Climate Act Budget Status and Cap-and-Invest Program

This year’s New York budget negotiations include significant changes to the Climate Leadership & Community Protection Act (Climate Act).  One of the contentious issues is implementation of the New York Cap-and-Invest (NYCI) program.  This post addresses a misleading opinion piece published in the Albany Times Union by environmental organizations.

I am convinced that implementation of the Climate Act net-zero mandates will do more harm than good if the future electric system relies only on wind, solar, and energy storage because of reliability and affordability risks.  I have followed the Climate Act since it was first proposed, submitted comments on the Climate Act implementation plan, and have written over 650 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 organization I have been associated with, these comments are mine alone. I acknowledge the use of Perplexity AI to generate an outline and draft for sections of this post.

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 reduction target of a 40% GHG reduction by 2030. Two targets address the electric sector: 70% of the electricity must come from renewable energy by 2030 and all electricity must be generated by “zero-emissions” resources by 2040.

In a recent post I described several initiatives that have led Governor Hochul to suggest that the timeline for the Climate Act electric sector goals needs to be revised. Legislative leaders and Hochul have not yet announced a final climate plan deal.  Reporting as of April 19–21 describes a stalemate with ongoing behind‑closed‑doors talks rather than agreed‑upon bill text.  Environmental groups have rejected the proposed revisions to the Climate Act.

I believe that opinion pieces published in the Albany Times Union have an out-sized impact on negotiations in Albany simply because everyone sees what is published.  I also believe that the Times Union is biased towards the environmentalist side.  This post addresses the Governor Hochul is mispresenting our CLCPA lawsuit (“TU Letter”) piece published this week written by Josh Berman, senior attorney with the Sierra Club’s Environmental Law Program and Eric Walker, energy justice senior policy manager at WE ACT for Environmental Justice.  I do not think that the Times Union will publish a response to  the op-ed that is long enough to rebut what I think is a misleading opinion.

NYCI Lawsuit

The first argument in the TU Letter describes the author’s rationale for the lawsuit.  I will only address the claims associated with NYCI. The letter states:

The governor asserts that only a cap-and-invest program with no checks on cost will satisfy the law and litigants. This is false.

The Preliminary Statement in the litigation Petition filed by the authors clearly states that they wanted to ensure that the emission reduction requirements were achieved. 

Statement 2 states that

Although the climate law sets mandatory limits on New York’s statewide greenhouse gas emissions, it does not specify how the emissions reductions will occur or obligate any polluting entity to reduce emissions. Instead, the Legislature directed the New York State Department of Environmental Conservation (“DEC”) to give the law teeth by issuing regulations that ensure the state achieves its statutory greenhouse gas reduction mandates.

Statement 2 states that

Although the climate law sets mandatory limits on New York’s statewide greenhouse gas emissions, it does not specify how the emissions reductions will occur or obligate any polluting entity to reduce emissions. Instead, the Legislature directed the New York State Department of Environmental Conservation (“DEC”) to give the law teeth by issuing regulations that ensure the state achieves its statutory greenhouse gas reduction mandates.

Statement 10 states that

DEC’s abdication of its statutory duties is unlawful and critically threatens the state’s ability to achieve the emissions reductions requirements of the CLCPA. DEC’s failure to implement the Legislature’s directive is also endangering Petitioners’ members who continue to breathe dirty air, suffer from pollution-related illnesses, and face economic barriers in their efforts to protect themselves and their communities by replacing fossil fuel-burning equipment with clean new technology. The state must not be allowed to continue to violate the law by withholding a climate solution that it has deemed necessary to achieve the greenhouse gas reduction targets of the climate law and that it estimates will prevent many premature deaths and asthma-related emergency room visits each year.

The litigation clearly states that they sued to ensure the state achieves its statutory greenhouse gas reduction mandates. 

The petition also describes the timeline of the regulatory process.  It started in 2023 with the release of draft regulations and public meetings.  Of particular interest was the June 1, 2023 pre-proposal Cap-and-Invest overview session because DEC requested feedback on the Cost Containment Reserve (CCR) program stability mechanism.  As described in the NYCI Second Stage Outreach: Preliminary Analysis Overview Preliminary Analysis on January 26, 2024, the CCR is a price control mechanism.  If the bidding price reaches a preset trigger limit, additional allowances would be released to the market.  That results in lower prices.  However, the CCR is a pool of extra allowances that is only used if the trigger price is exceeded and that means that the cap will be exceeded if used.  I

I always felt that this was an inconsistency that would eventually cause problems.  Proponents of the economy-wide cap-and-invest approach presumed compliance with the Climate Act mandates, but this affordability mechanism would cause non-compliance.  Frankly, I do not think that the litigants understood that this provision was inconsistent with their desire to ensure the state achieves its statutory greenhouse gas reduction mandates. 

As the petition notes everyone understood at the end of 2024 that the regulations were ready and would be released in January 2025.  That did not happen.  The only regulation released was the greenhouse gas emission reporting rule and that was months later.  The cap-and-invest rule regulation was put on hold and on March 31, 2025 the litigants filed the petition demanding that the Department of Environmental Conservation (DEC) issue the draft regulations.

In October 2025, the New York Supreme Court issued a decision ordering the DEC to either issue the regulations or revise the regulations.  DEC appealed the decision, a hearing was held in the last month, but no decision has been made. 

However, this is an election year and the Governor is pushing an affordability agenda.  David Caralfamo described the political theater that preceded the budget deliberations:  “Two days after Governor Hochul’s own budget director stood up at a hearing and all but announced that CLCPA rollbacks were coming, a conveniently alarming memo from NYSERDA — dated the very same day — found its way into the press.”  The NYSERDA memo was allegedly a new analysis, but I believe that these numbers have been available since early 2024 and were the driver for the recommendation to include the CCR mechanism.  That is the key.  These are the cost estimates for NYCI without the CCR which will necessarily increase the costs but is also the only way to ensure compliance.

NYCI Affordability

The TU Letter addresses Hochul’s affordability arguments:

Hochul appears to have forgotten that many of our groups had expressed support for a program that controlled for cost and would have lowered energy bills by over $1,000 a year for families making under $200,000. That’s not our number; it’s based on two independent research reports. There is no reason such a program cannot move forward now.

I addressed those “independent research reports” when they came out.  I believe they are referring to a January 2025 report titled New York’s Affordable Energy Future and a January 2026 report titled Investments for New York’s Future.  In my opinion described research reports as “independent” when they were sponsored by the authors’ organizations is misrepresentation.  The 2025 report was funded in part by WE ACT for Environmental Justice and the 2026 report was funded by EDF.  Moreover, there was no independent peer review of the reports so they are not unbiased independent analyses.

I raised a number of concerns with the 2025 analysis by Switchbox. I found that while the report does acknowledge that cap-and-invest alone won’t achieve the 2050 goals (which is honest), it doesn’t adequately address a critical problem: the proposed investments cannot achieve the required annual emission reduction rates to meet 2030 targets. I showed that under Scenario C (lower revenue), the program falls short of the 2030 goal entirely, and neither scenario achieves the 2050 target.

The bigger problem, and one that exemplifies the authors’ presumptions about NYCI, is that fundamental feasibility problems are not addressed.  The authors assume compliance as a matter of faith and ignore reality. There are no add-on controls that achieve zero emissions for any sector. The only strategy is to convert to different energy sources, which takes time and is partially outside the control of compliance entities.  The political timeline of the Climate Act has never been evaluated for feasibility and the record since 2019 proves that it is impossible. 

Another feasibility aspect is the cost-effectiveness of controls.  I showed that using New York’s experience with Regional Greenhouse Gas Initiative proceeds that the proposed spending allocations will not provide meaningful reductions.  Furthermore, in the book Making Climate Policy Work, the authors argue that the level of expenditures needed to implement the net-zero transition vastly exceeds the “funds that can be readily appropriated from market mechanisms”. 

The TU Letter and this report don’t acknowledge what happens if the program fails to meet emission reduction targets. Organizations don’t voluntarily violate compliance requirements, and the penalties are severe. If the schedule or technologies aren’t feasible, the only remaining option is to simply stop selling fuel or generating power.  This could create an artificial energy shortage with serious consequences as the only way to comply with the regulations.

I concluded that while Switchbox is more transparent than some analyses in acknowledging price ceiling limitations, it remains advocacy research designed to support a predetermined conclusion. It overstates benefits while downplaying the fundamental feasibility challenges of meeting Climate Act targets, and it doesn’t adequately address whether the proposed investments can actually deliver the emission reductions needed—especially by 2030.

I also reviewed the2026 EDF Investments for New York’s Future report and found that it was advocacy research, not independent analysis. I showed that:

• Greenline Insights explicitly states they “develop compelling research questions and build the right mix of tools to answer them” – which I interpret as getting the results clients want

• EDF has been actively lobbying for cap-and-invest since 2023 and has a vested interest in the program’s success

• They strategically rebranded the program as the “Clean Air Initiative” (CAI) instead of using the official “New York Cap-and-Invest” (NYCI) terminology – a deliberate messaging strategy

I also explained that the methodology has serious flaws:

• The analysis doesn’t account for opportunity costs—what else could be done with those resources

• It assumes idle economic resources, which is unrealistic in a full employment economy

• It measures “gross economic activity” without subtracting displaced economic activity elsewhere

• It’s missing “the Missing Peter Problem”—robbing Peter (existing economy) to pay Paul (clean energy sector) while claiming total growth

I also showed that the economic projections are questionable and concluded that the report is simply a lobbying presentation that was commissioned by EDF. The benefits are overstated, the costs are minimized, if not ignored, and the methodology is sketchy.

Discussion

The TU Letter was published without qualification at a critical time in the Climate Act revision negotiations by the organizations that sued the DEC to release the NYCI regulations.  It is ironic that the unintended consequence of their successful lawsuit turned into political cover for the Governor to argue that NYCI would be unaffordable.  However, the TU Letter attempt to resolve the perverse result of their actions is flawed and their arguments that the Climate Act does not need to be changed are without merit.

Their lawsuit explicitly demanded NYCI regulations that “ensure the state achieves its statutory greenhouse gas reduction mandates”.  The authors of the TU Letter disagree with the presumption that “only a cap-and-invest program with no checks on cost” will satisfy the law and their litigation.  However, I showed that the CCR checks on cost mechanism in the pre-proposal documents was incompatible with ensuring compliance with the reduction mandates. 

The two reports referenced in the TU Letter do not provide credible affordability mechanisms.  Moreover, the reports do not acknowledge that the CCR mechanism is necessary to keep the costs palatable.  The NYSERDA memo with the high costs that Hochul cites as the reason that revisions to the rule are necessary simply shows costs for NYCI without the CCR mechanism.

Conclusion

This opinion piece offers no credible reasons why New York State should not be considering revisions to the Climate Act but got published in Albany while negotiations are underway.   I plan to submit a letter to the editor of the Times Union summarizing this post.  Unfortunately, a word limited summary could not incorporate the explanations why this letter was flawed even if it was accepted.  This is a perfect example of the BS Asymmetry Principle: Alberto Brandolini: “The amount of energy necessary to refute BS is an order of magnitude bigger than to produce it.”