynamics between these stated goals are not resolved. There is no indication that tradeoffs between these goals are even being considered. Furthermore, implementation of this sophisticated and complicated economy-wide program is handicapped by the aspirational legislative constraints on timing and targets.
If the influential book Making Climate Policy Work had been considered by the Climate Action Council or Governor’s Office I believe that there would be substantive changes to the plan. Authors Danny Cullenward and David Victor explain how the politics of creating and maintaining market-based policies render them ineffective nearly everywhere they have been applied. They recognize the enormity of the challenge to transform industry and energy use on the scale necessary for deep decarbonization. They write that the “requirements for profound industrial change are difficult to initiate, sustain, and run to completion.” Because this is hard, they call for “realism about solutions.”
NYCI proponents point to the “success” of the Regional Greenhouse Gas Initiative (RGGI) and presume that their proposed program will work as well. I evaluated the Making Climate Policy Work analysis of RGGI. I agree with the authors that the results of RGGI and other programs suggest that programs like the NYCI proposal will generate revenues. However, we also agree that the amount of money needed for decarbonization is likely more than any such market can bear. The problem confronting the Administration is that in order to make the emission reductions needed I estimate they have to invest between $15.5 and $46.4 billion per year. The first issue that NYCI implementation must address is the revenue target relative to what is needed for investments to meet the Climate Act 2030 GHG emission reduction target.
The use of NYCI as a compliance mechanism is also a problem. The NYCI webinars have not acknowledged or figured out that the emission reduction ambition of the Climate Act targets is inconsistent with the technological reality of the Climate Act schedule. Because GHG emissions are equivalent to energy use, limiting GHG emissions before there are technological solutions that provide sufficient zero-emissions energy means that compliance will only be possible by restricting energy use. The second issue that NYCI implementation must address is a feasibility analysis whether there will be sufficient allowances to avoid limits on power plant operations, gasoline availability, and natural gas for residential use for the 2030 Climate Act 40% GHG emission reduction target. This issue is the focus of this post.
There is no excuse to not include a safety valve that could make changes to the schedule based on the results of a feasibility analysis. The NYCI webinars have not acknowledged that there are conditions relative to meeting the Climate Act targets, but there is one available. New York Public Service Law § 66-p. “Establishment of a renewable energy program” has safety valve conditions for affordability and reliability that are directly related to the two issues described above. § 66-p (4) states: “The commission may temporarily suspend or modify the obligations under such program provided that the commission, after conducting a hearing as provided in section twenty of this chapter, makes a finding that the program impedes the provision of safe and adequate electric service; the program is likely to impair existing obligations and agreements; and/or that there is a significant increase in arrears or service disconnections that the commission determines is related to the program”. If the feasibility analysis finds that reliability or affordability issues are likely due to implementation issues, then this could be used to modify the schedule.
California Uncertainty Analysis
One of the principles of NYCI is Climate Leadership which is defined as: “Catalyze other states to join New York, and allows linkage to other jurisdictions”. In order to link to other jurisdictions, it is necessary to be consistent with their cap and invest programs. The California Air Resources Board (CARB) has a GHG emissions cap-and-trade program that has been in place since 2019. Even though the Climate Act differs from the California plan because the Climate Act requires that all GHG emissions must be accounted for rather offering some exemptions, I am disappointed that there does not seem to be much sign that New York is considering using the methodological approaches used by California.
Last year CARB prepared a 2022 Scoping Plan for Achieving Carbon Neutrality (2022 Scoping Plan) that “lays out a path to achieve targets for carbon neutrality and reduce anthropogenic greenhouse gas (GHG) emissions by 85 percent below 1990 levels no later than 2045, as directed by Assembly Bill 1279.” This is one example where New York’s efforts could be informed by the California process and it addresses my feasibility concern. The California Air Resources Board 2022 Scoping Plan issued in November 2022 included a 2030 Uncertainty Analysis. The report explains that the implementation effort requires additional efforts beyond those already in place but notes:
There is also uncertainty that the current mix of policies (regulations, incentives, and carbon pricing) will be sufficient to achieve California’s 2030 target, at least 40% below 1990 greenhouse gas (GHG) emissions. Uncertainty is an inherent part of emissions forecasting and modeling – there is no model capable of predicting the future with perfect accuracy. As the on-going global COVID-19 pandemic and recovery has demonstrated, unexpected events can dramatically impact human welfare, economic activity, and GHG emissions.
In this analysis, we identify the drivers of uncertainty and analyze the potential impact of implementation delays on GHG emissions in 2030. That is, what if delayed implementation of actions as defined in the Scoping Plan Reference Scenario fail to achieve anticipated GHG reductions by 2030? This uncertainty analysis focuses on progress in achieving the 2030 target of at least 40% below 1990 levels by 2030 and does not include an assessment of the uncertainty faced in implementing the Scoping Plan scenario for achieving carbon neutrality by 2045.
We construct two scenarios that capture the largest emissions impact in 2030 from delays in implementation under the Scoping Plan Reference Scenario: delayed renewable capacity and delayed transportation electrification. We quantify the magnitude of the emissions impact under these two scenarios, highlighting the importance of these two actions in achieving the reductions outlined in the Scoping Plan Reference Scenario to hit California’s 2030 climate target.
This is exactly what I believe is necessary for NYCI. The report notes that:
The main drivers of future GHG emissions – technology costs, energy prices, macroeconomic conditions, and policy implementation – are not known with perfect certainty. Modelers make informed assumptions about these drivers and estimate a range of GHG emissions based on historic, current, and potential future trends.
Unanticipated changes in these variables impact GHG emissions, however they are largely outside the control of policy makers. In just the past few years, we have seen global geopolitical and macroeconomic events dramatically alter energy prices, technology costs, and GHG emissions in California. The impacts of these events are still being felt and will continue to impact California’s economy and emissions – but are largely outside the control of the State.
The uncertainty analysis considered two scenarios: one for delayed renewable development and another for delayed transportation electrification. The delayed renewable capacity scenario description notes:
In the Scoping Plan Reference Scenario, California has a 38 MMT GHG constraint in the power sector and achieves a 60% Renewable Portfolio Standard (RPS) by 2030 as required in SB 100. Under the delayed renewable capacity scenario, we construct an emissions trajectory from 2022 to 2030 under a 5-year delay in renewable capacity including infrastructure for existing renewable facilities as well as delays in permitting and construction for new renewable generation and transmission.
The delayed transportation electrification scenario description explains:
In the transportation sector, there are two assumptions driving emissions in 2030 in the Scoping Plan Reference Scenario- per-capita vehicle miles travelled (VMT) are reduced 4% below 2019 levels by 2045 and 40% of light-duty vehicle (LDV) sales are zero emission vehicles (ZEV) by 2030 (with minimal medium-duty and heavy-duty vehicle decarbonization) aligned with California Institute for Transportation Studies (ITS) BAU scenario. In California, per-capita VMT increased from 2017 to 2019. Therefore, the assumption that VMT decreases, even marginally, without additional action is a risk to achieving the 2030 emissions under the Scoping Plan Reference Scenario. However, the overall emissions impact in 2030 of failing to achieve the 4% per capita VMT reduction is relatively small under the Scoping Plan Reference Scenario as compared to the emissions impact of near-term transportation electrification.
The analysis concludes:
California’s path to carbon neutrality by 2045 is predicated on achieving the emission reductions outlined in the Scoping Plan Reference Scenario. We find that delaying renewable capacity by 5 years will increase California emissions by 8% in 2030 while delaying vehicle electrification will increase emissions by 6% in 2030. While the magnitude of these values may seem small, the risks are high. 2030 is just over seven years away and the gap to achieving the sector targets in the Scoping Plan Reference Scenario are large.
These emission reductions outlined in the Scoping Plan Reference Scenario are not guaranteed and while some of the risk and uncertainty is global and largely exogenous, there are risks associated with implementation. These risks can potentially be reduced or eliminated with targeted policy interventions. While in this analysis we have highlighted the impact of delayed renewable capacity and transportation electrification, there are uncertainties in each implementation assumption across California’s economic sectors. The magnitude of the emissions impact will vary as will any potential policy or regulatory intervention.
This analysis has focused on the risks associated with California achieving the GHG emissions outlined in the Scoping Plan Reference Scenario. Any increase in emissions on the pathway to 2030 will impact California’s ability to achieve carbon neutrality by 2045. In addition, the technologies and fuels needed to achieve carbon neutrality will also face significant uncertainties in the future. While outside the scope of this analysis, the same implementation risks discussed in relation to renewable capacity may be relevant to emerging technologies like carbon dioxide removal or carbon capture and renewable hydrogen production.
Discussion
The California analysis found that delays in renewable energy deployment would increase emissions 8% (~ 28 million metric tons) and vehicle electrification would increase emissions by 6% (~21 million metric tons). These are significant emission increases. If there are similar issues relative to the New York implementation plans, then it would threaten the compliance with the cap.
The NYCI implementation plan includes a goal for a declining cap on greenhouse gas emissions that provides compliance certainty. In my opinion, the State has not considered that there will be significant consequences related to the use of NYCI as a compliance mechanism if the deployment of zero-emissions resources necessary to make the reductions is delayed. The Hochul Administration has not acknowledged or figured out that the emission reduction ambition of their Climate Act targets is inconsistent with technology reality. Because GHG emissions are equivalent to energy use, limiting GHG emissions before there are technological solutions that provide zero-emissions energy means that compliance will only be possible by restricting energy use.
I do not understand why Climate Act proponents don’t acknowledge that restrictions on energy use because there are insufficient allowances available would catastrophically impact their ambitions. It is indisputable that New York GHG emissions are less than one half of one percent of global emissions and global emissions have been increasing on average by more than one half of one percent per year since 1990. I would not want to argue to the public that they cannot have gasoline for their cars or fossil fuels for their homes because the allowances ran out attempting to reduce New York emissions a fraction of the total when the total emissions are globally irrelevant. It is not necessarily inappropriate to do something but disallowing changes to the schedule based on feasibility or the reality that emissions are greater than the aspirational targets leading to artificial energy shortages will surely cause massive pushback by most New Yorkers.
Conclusion
The allure of a source of revenues and compliance certainty using climate policies that apparently have worked in the past led the Council and Governor to put the cart before the horse with their NYCI recommendations. The Cap-and-Invest Program recommended by the Climate Action Council’s final Scoping Plan and proposed in Governor Kathy Hochul’s 2023 State of the State Address and Executive Budget has not paid adequate attention to what made previous policies work and whether there are significant differences between the Climate Act requirements and previous policy goals in those other programs that might impact NYCI. There are provisions for a safety valve that enable adjustments to the schedule. The recent announcements that there are delays in the offshore wind projects suggests that there are potential issues. Failing to plan and incorporate a feasibility analysis to determine the reasonableness of the deployment of wind and solar resources necessary to meet the targets relative to the Climate Act schedule will likely lead to serious problems in the future.
Pragmatic Environmentalist of New York 