In the first two months of 2024 the New York State Department of Environmental Conservation (DEC) and the New York Energy Research & Development Authority (NYSERDA) worked on the New York Cap-and-Invest (NYCI) Program stakeholder engagement process requesting comments on the pre-proposal outline of the regulations. Since then, there have not been any signs of progress. This post describes my recent letter to the editor published at Syracuse.com.
I have followed the Climate Leadership & Community Protection Act (Climate Act)since it was first proposed, submitted comments on the Climate Act implementation plan, and have written over 400 articles about New York’s net-zero transition. The opinions expressed in this article 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.
Overview
The Climate Act established a New York “Net Zero” target (85% reduction in GHG emissions and 15% offset of emissions) by 2050. It includes an interim 2030 reduction target of a 40% reduction by 2030 and a requirement that all electricity generated be “zero-emissions” by 2040. The Climate Action Council (CAC) was responsible for preparing the Scoping Plan that outlined how to “achieve the State’s bold clean energy and climate agenda.” In brief, that plan is to electrify everything possible using zero-emissions electricity. 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 develop the Draft Scoping Plan outline of strategies. After a year-long review, the Scoping Plan was finalized at the end of 2022. Since then, State agencies and the legislature have been attempting to implement the plans.
Cap-and-Invest
The Climate Action Council’s Scoping Plan recommended a market-based economywide cap-and-invest program. The program works by setting an annual cap on the amount of greenhouse gas pollution that is permitted to be emitted in New York: “The declining cap ensures annual emissions are reduced, setting the state on a trajectory to meet our greenhouse gas emission reduction requirements of 40% by 2030, and at least 85% from 1990 levels by 2050, as mandated by the Climate Leadership & Community Protection Act (Climate Act).” In addition to the declining cap, it is supposed to 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. The stakeholder engagement process was supposed to refine the proposal, DEC will and NYSERDA will propose regulations by summer, and the final rules are supposed to be in place by the end of the year.
Late last year DEC and NYSERDA released the pre-proposal outline of issues that included a long list of topics. The Agencies said that they were “seeking and appreciate any feedback provided on these pre-proposal program leanings to inform final decisions in the State’s stakeholder-driven process to develop these programs.” In a post describing my comments I provided additional background information.
Letter to the Editor
Because I knew that NYCI would eventually get released I contacted the editorial staff at the Syracuse Post Standard weeks ago with a proposed commentary (800-word limit). After no response to that I submitted a letter (250-word limit) and that was published. In the following I will annotate the letter with background and reference information.
The published letter points out that Governor Hochul’s recent decision to pause implementation of the New York City congestion pricing was based on costs. I believe that the costs of the Climate Act should be considered in the same light.
On June 7, 2024, Gov. Kathy Hochul explained why she reversed the decision to proceed with the New York City congestion pricing plan, stating: “Now my job is not to make it harder or more expensive for New Yorkers to live in our state — working hard, make ends meet, raise their families.” The ultimate question is whether this concern also should be raised relative to the Climate Leadership & Community Protection Act (Climate Act).
With the word limit it was impossible to provide much detail on the NYCI plan.
This summer, her administration will be rolling out an economy-wide cap-and-invest plan to fund Climate Act decarbonization projects. The New York Cap-and-Invest (NYCI) Program is simply a tax on carbon. It will require large-scale distributors of heating and transportation fuels to purchase permits to pay for carbon emissions in the fuels they sell. Those costs will be passed on to consumers.
At the Energy Access and Equity Research webinar sponsored by the NYU Institute for Policy Integrity on May 13, 2024 Jonathan Binder stated that the New York Cap and Invest Program would generate proceeds of “between $6 and $12 billion per year” by 2030.
Administration officials estimate that NYCI auctions will generate “between $6 [billion] and $12 billion per year” by 2030. The New York City congestion pricing program was projected to raise $1 billion per year.
I used the example of gasoline costs for consumer impacts.
Consider gasoline costs. The current NYCI proposal outline analyzed allowance prices starting at $23 per ton of CO2 in 2025 with 5% escalation for 2026, and an increase to a higher ceiling in 2027, escalating by 6% annually thereafter. According to the U.S. Energy Information Administration, 17.86 pounds of CO2 are emitted per gallon of finished motor gasoline; 112 gallons burned equals 1 ton of CO2. A price of $23 per ton of CO2 translates to an increase in gasoline prices of 21 cents per gallon in 2025, 48 cents per gallon in 2027 and 57 cents per gallon in 2030.
Faced with the word limit, I concluded that New Yorkers want to know how much this will cost.
Raising the cost of fuel makes it harder to make ends meet. It is time to demand a transparent accounting of all Climate Act costs.
Commentary Version
In the longer version that was rejected I made some other points.
I pointed out that there are significant unaddressed issues and insufficient documentation to verify that it will not adversely affect energy affordability. Everyone wants a cleaner, greener, safer planet, but not at the cost of a decent standard of living and quality of life. There are unacknowledged tradeoffs associated with the Climate Act requirements that its supporters are covering up. Everyone has a different tolerance for these tradeoffs but resolving them requires much more information than is presently available. The state needs to provide the public with a clear New York Cap-and-Invest (NYCI) roadmap to achieve the 2030 targets, including additional emission reduction mandates, their costs, and how they will be paid for.
I also included information based on the comments I submitted. NYCI proponents argue that similar programs are a “well-tested mechanism for addressing climate change.” Past performance does not guarantee future success especially as the NYCI proposal contains significant revisions to earlier programs. Differences include proposals for limitations to trading and banking of allowances included in previous programs, emission reduction schedules in NYCI that did not include any evaluation of practicality, and a mandate to reach zero emissions.
I am convinced that affordability is the main concern of New Yorkers, so I addressed that in more detail. No price adder can drive emission reductions at existing sources because control technology to go to zero emissions does not exist. The only control strategy available is to displace fossil fuel usage with a different technology. The entities responsible for NYCI compliance do not control the deployment of the replacement technology and determining the market price necessary to incentivize their development is uncertain. If the 2030 allowance price is $64.31 the total auction proceeds will be $10.9 billion. There is a state law that mandates that 30% or $3.3 billion will be allocated to the Consumer Climate Action Account. The NYCI outline proposes that 63% or $6.8 billion be dedicated to clean energy investments. The State has not provided an analysis that specifies affordability targets or the requirements for the zero-emissions technology necessary to displace existing fossil fuel use.
There is another underappreciated NYCI risk that I included in the commentary. The allowances available for auctions will be determined by the Climate Act targets. If insufficient investments are made for the deployment of replacement zero-emissions technologies or there are issues that delay implementation, then the emissions will not decrease at a rate consistent with allowance availability. Without a safety-valve provision, the only compliance option available is to stop burning fossil fuels. If gasoline distributors, for example, think they have insufficient allowances near the end of the year they would stop selling gasoline. Fortunately, the NYCI outline proposal includes a safety valve provision that will prevent an artificial energy shortage.
Even though there is a safety valve mechanism included, climate activists have argued that is inappropriate. Their ideological position is inconsistent with reality. In 2021 CO2 emissions in the Chinese energy sector increased by 400 million tons. Total New York GHG emissions for all greenhouse gases and all sectors in 2021 were 268 million tons. If the safety valve provision is needed it will only cover a small fraction of the total NY emissions. Insistence on meeting an arbitrary cap when annual emission increases elsewhere are greater than total NY emissions is not in the best interest of New Yorkers.
Conclusion
To meet the promise that NYCI implementing regulations would be in place by the end of the year, the proposed regulations have to be released soon. I think that the process has been delayed in large part because DEC has staffing issues. From what I understand the California environmental agency had ten times more staff working on the project and took longer than the time available to meet the end of the year target. This is a very big ask for DEC.
I have no idea whether the pre-proposal outline will have significant changes. The climate activists have made their position known and the Hochul Administration has given them pretty much whatever they have demanded in the past. The pragmatic inclusion of a safety valve will ensure that there are consumer safeguards in place but I am not confident it will make the final draft.
Pragmatic Environmentalist of New York 