October 28 2019 Buffalo NYS Public Participation Workshop on Regional Approaches to Climate and Transportation

On October 28, 2019 I attended the Buffalo NYS Public Participation Workshop on Regional Approaches to Climate and Transportation.  As I promised previously this post describes the meeting.

My over-whelming impression of this meeting is that the NYS Department of Environmental Conservation (DEC) and Department of Transportation (DOT) staff supporting the effort to develop a low-carbon transportation future believe that their public stakeholder process represents the will of the people.  I disagree with this characterization because my definition of “public” refers to society as a whole.  This stakeholder process has been confined to a limited and biased subset of the people based on my attendance at three meetings.  Please consider submitting a comment asking for costs which I think is the primary concern of the “public”.

Background

According to the Transportation and Climate Initiative webpage:

“The Transportation and Climate Initiative (TCI) is a regional collaboration of 12 Northeast and Mid-Atlantic states and the District of Columbia that seeks to improve transportation, develop the clean energy economy and reduce carbon emissions from the transportation sector. The participating states are: Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, Vermont, and Virginia.”

This meeting was part of New York’s response to the TCI and a component of the response to the state’s Climate Leadership and Community Protection Act (CLCPA).  In order to meet the “most aggressive” climate law transportation controls are needed on the sector because as shown in the New York State GHG Emissions 1990–2016 table it is has the most emissions of any sector.  Moreover, because the CLCPA is now the law DEC and DOT have to come up with a plan to make reductions from the sector.

The invitation to the meeting described the purpose and provided links to background information:

“The State Departments of Environmental Conservation (DEC) and Transportation (DOT) and the New York State Energy Research and Development Authority (NYSERDA) are conducting public outreach to inform New York’s participation in a multi-state initiative to reduce greenhouse gas emissions from the transportation sector with the Transportation and Climate Initiative (TCI). DEC, DOT, and NYSERDA are seeking input from the public regarding New York’s potential participation in a regional program designed to reduce emissions, boost the economy, improve public health, and achieve fair and equitable outcomes for underserved communities and transportation-related businesses.”

“The states participating in the Transportation and Climate Initiative have released a framework for a draft regional policy proposal to reduce greenhouse gas emissions from transportation and are seeking public feedback. The framework can be reviewed at https://www.transportationandclimate.org/sites/default/files/TCI-Framework_10-01-2019.pdf. We invite the public to submit input to the TCI portal at https://www.transportationandclimate.org/main-menu/tci-regional-policy-design-stakeholder-input-form. Background materials are available at https://www.transportationandclimate.org/main-menu/tcis-regional-policy-design-process-2019.”

“In addition, DEC, DOT and NYSERDA are conducting public meetings to better understand various perspectives on New York’s potential participation in a regional policy. The agencies will also seek input on alternative or complementary strategies to reduce emissions from transportation.”

“Additional information is available on the DEC website https://www.dec.ny.gov/energy/99223.html.  Questions can be directed to climateandtransportation@dec.ny.gov.”

Meeting

The agenda for the workshop that I attended had two main components.  After opening remarks that introduced speakers and introduced the topics, the first main component was “Key Elements of a Potential Regional Approach to Transportation and Climate”.  After a break the second component was a “Discussion on Investment Opportunities”.  The meeting ended with “suggestions, reflection and next steps”.

The description of the cap-and-invest program described their current thinking.  At this time, they plan to regulate state fuel suppliers of gasoline and on-road diesel.  That means the tank farms where distributors provide gasoline and diesel fuel that is sent to retail outlets will have to participate in the trading program.  They are doing analyses to determine the cap level and, as I understand it, the costs necessary to fund control programs to determine the rate of reductions that will be proposed.  Frankly, the lack of specificity for this aspect of the proposed framework is troubling and this meeting provided no details.

My primary interest in the meeting was the discussion of the multi-state process to develop a potential cap-and-invest program.  I have been involved with emissions marketing pollution control programs since 1990 and the Regional Greenhouse Gas Initiative (RGGI) since its inception over ten years ago so I wanted to see what they are thinking in the first half of the meeting.  In my opinion the proponents of a transportation cap-and-invest program overlook many of the lessons of RGGI.  Because they have to do something I took the opportunity to make the following suggestion for doing what I think will be least destructive and costly:

I think you should just go with a carbon tax rather than trying a cap and dividend program for the following reasons:

      • In the TCI framework the affected sources are state fuel suppliers.  They have no real stake in compliance with the cap and minor options to directly meet the cap. All they will do is sell fuel up to the cap limit and tack the price they paid for allowances onto the price they sell to fuel retailers.
      • RGGI was a cap and dividend program and it did not work out as well as many believe. Per the 2017 proceeds investment report that came out earlier this month, of the observed RGGI emission reductions less than 5% were directly attributed to dividend investments
      • The observed cost per ton of CO2 reduced was $897 – far higher than the social cost of carbon.
      • Logistically there is a cost issue. As reductions are made the amount of fuel sold will go down so the dividend proceeds will also go down.  How can you maintain the funding to keep up the rate of reductions needed?
      • I also worry that there will be cost increases related to the cap and dividend program that will increase cost to customers that will not be passed on as dividends to the public.

The second half of the meeting focused on the question “How could the proceeds from a cap-and-invest program promote cleaner transportation, improve public health, create economic opportunities, and enhance mobility?  While it is nice to come up with a list of possible investment projects such a list does not consider practicality and cost so I see little value in the exercise.  Faced with a two and a half hour ride home I left the meeting at the break.

Impression

As noted in the introduction my overall impression with this process is that the organizers and administrators truly believe that their public stakeholder process is representative of the “public”.  I disagree with this characterization because my definition of “public” refers to society as a whole and I have seen no indication that this topic has not been confined to a limited and biased subset of the public who have vested interests in transportation planning.  I base this impression on the three meetings I attended.

I went to the Georgetown Climate Center listening session in Albany, NY on April 9, 2018.  I don’t believe that there was public notice of the meeting because I got a call from NYS Department of Environmental Conservation Deputy Commissioner Jared Snyder asking why I wanted to attend.  He was clearly surprised that I knew about the meeting.  After assuring him that I would behave, I was allowed to attend.  When I showed up at the meeting, where I expected to be the only member of the public, I was surprised how many members of environmental organizations were present in addition to the regulatory agency people.   Whatever the motivation to check my rationale to participate, this was not an event that the general public knew about.

New York had its own listening sessions  to help advance a cleaner, safer, and more reliable low-carbon transportation future in the summer of 2018.  I attended the Central New York session on August 21, 2018.  The meeting was “designed to engage stakeholders with diverse interests and concerns in discussion of the economic and social considerations for deploying clean transportation options, opportunities to enhance environmental and public health benefits through a modernized transportation system, how innovative, low-carbon transportation can enhance quality of life and boost economic competitiveness, and what policies and programs may help advance a clean transportation future”.  Notice for this meeting was provided in the NYS DEC e-mail distribution system and there was a press release, so the general public as a whole might have had the opportunity to hear about the meeting.  However, attendance at the meeting was limited to members of environmental organizations, staff from transit agencies in the region, other people with a vested interest in a clean transportation future, and me.

Because the Buffalo meeting did not include an opportunity to formally meet people and the attendance list was not published, I don’t know the background of the attendees.  However, the people I did know were mostly agency staff so at least a third were there as part of their job.  The meeting was hosted by PUSH Buffalo whose mission is “to mobilize residents to create strong neighborhoods with quality, affordable housing; to expand local hiring opportunities; and to advance economic and environmental justice in Buffalo”.  As a result, I think that the majority of the rest of the audience were in that demographic or environmental organizations.  I do believe that there were some industry people in attendance but did not hear from any of them while I was at the meeting.

Therefore, I think it is presumptuous to say that these meetings provide engagement from the public, which I define as including anyone outside the wonky world of future transportation policy especially as it pertains to environmental justice.  Moreover, the format of these meetings was more about “what are the things we can do for clean transportation options” than “how can we implement these options and at what cost?”.  None of the meetings I attended addressed implementation issues, feasibility concerns, or potential costs.

Public Involvement

Roger Pielke Jr.’s Iron Law of Climate Policy states that “while people are often willing to pay some price for achieving environmental objectives, that willingness has its limits”.  I find it difficult to believe that the modeling mentioned at this meeting and described on the TCI webpage has not generated an estimated cost per gallon of fuel.  I believe that is an over-riding concern of the public so I suggest that asking for that information is entirely appropriate.

I think it is very important that residents of Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, Vermont, and Virginia submit input to the TCI portal at https://www.transportationandclimate.org/main-menu/tci-regional-policy-design-stakeholder-input-form.   All you have to do is go to that link, fill out a few questions and then you can share your input with the Transportation and Climate Initiative.  I think a comment as simple as “I am concerned about the cost of this initiative and would like to know the expected cost increase to a gallon of gasoline.” from members of the public and not just the folks who go to these meetings would be effective.  By all means please consider making more extensive comments but the more people who ask for the costs the better.  New Yorkers could also send an email to climateandtransportation@dec.ny.gov asking for the expected cost.  I am not saying that they won’t ignore the request but at least they will be on notice that the public worries about the cost.

Final Note

By the way I did wear my yellow vest so I may go down as the first such protester at a NY meeting.  I did not go out of my way to get a reaction from the meeting attendees but I did make my point.  Over the years I have made the acquaintance of many people at DEC including Deputy Director Jared Snyder and now retired DEC climate advocate Lois New.  I got to the meeting early and had a chance to make sure they understood I was wearing the vest because I think yellow vest protests are inevitable.  Their reaction was a mixture of amusement (curmudgeon Roger is joking around again) and amazement (I don’t think that either Jared or Lois have contact with very many people who don’t agree with their views on climate change so this kind of confrontation surprised them.)

NYS Public Participation Workshop on Regional Approaches to Climate and Transportation

On October 28, 2019 I attended the Buffalo NYS Public Participation Workshop on Regional Approaches to Climate and Transportation.  I wore a yellow vest to the meeting because I believe that the policy suggested at the workshop will inevitably lead to prices that will be unacceptably high.  I also made up a handout if anyone asked about the yellow vest and that included a link to my posts on the Climate Leadership and Community Protection Act (CLCPA) page where I have posted this expanded version of the Handout DEC Workshop on Regional Approaches to Climate and Transportation.  I will post on the meeting itself later.

There have been multiple instances where expensive climate policies were the initial spark to protests that expanded in scope to cover more issues.  The French “Yellow Vest” movement was triggered in November 2018 when fuel prices were raised.  In October 2019 protests started in Chile when subway fares were increased.  The evidence in this post and my handout suggests that a similar protest could occur in New York as the 2030 requirement to reduce greenhouse gas (GHG) emissions to 60 percent of 1990 emissions levels in 2030 included in the CLCPA legislation is implemented.

The New York State GHG Emissions 1990–2016 table lists historical GHG emissions in New York.  The State has yet to provide a plan to meet the requirements of the CLCPA.  One way to meet the 2030 emission target in ten years would be to require all these sectors to reduce their 2016 emissions 30%.  While the ultimate plan probably will require different amounts from each sector the final strategy’s reduction requirements probably will not vary too much from 30% each.

I only considered the transportation sector in my handout.  The ultimate strategy to meet the CLCPA goals will have to specify options for each component of the transportation sector.   In order to meet a 30% reduction goal from this sector the plan could call for 30% electric vehicle conversions of each of these registration categories in the New York State Dept of Motor Vehicles Registrations in 2016 table.  For the standard registration category that means that we would need 2,844,099 electric vehicles on the road by 2030.  According to the NYS Energy Research & Development Authority (NYSERDA) there are 58,278 electric vehicle registrations in the state as of June 2019 and 35,296 were registered since January 2017.  As a result, we need to have 2,808,803 more electric vehicles to meet the 30% reduction goal and sales would have to average 244,244 electric vehicles per year.  That is over four times per year the total number of electric vehicles in the state in June 2019.

The transportation cap-and-invest program proposed would “cap emissions of carbon dioxide from the combustion of the fossil component of finished motor gasoline and on-road diesel fuel in the region”.  Owners of fuel at terminals would buy permits to sell the equivalent amount of fuel corresponding to the emissions cap and then New York will invest the money received in programs to reduce fuel use.  One investment could be to fund the current $2,000 NYSERDA incentive for the purchase of electric vehicles.  In the previous example that is $488 million per year and would roughly add 9 cents per gallon.  However, the $2,000 per car incentive is not working well enough to get many people to purchase them.  If the incentive is kicked up to $10,000 per vehicle then the cap cost would go up to 43 cents per gallon.  The cost per electric vehicle is just the start of the costs necessary to implement over two million electric vehicles.  What is the plan for charging infrastructure particularly in cities where residents have to park in lots or on the street and how much will that cost?

A recent poll asked the public how much they were willing to pay to combat climate change.  The poll found that “To combat climate change, 57 percent of Americans are willing to pay a $1 monthly fee and 23 percent are willing to pay a monthly fee of $40.”  Dividing the NYS annual gasoline sales of 5.73 million gallons in 2016 by the 9,480,329 standard registrations averages 50 gallons per month so the nine cents per gallon equates to $4.29 per month but would rise to $21 a month for 43 cents per gallon to fund a $10,000 per vehicle incentive.

Advocates for the cap-and-invest program point to the Regional Greenhouse Gas Initiative (RGGI) as model of a program that works.  I believe that RGGI has significant differences that make the approach unlikely to work well if at all.  In RGGI, affected sources did not have viable options to install control equipment but could switch to a lower emitting fuel.  I have calculated that fuel switching was the cause of most of the reductions and that reductions linked directly to investments from the auction dividends provided only 5% of the total reductions.  Another big difference is that affected sources have different stakes.  The TCI proposed cap and dividend approach proposes to regulate state fuel suppliers.  In RGGI affected sources were penalized if they did not comply but the TCI affected sources have no stake in compliance with the cap.  They will only sell whatever amount of fuel is specified by the cap and will not worry about how society meets the cap.  As a result, the TCI price signal has to be high enough to force the public to reduce fuel use and TCI dividend investments have to give citizens viable options that use less fuel.

There is another problem.  The RGGI dividend investment results did not reduce emissions enough to meet the cap.  If the TCI investments don’t reduce emissions sufficiently to meet the cap necessary to meet New York’s CLCPA targets, then the inevitable outcome is that there will be more demand for fuel than the cap allows and the amount of fuel available will be limited.  It is inconceivable to me that government-caused fuel outages would be acceptable to the citizens of New York.

Ultimately a cap-and-dividend program equates to a tax.  Just as taxes are invested by government for services this approach takes in money that supposedly will be invested to promote cleaner transportation, improve public health, create economic opportunities, and enhance mobility.  Before anyone can reasonably be expected to decide to support this program the State needs to provide their plan for specific programs and resulting costs.  What is the expected increase to fuel prices for this new tax and how will it be structured so that the those least able to afford a price increase not be adversely affected in general and particularly the rural poor located beyond the availability of public transit?

Most importantly, this analysis looks only at one sector.  The electric generation, residential, commercial, industrial and other sectors all have to make similar reductions.  Given that the costs of just this sector fall between the amount 57% and 23% of the public are willing to pay I believe it is clear that there will be pushback similar to the French “yellow vest” movement in New York when the costs of the CLCPA become apparent.  Roger Pielke Jr.’s Iron Law of Climate Policy states that “while people are often willing to pay some price for achieving environmental objectives, that willingness has its limits”.  New York will test that law.

Let Experience be your Guide to Climate Science

In this post I explain why I think that your direct experience should guide your opinion on global warming climate science.  You may not be a climate scientist but your personal experiences enable you to judge the certainty of the climate claims popularly heard.

Update November 1, 2019: Added a link at the end to a post about the reliability of extended forecasts

Greenhouse Effect

The reason that we hear that there is an inevitable, imminent climate emergency is because of the greenhouse effect.  But how do we observe it in the atmosphere?  All things being equal, if you know whether it is warmer or colder in the morning after a clear night then you understand the impact of the greenhouse effect.  Of course, the answer is it is colder after a clear night.  Simply put, when something, in this case clouds, reduces the amount of heat loss (long wave radiation) from the surface and atmosphere, then the temperature does not cool as much, so it is colder after a clear night than a cloudy night.

There are a couple of ramifications of what you already know about this greenhouse effect fact.  On clear nights cooling can occur at about 3.4 deg F an hour while on an overcast night cooling is only about 0.5 deg F per hour.  Global average temperature was on the order of 2.5 deg F warmer in 2017 than in 1850.  If all the warming since 1850 was due to greenhouse gases, then that warming is less than one hour of a cloudy night as opposed to a clear night.  Therefore, clouds have a much stronger effect on temperature than greenhouse gases.   The other point is that the greenhouse gas effect is stronger at night than during the day so nights are warming faster than days.  Keep this in mind when you hear that climate change is going to cause much hotter day time temperatures.  The reality is that the average is going up more because the minimum temperature is going up rather than because the maximum temperature is going up.

Forecast Skill

Predictions of a climate emergency are based on climate prediction models.  Remember weather is what we feel over short periods and climate is how the atmosphere acts over longer periods of time, i.e., decades.  Observant weather-wise people understand the uncertainty of forecasts for different time periods.  Obviously, a 24-hour forecast is more reliable than a seven-day forecast.  You know that longer term weather forecasts are not as reliable because you have observed that.  The fact is that the physical relationships for forecasting weather and climate are the same.  There are differences but the inescapable conclusion is that climate forecasts for one hundred years from now are much less reliable than weather forecasts.

Although people like to say that the weather forecasting profession is the only one that lets you be wrong much of the time and still have a job, the reality is that weather forecasts have improved markedly over time.  When I graduated in 1976 with a master of science degree in meteorology, three to five-day forecasts were much less accurate than they are today.  In no small part that is because weather forecasters are constantly verifying their predictions against observations.  If the forecast is radically wrong then the data are re-evaluated and the modeling parameters are reviewed.  Testing a new modeling variation with the data from the period when the old model forecast failed to test improvements and then implementing the revised modeled is a constant process.  Obviously, a 100-year climate forecast cannot be tested the same way.  It is just not possible to improve climate models much because they cannot be tested frequently enough to make a lot of improvements.

Clouds

Another aspect of forecasting that observant folks understand is the effect of clouds on forecast reliability and usefulness.  Consider the uncertainty when the forecast is for scattered showers.  You know that you may get rain or just as likely may not and if your outdoor activity depends on dry weather that means a lot.  For numerous reasons it is not possible under many conditions to predict exactly when and where a shower may pop up.  The primary reason is that cloud formation is a process that takes place over a small spatial-scale – yards instead of miles.  Weather forecast models can incorporate the factors that cause clouds and precipitation into the predictions but not the small-scale factors that cause them at a specific location and time.  Residents of Upstate New York are very familiar with the forecast that lake-effect snow is going to occur “north of the Thruway”.  Even though forecasters run finer-scale models that are limited to areas immediately adjacent to the Great Lakes, they still can only predict that somewhere in that area there will be a snow band but not exactly where.

There are very serious implications of clouds on the climate forecasting models.  Because climate models have to predict over the entire globe, none of the physical processes that create clouds are incorporated into the models.  Instead the models simulate clouds by parameters which, to be kind, is simply the expert opinion of the model developer.  Don’t believe me?  Here is what Nakamura Mototaka says in Confessions of a climate scientist:

“Clouds are represented with parametric methods in climate models. Are those methods reasonably accurate? No. If one seriously studies properties of clouds and processes involved in cloud formation and dissipation, and compare them with the cloud treatment in climate models, one would most likely be flabbergasted by the perfunctory treatment of clouds in the models. The parametric representations of clouds are ad hoc and are tuned to produce the average cloud cover that somewhat resembles that seen in the current climate. Can we, or should we, expect them to simulate the cloud coverage and properties in the “doubled atmospheric carbon dioxide” scenario with reasonable accuracy? No.”

Implications

I have described three aspects of global warming climate science that observant folks basically understand based on their personal experience.  We know that clouds cause great differences in temperatures.  Clearly weather forecast models that can be tested are more reliable than climate prediction models that cannot be tested for the relevant forecast period.  Even though weather forecast models have improved we know that they still don’t do as well as we would like for clouds and precipitation.

This all leads to the implication of the fact that the climate models do not do a credible job with clouds.  We all know that clouds have a big effect on the temperatures we observe.  If the climate models that cannot be tested do not simulate clouds correctly, why should we have much faith in the projections of inevitable, imminent climate emergency from those climate models?

I believe we should consider the results of climate models the same way we treat a forecast for a slight chance of scattered showers.  Based on our experiences we know that there are a range of potential outcomes for that forecast.  Clearly, those who claim that there is an inevitable, imminent climate catastrophe are stretching credibility.  While nothing here can lead to the conclusion that a catastrophic outcome is impossible, the uncertainty surely dictates that our response be carefully crafted. While it might seem prudent to act we must not forget  Ridley’s ParadoxEconomic damage from man-made ‘climate change’ is illusory whereas damage from man-made ‘policies’ to fight the said change is real.  Moreover, there is the potential that the current focus on a climate emergency is diverting attention that might be better spent on higher probability issues such as: global pandemics, antibiotic resistance, Carrington events, or, if you worried about truly existential threats with low probabilities, asteroid impacts.

November 1, 2019 Update  This post by Dr. Cliff Mass provides good background to our experience that extended forecasts are not reliable.

Status of Climate Change Science October 2019

Several recent blog posts have come to my attention that I want to pass on to readers of this blog because all three make good points and, ultimately justify a pragmatic approach in my opinion.  I have summarized them below but recommend that you read them all in their entirety.

Judith Curry argues that the science does not support the claims that climate change in an existential threat.  I believe it is safe to say that Cliff Mass is more worried about the threats of climate change but makes the point that there is an active group in the climate debate, “mainly on the political left, that is highly partisan, anxious and often despairing, self-righteous, big on blame and social justice, and willing to attack those that disagree with them” that he believes may in the end do more harm than good.  Finally, Larry Kummer offers suggestions that could be implemented today with widespread support from most of society.

Judith Curry writing on her Climate Etc blog posted her response to a reporter’s questions about the current state of climate limits and timelines.  The reporter asked about the deadlines (e.g., the 12 years to act) currently in the news. She concluded:

Bottom line is that these timelines are meaningless.  While we have confidence in the sign of the temperature change, we have no idea what its magnitude will turn out to be.  Apart from uncertainties in emissions and the Earth’s carbon cycle, we are still facing a factor of 3 or more uncertainty in the sensitivity of the Earth’s climate to CO2, and we have no idea how natural climate variability (solar, volcanoes, ocean oscillations) will play out in the 21st century.  And even if we did have significant confidence in the amount of global warming, we still don’t have much of a handle on how this will change extreme weather events.  With regards to species and ecosystems, land use and exploitation is a far bigger issue.

Cleaner sources of energy have several different threads of justification, but thinking that sending CO2 emissions to zero by 2050 or whenever is going to improve the weather and the environment by 2100 is a pipe dream.  If such reductions come at the expense of economic development, then vulnerability to extreme weather events will increase.

There is a reason that the so-called climate change problem has been referred to as a ‘wicked mess.’

Cliff Mass has his own blog on weather and climate.  He recently posted on the Real Climate Debate.  The point of his post was that there are two groups of people active in the climate change debate covered by media and politicians.  He defines the two groups as the ACT group (Apolitical/Confident/Technical) and the the ASP group (Anxious, Social-Justice, Partisan).  The ACT group thinks that global warming is a technical problem with technical solutions while the ASP group see that social change is necessary to deal with global warming and that will require re-organizing society.  His bottom line:

Progress on climate change is being undermined by the efforts of the highly vocal, partisan, and ineffective ASP group.  They are standing in the way of bipartisan action on climate change, efforts to fix our forests, and the use of essential technologies.   They are a big part of the problem, not the solution.

In contrast to the ASP folks, the ACT group generally tries to stay out of the public eye, quietly completing the work  needed to develop the technologies and infrastructure that will allow us to mitigate and adapt to climate change.  In the end, they will save us.  That is, if the ASP folks don’t get in their way.

Larry Kummer writing at the Fabius Maximus blog recommended issues that he hopes a presidential candidate can adopt that will address serious threats. One of the issues he included was Climate Change.  The only disagreement I have with his recommendations concerns conversion to non-carbon-based energy. I think this needs to be included but would prefer that the emphasis be on R&D to find alternatives that are cheaper than fossil fuels.  Until that happens I believe that Roger Pielke Jr.’s Iron Law of Climate Policy will make implementation impossible.  His “iron law” simply states that “while people are often willing to pay some price for achieving environmental objectives, that willingness has its limits”.  Larry’s recommendations are:

   “We don’t even plan for the past.”
— Steven Mosher (member of Berkeley Earthbio here), a comment posted at Climate Etc.

We are locked into two camps, with a large confused mass between the climate extremists and those who deny that global warming is a threat. The resulting gridlock leaves us vulnerable to the inevitable repeat of past extreme weather and the effects of the continuation of the two centuries of warming (from a combination of natural and anthropogenic factors). We can continue to do almost nothing, waiting for one side to stampede the American public into acquiescence – or for the weather to decide for us. Or we can immediately take smaller but still effectual steps. I gave these recommendations six years, and they remain sound today. They could command popular support.

        1. Increased government funding for climate sciences. Many key aspects (e.g., global temperature data collection and analysis) are grossly underfunded. But this research should be run with tighter standards (e.g., posting of data and methods, review by unaffiliated experts), just as we do for biomedical research – and for the same reason, to increase its reliability.
        2. Fund a review of the climate forecasting models by a multidisciplinary team of relevant experts who have not been central players in this debate. Include a broader pool than those who have dominated the field, such as geologists, chemists, statisticians and software engineers. This should include a back-test of the climate models used in the first four Assessment Reports of the IPCC (i.e., run them with forcing data through now, and compare their predictions with actual weather). This will tell us much (details here).
        3. We should begin a well-funded conversion in fifty years to mostly non-carbon-based energy sources. We need not wreck the economy or defund defenses against the many other threats we face. This is justified by both environmental and economic reasons (see these posts for details). As we learn more about climate change, this program can be accelerated if necessary.
        4. Begin more aggressive efforts to prepare for extreme climate. We’re not prepared for repeat of past extreme weather(e.g., a major hurricane hitting NYC), let alone predictable climate change (e.g., sea levels climbing, as they have for thousands of years).

Conclusion

My pragmatic take based on these posts.  Climate change is an extraordinarily difficult problem to understand but the extremely bad projections are very unlikely.  Unfortunately those worst-case projections have the attention of a segment of society that is convinced otherwise and their passion may make reasonable and no regrets responses impossible.  Because we don’t understand natural variability well enough to pick out the small signal of human-caused global warming and, more importantly because the current alternatives to will be extremely expensive we need to monitor the climate better, focus our climate research on results and natural variability, develop a research program to develop alternative to fossil fuels that are cheaper than they are, and finally develop resiliency to observed extreme weather.

RGGI Investment Report for 2017

UPDATE: November 15, 2019  – The lifetime totals listed in the originally posted text were wrong due to a copy and paste error.

In October 2019 the Regional Greenhouse Gas Initiative (RGGI) released their annual Investments of Proceeds update.  This post compares the claims about the success of the investments against reality.

I have been involved in the RGGI program process since its inception.  I blog about the details of the RGGI program because very few seem to want to provide any criticisms of the program. 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.

Background

RGGI is a market-based program to reduce greenhouse gas emissions. It is a cooperative effort among the states of Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New York, Rhode Island, and Vermont to cap and reduce CO2 emissions from the power sector.  According to a RGGI website: “The RGGI states issue CO2 allowances which are distributed almost entirely through regional auctions, resulting in proceeds for reinvestment in strategic energy and consumer programs. Programs funded with RGGI investments have spanned a wide range of consumers, providing benefits and improvements to private homes, local businesses, multi-family housing, industrial facilities, community buildings, retail customers, and more.”

Released in October 2019, The Investment of RGGI Proceeds in 2017 report tracks the investment of the RGGI proceeds and the benefits of these investments throughout the region. According to the report, the lifetime benefits of RGGI investments made in 2017 include:

      • 9 million MWh of electricity use avoided
      • 6 million MMBtu of fossil fuel use avoided
      • 3 million short tons of CO2 emissions avoided
      • 13.9 million MWh of electricity use avoided
      • 22.6 million MMBtu of fossil fuel use avoided
      • 8.3 million short tons of CO2 emissions avoided

The report’s press release quotes Ben Grumbles, Secretary of the Maryland Department of the Environment and Chair of the RGGI, Inc. Board of Directors: “The 2017 report shows why RGGI is a climate leader globally and nationally, not only cutting emissions in half but generating revenues to strengthen local economies and communities.” Katie Dykes, Commissioner of the Connecticut Department of Energy and Environmental Protection and Vice Chair of the RGGI, Inc. Board of Directors said “RGGI states’ investments accelerate clean energy, reduce climate risk, and improve lives”.  Bruce Ho at the National Resources Defense Council blogged that the report “confirms that RGGI is a tremendous success story whose benefits continue to grow, and it shows how, in the absence of national leadership, states are forging ahead to protect our health, environment, and economy from the worst impacts of climate change.”

As I will show below, I disagree with these assertions of success.  I believe that the report mis-characterizes some of the numbers relative to the value of the program as an emission reduction approach.  This is because they present “lifetime” benefits of the investments.  Everyone is talking about emissions reductions from some annual value, usually 1990.  In order to determine effectiveness to meet those goals the only benefits that count are annual reductions due to RGGI.  While it may be appropriate to document the lifetime dollar savings for energy efficiency, I am convinced that using lifetime values for any other parameter is bogus.

Emissions Reductions

In the first year of the RGGI program, 2009, the states of Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New York, Rhode Island, and Vermont emitted 123,880,601 tons of CO2.  This report was for 2017 and those states emitted 66,349,058 tons of CO2 so emissions the emission reduction was 46% which is close enough to half to accept the claim.  However, the real question is why did the emissions go down.  I believe that the real measure of RGGI emissions reductions success is the reduction due to the investments made with the auction proceeds.

The report does not provide the annual RGGI investment savings values accumulated since the beginning of the program.  In order to make a comparison to the CO2 reduction goals we have to sum the values in the previous reports to provide that information.  The table Accumulated Annual Regional Greenhouse Gas Initiative Benefits lists the annual avoided CO2 emissions generated by the RGGI investments from three previous reports as well as the lifetime values.  The total of the annual reductions is 2,818,775 tons while the difference between total annual 2009 and 2017 emissions is 57,531,543 tons.  The RGGI investments are only directly responsible for 5% of the total observed reductions!

Cost Efficiency

In order to argue that RGGI emission reduction programs are a good investment relative to the expected societal cost of CO2 emissions the Obama Administration developed a value for the social cost of carbon.  This parameter was developed to estimate the cost of the long-term (that is to say hundreds of years) damage done by a ton of carbon dioxide (CO2) emitted today. This dollar figure also represents the benefit of a CO2 reduction. I have posted on some of the issues with this parameter but for the purposes of this post you need to know that the values range widely depending on assumptions.  For example, if you use a discount rate of 3% and consider global benefits like the Obama-era Environmental Protection Agency (EPA) did then the 2020 SCC value is $50.  On the other hand, the current Administration EPA SCC value for SCC is $7 for a 3% discount rate and $2 for a 5% discount rate that represents only benefits to the United States.  The Institute for Policy Integrity report “Expert Consensus on the Economics of Climate Change” projected a higher 2020 SCC value of ~$140 based on a survey of experts.  A 2015 paper in Nature Climate Change “Temperature impacts on economic growth warrant stringent mitigation policy” suggest that the SCC value should be $220.

The Accumulated Annual Regional Greenhouse Gas Initiative Benefits table lists the data needed to calculate the RGGI CO2 reduction cost per ton.  From the start of the program in 2009 through 2017 RGGI has invested $2,527,635,414 and reduced CO2 2,818775 tons annually.  The result, $897 per ton reduced, is four times greater than the highest SCC value and two orders of magnitude greater than the current EPA SCC value for United States benefits.

Conclusion

The fact is that for policy purposes the annual reductions from RGGI have to be considered because that is the “apples to apples” comparison.  I have to believe the reason why the RGGI investment reports no longer report the accumulated annual benefits and only report the lifetime benefits is because the values appropriate for determining the effectiveness of this program as a control program reflect so poorly on the program.  Reductions of CO2 directly attributable to investments made from the auction proceeds only total %5 of the observed CO2 reductions from 2009 to 2017.  Those poor results combined with $2.5 billion investments costs result in a nearly $900 cost per ton of CO2 reduced.  That value far exceeds the social cost of carbon value contrived to prove the value of CO2 reductions.

Analysis Group “Potential New Carbon Pricing in the NYISO Market” Presentation October 2019

After nine months without posting on the New York State Carbon Pricing Initiative some things have come up that have led to posts as the initiative relates to New York’s Climate Leadership and Community Protection Act (CLCPA).  I am motivated to submit comments and prepare blog posts on the carbon pricing initiative so that there is at least one unaffiliated critical voice that has an understanding of the basis of the rationale for a carbon price and understands some of the complexities associated with implementing such a program. New York State energy planning is trying to choose between many expensive policy options like pricing carbon in the electric sector while at the same time attempting to understand which one (or what mix) will be the least expensive and have the fewest negative impacts on the existing system. If they make a good pick then state ratepayers spend the least amount of a lot of money, but if they get it wrong, the State will be left with lots of negative outcomes and even higher costs for a long time.

At the time of this writing in October 2019, the New York Independent System Operator (NYISO) carbon pricing initiative is being addressed by internal working groups without the opportunity for public input.  On October 3, 2019 the Market Issues Working Group, Installed Capacity Working Group, and Price Responsive Load Working Group Meeting included a presentation by the Analysis Group entitled “Potential New Carbon Pricing in the NYISO Market”.  This post addresses that presentation.

Background

The Analysis Group was hired by the NYISO to examine potential economic impacts of the proposed carbon-pricing mechanism for NY’s wholesale power markets.  In the latest round of work conducted without the public input component, they were supposed to evaluate the latest round of modeling impacts and incorporate other economic considerations.  The enactment of the CLCPA in the summer of 2019 required changes to their approach and, in fact, the entire premise of the analysis.  It has changed from whether New York would pursue aggressive goals for reducing carbon emissions and do so through administrative and other mechanisms, to how New York will best accomplish its goals and meet the CLCPA mandates for reducing GHG emissions in the power sector and in the economy at large.

The report notes that the different premise fundamentally changed the nature of the study.  Now it examines “how NYISO’s proposed carbon-pricing mechanism can help the State meet its new statutory requirements for decarbonizing the electric system through efficient market design and at the lowest cost, and how New York’s wholesale competitive electric markets can help the state achieve its climate goals more broadly, efficiently, and effectively.”

Presentation

The presentation at this meeting was a typical power point slide deck.  The summary for policy makers, full report and technical appendix will be made available later this month.  The presentation itself included a list of fourteen key findings that I will address below.

  1. New York has the strongest set of climate policies in the U.S

The basis for this finding is the passage of the CLCPA that includes “a requirement for the state to eliminate greenhouse gas (GHG) emissions from all man-made sources in New York by 2050”.  The CLCPA “codifies a mandate for the electric system to rely on renewables for 70 percent of supply by 2030 and on zero-emitting resources for 100 percent of supply by 2040”. To the extent that New York now has bragging rights I agree.  However noble the intent, the fact is that no one has proposed a plan to get to a 100% zero-emitting electric system supply by 2040.  This presentation glibly assumes that these goals can be met with no caveats about the difficulties of this task.

  1. New York State has long been a policy leader

This slide is thinly veiled cheer-leading.  Their basis for supporting this leadership is this: “Considering that New York’s economy accounts for one out of every 200 tons of energy-related carbon dioxide (CO2) emitted anywhere in the world, the Act’s new commitments represent a significant action to reduce and mitigate the costly impacts of global climate change”.  Frankly, I was surprised at that number so I did some checking.  The World Resources Institute listed global CO2 emissions since 2010.   In 2016, the last year that the NYSERDA Patterns and Trends document has New York State total CO2 emissions data, the world emissions total was 35,700 million metric tons and NY’s emission total was 167 million metric tons which works out to one out of every 214 tons, close enough.  However, what was not mentioned was that between 2016 and 2017 global emissions increased 500 million metric tons – three times the NY total and between 2017 and 2018 global emissions increased 900 million metric tons – over five times the NY total.

  1. This work will not be easy

This statement is certainly true.  The slide concludes: “To keep these costs as low as possible, New York will need to draw on the long and successful history of market-based policies and pursue every effective tool at its disposal”.  Here is the problem.  There is no consideration of why previous market-based policies were successful.  I believe that switching to a fuel that was not only lower polluting, but as cheap or cheaper, was the primary cause for the success of the EPA Acid Rain program and to whatever success can be claimed for the Regional Greenhouse Gas Initiative (RGGI).  The problem is that the opportunities for fuel switching are used up.  Reductions in New York’s future will have to increase the cost of energy because future reductions will have to displace a cheaper source of energy.  I should also note that the premise that carbon pricing is “an effective tool” is an assumption, particularly in the context of this proposal.  The theory of carbon pricing is that an economy wide program covering as many jurisdictions as possible will provide incentives to make the transition more efficiently than other approaches.  This proposal is for one jurisdiction and one energy sector.  It is not clear how the program can deal with all the interface issues that causes.

  1. The CLCPA envisions using an array of measures

This statement is necessarily true.  The slide also notes that the CLCPA “anticipates putting measures in place as soon as possible”.  I think this is a prescription for problems.  This initiative is roaring ahead without the time and effort to develop a feasibility study, an implementation plan and outside critical review.  Given the scope and potential impacts to New York society that seems rash.

  1. The CLCPA envisions a big role for the electric grid

“The provisions to expand the role of electricity into transportation and buildings will go hand in hand with the Act’s requirements that the state’s electric system eventually eliminate its carbon emissions by 2040.”  I cannot over-emphasize that the CLCPA is legislation that did not include provisions to develop a plan to see if this goal is feasible.  The Brattle Group recently released a report entitled “Achieving New England’s Ambitious 2050 Greenhouse Gas Reduction Goals Will Require Keeping the Foot on the Clean Energy Deployment Accelerator”.   That report expects that the New England electrical load will need to double to meet an 80% reduction by 2050 so that “beneficial electrification” will CO2 displace emitting sources.  I see no reason why New York should not expect an even bigger increase in load in order to eliminate GHG emissions from all man-made sources in New York by 2050.  How much renewable energy will be needed, where does it have to be located, and how much will all this cost are all reasonable unresolved questions.

  1. New York has a home-grown policy proposal: a carbon-pricing mechanism

“NYISO can unleash the power and creativity of market forces through adoption of a carbon price in the state’s wholesale electricity market.  In fact, if NYISO were a state agency (which it is not), it would be obligated under Sections 7 and 8 of the Act to contribute to achieving the statewide GHG emissions limits, and adoption of a carbon price would be a natural response to such a mandate.”

The last I checked the NYISO was supposed to be independent.  Until such time as the NYISO or the State has come up with a feasibility study showing that the aspirational goals of the CLCPA can be met without endangering the goals of safe, adequate, and reliable service at just and reasonable rates, I think that it is premature to adopt a carbon price just because of this mandate.  Only when there is a plan can we really analyze how the carbon-pricing mechanism will work for New York.

  1. A NYISO carbon price can help deliver NY’s clean-energy transition in faster, cheaper, more reliable, more efficient, and more creative ways

“NYISO and key stakeholders have already developed a carbon-pricing proposal that—once in place—can send positive signals to encourage early action, consistent with the Act’s intent.”  I do not dispute that the carbon-pricing proposal can send a price signal.  However, I have seen no evidence that price signal from the proposal will actually send a strong enough signal to provide all the benefits suggested.  For example, according to the NYSERDA Patterns and Trends document in 2016 the electric sector emitted 27.7 million metric tons of CO2.  At a social cost of carbon value of $50 the carbon price initiative revenues would be $1.386 billion.  At the same time the CLCPA was signed, Governor Cuomo “executed the nation’s largest offshore wind agreement and the single largest renewable energy procurement by any state in U.S. history – nearly 1,700 megawatts -with the selection of two offshore wind projects”.  According to the Electricity Market Module chapter of the U.S. Energy Information Administration’s (EIA) Annual Energy Outlook 2019 the New York region cost per kW is $8,380.  This means that the “overnight capital costs” of the two announced offshore projects (1,696 MW) will cost $14.212 billion.  Is an indirect price signal that is less than 10% of the cost of just these two projects amongst the many more that will be required really going to spur investments?

The second slide with the same title goes on to say that the price will also “help retain existing generating units with zero or low carbon emissions in operation as long as safely possible”.  While it surely cannot hurt, I again wonder if this is strong enough a signal.

  1. A carbon price will position private investment and operations in the direction of State goals

“Since 2000, private power companies and public power authorities have added nearly 13,000 MW of new power-production capacity (which now equals more than one-third of the capacity on today’s NYISO system). Most of these more-modern and more-efficient power plants have located in downstate New York where most of the state’s power consumption occurs, and where the operation of competitive and efficient markets minimizes production costs and investment risks for the state’s consumers of electricity.”  The report claims that the carbon price will incentivize even more investment where it is needed.  I cannot argue with that but the record shows that investment is occurring where it is needed anyway.  Is this untried theoretical approach needed?

  1. A carbon price in NYISO markets creates synergy between the state’s wholesale electricity market design and the Act’s GHG-reduction targets

The presentation claims “Adoption of a carbon price would help to send efficient price signals to market participants about the value of clean energy resources, and would establish an electric system strongly aligned with the goals of the Act.”  I don’t question the theory and it makes sense that this is an added incentive.  The real issue is whether the social cost of carbon price adder provides a strong enough signal to create “synergy”.

  1. A carbon price can work hand in hand with other policies to amplify innovation in clean-energy products and services, the control of air pollution, investment in advanced energy infrastructure, and improvements in public-health outcomes

I think this argument is weak.  The unresolved question is whether the social cost of carbon price indirect cost adder will be strong enough to provide more incentives for clean energy than direct subsidies.  I have analyzed the results of RGGI investments in New York and it appears to me that direct subsidies reduced emissions more effectively than indirect subsidies.  A carbon pricing scheme is the ultimate indirect approach.  If it covers the entire energy sector, I think this effect will be reduced but we simply don’t know.

  1. There will be out-of-pocket costs to transition NY’s energy economy

“Certainly, it will be difficult to achieve the goals of the Act without incurring costs”.  This is a big understatement.  This is the biggest unknown for New York’s “strongest set of climate policies”. How can anyone know what the costs will be until we have a plan how the goals will be met.  The relevant question for the carbon pricing initiative is whether it is worth the risk trying to implement a theoretical solution at the same time all these other unresolved plans are developed.

The presentation goes on to say:

“New York policy makers have decided, at least implicitly in the findings of the Act, that the real costs of climate change are significant enough to warrant urgent, aggressive action to transition the state’s economy away from fossil fuels.”  The legislative approach ignores numbers.  If, as I believe is likely, the cost of this transition exceeds the social cost of carbon what is the value of urgent, aggressive action?  We won’t know until there is a plan.

“The Act is premised on policy makers’ recognition that New Yorkers are already experiencing hardships and real economic costs—in the form of air pollution, harm to public health (especially for vulnerable populations), damage to property and critical infrastructure, declines in fish populations, and injury to key industries like ‘agriculture, commercial shipping, forestry, tourism, and recreational and commercial fishing’.”  This is an emotional rather than quantitative argument because the potential economic costs and benefits have not been quantified.  I believe it is appropriate for an independent organization to make this claim.

“The Act seeks to reduce and mitigate even worse impacts from a changing climate by requiring the actions the state will undertake to reduce GHG emissions.”  The state has never quantified the expected reduction and mitigation of worse impacts.  The reality is that it is inappropriate to expect that there will be any alleged impacts when the reduction in global warming potential cannot be measured if the State manages to eliminate CO2 emissions.

  1. The Act is still new.

“None of the prior studies that have modeled consumer cost impacts from a carbon price in NYISO markets reflects the timing and depth of changes that will be needed in NY’s electric system under the Act.”   At the risk of repeating myself again, if there is not plan then we cannot calculate consumer cost impacts.  The slide goes on to say “we observe that various studies to date indicate that a carbon price will lead to billions of dollars of positive economic benefits”.  Rather than argue about the value of the alleged benefits I will simply note that it is not clear why this report advocates for the rationale for the program.

  1. A carbon price will help move NY’s clean-energy economy forward in ways that are hard to predict

“Just as we are unable to quantify the actual costs to consumers of New York’s transition to a lower-carbon electricity system and lower-carbon economy, we are unable to quantify the actual costs (or net benefits) of adding a carbon price into NYISO’s market.”  Even if the theory works out, there significant logistical implementation issues.  The possibility that there may be dis-benefits, unanticipated problems and negative unintended consequences is ignored.

“Yet we strongly expect—based on the efficiencies achieved in electricity pricing since the start of competitive wholesale electricity markets, and on the similarly successful history of SOx and NOx emissions pricing in electricity markets—that NY’s economy and consumers will benefit from the operation of a carbon price to internalize into market prices the costs of carbon emissions alongside the deployment of myriad other public policies aimed at advancing the state’s energy transition.”  Because of fundamental differences between control options the success of historical SOx and NOx emissions pricing is no guarantee of future performance of a different market approach for CO2.

  1. Powering more of NY’s economy on electricity will help lower the costs of reducing GHG emissions from buildings and vehicles, compared to other approaches

In order to further justify their approach the report states: “This positioning of the electric system to help lower carbon emissions in the economy is consistent with the academic literature which strongly suggests that an electric system comprised of diverse, zero-carbon supplies coupled with an economy that is more reliant on electricity increases the possibility of significantly reducing GHG emissions at lower costs than other approaches.”  I agree electrification is probably the cheapest reduction approach for economy-wide GHG emissions.  The questions that remain are how much will the approach cost and how will it be implemented?

Conclusion

The report concludes with 14 outcomes that the authors believe provide incremental value for the NYISO carbon-pricing mechanism.  I don’t necessarily disagree with any of them.  The problem is the matter of degree.  I have seen no evidence that the price signal will be strong enough to drive investments.  For example, this initiative certainly will not be a dis-incentive for innovation but will it provide enough value to be worth the risks.

I describe a number of potential issues with the carbon pricing initiative in this post.   Among the implementation issues are the requirement to track CO2 emissions not only within the state but also from outside sources and reporting requirements that are incompatible with existing regulations. The carbon price will generate over a billion dollars.  In theory the money will flow where and reward who it is supposed to but there could be issues such as getting back the money so that it does not negatively impact consumers. The biggest unresolved question is whether the social cost of carbon signal proposed for this initiative will be strong enough to produce any of the claimed benefits.  No one has addressed that to date.

Finally, I believe that there is one over-arching issue that dictates caution and delay.  The regulations were written without a feasibility requirement.  Until such a study has been done so we have a planning scenario for the amount of renewable power needed, the amount of storage needed to back the intermittent renewable power up and the amount of transmission needed to move the diffuse renewable power to where it is needed, I don’t believe we should be assuming that a carbon price approach will be the best way to pay for it.  Therefore, it only seems logical to delay implementation until you know what you are going to do.

Can Carbon Pricing Support the New York CLCPA

It has been a long time since I have posted anything about the New York State Carbon Pricing Initiative.  A couple of recent events precipitated my desire to do another post especially as it relates to New York’s Climate Leadership and Community Protection Act (CLCPA).  This post describes my concerns with carbon pricing in general and the New York proposal in particular.

Reason to Post

I am posting because of two recent items.  According to Marie French in Politico’s New York Energy September 18, 2019 edition:

“The state’s top utility regulator said Gov. Andrew Cuomo’s administration continues to await evidence on whether carbon pricing offers a better way to achieve New York’s energy policy goals before offering a verdict on the proposal’s fate. Public Service Commission Chairman John Rhodes spoke to a gathering of energy industry executives at the Independent Power Producers of New York’s annual fall conference at the Gideon Putnam. He was asked head-on about the administration’s position on carbon pricing and reiterated the wait-and-see tack taken by policymakers thus far. “When carbon pricing was first proposed, we were interested and as it’s been shaped and subjected to analysis we have remained interested,” Rhodes said. “But from the very beginning we stated the basis on which we would be interested … which is as long as it’s a more effective instrument of state policy.” The New York Independent System Operator (NYISO) has been grappling with how to implement carbon pricing since a process was kicked off by Rhodes and then-NYISO leader Brad Jones in August 2017. NYISO has indicated it doesn’t plan to take a vote on the proposal without support from the Cuomo administration, and the state would have to set the price for carbon under the scheme.”

The other item is a video entitled How carbon pricing can help support the CLCPA posted by the NYISO on August 14, 2019.  The video features NYISO principal economist Nicole Bouchez who explains “how injecting a “social cost of carbon” into wholesale electricity markets provides an efficient dispatch mechanism for selecting energy resources with the lowest emissions. This offers the state another tool for achieving its aggressive carbon reduction goals.”

It sounds to me like the Administration is nervous about this approach and so won’t make a commitment.  Bouchez who has spent the last 18 months or so developing the proposal is lobbying for its use.  I have not been following the proposal this year because my comments to the NYISO during their development phase last year were ignored and this year it went to a different phase with a different committee that does not even allow comments from outside parties.  I have plenty of other things to do to so wasting my time commenting on this topic to an organization that ignores comments was not a priority. I will post once again on this topic for your edification.

New York Carbon Pricing

In its simplest form, the carbon pricing initiative would add a carbon cost adder to all electric generation sources in New York.  This is supposed to reflect the social cost of carbon dioxide emissions.  My last post on this initiative translated the Carbon Pricing Proposal Prepared for the Integrating Public Policy Task Force for an outside the New York Capital District energy wonk audience.  Upon further review of that post I still stand by all of my concerns.  There are significant logistical issues associated with implementation of the proposed scheme.  NYISO has consistently downplayed those issues.  I am concerned that implementation will be a logistical nightmare for the people who have to do the work but that is not my biggest worry.  There are so many unknowns in how this will work that I think it is likely that there will be inadvertent gaming of the system and the potential for intentional gaming that will not be in the interest of the public’s need for just and reasonable electric rates.

When I came back to this topic after stepping away from the nitty-gritty details of this initiative for eight months, I realized that my primary concern was not in the details of the application but in the theory.  For some reason my top viewed post at my blog is Academic RGGI Economic Theory of Allowance Management and there is a similar problem with the carbon pricing theory.  Economist theorize that the CO2 allowances in the Regional Greenhouse Gas Initiative are treated as storable commodities.  As such the current price and the plan for accumulation of allowances should depend on the expected long-run total supply compared to the expected long-run total demand.  However, in the real-world, allowances are not treated as storable commodities by the affected sources.  Instead, allowances are treated as compliance requirements with short-term horizons by sources who own the most allowances.  I am not about to disagree that they should not be taking a longer-term view but the reality is that for a variety of reasons it does not happen that way.  Eventually I predict that the departure from reality in the theory that has driven the RGGI plan will cause problems because the latest round of revisions to the rule depended on the theory more than the history of the program.

For the NY carbon pricing initiative, I have a similar concern rationalizing theory and practice.  The theory says that when the price of electricity is raised by pricing carbon, the increased costs at the higher CO2 emitting facilities will reward existing lower emitting units and will incentivize investment in new lower emitting facilities.  If the market is efficient then the most cost-effective reductions will occur and everyone will be happy.  I think that there are a number of practical reasons that this will not work as proposed in the New York market.

My most general concern is that the carbon pricing initiative is just for the electric sector in one market.  Ideally you want a carbon price on all sectors across the globe.  I don’t think that is ever going to happen because of the tradeoff between the benefits which are all long term versus the costs which are all short term.  I don’t see how anyone could ever come up with a cost scheme that equitably addresses the gulf between the energy abundant “haves” and those who don’t have access to reliable energy.  Trying to force fit this global theory into the New York electricity market will likely bring up many unintended consequences.  The biggest problem is simply leakage between New York and every other neighboring electric market.

I also don’t think that advocates for this approach have fully considered how reductions could be implemented.  Who is going to invest in the alternatives?  Existing fossil-fired generating sources in New York are on death row if we are to believe that the CLCPA target to eliminate CO2 emissions from the electric sector by 2040.  Even if there were cost-effective add-on CO2 controls for existing sources, I doubt that anyone would invest given that end date.  I don’t think that there are any existing power facilities with room for much in the way of diffuse renewable generation.  Solar cells could work but there isn’t enough room for much at existing facilities.

Ultimately, I think that the investment problem boils down to an indirect signal versus a direct signal. In a recent post, I analyzed NYSERDA’s investment of RGGI auction proceeds.  Comparing different programs, I concluded that the more there is a focus on direct investments in emission reductions the better the cost benefit ratio.  On one hand it could be seen as intuitively obvious but the point is that carbon pricing proposals rely on a completely indirect impetus for emission reductions.  As such those proposals, as theoretically appealing as they may be, may be much less cost effective than suggested.

That same post showed that RGGI investments are not very cost efficient.  New York will likely propose to use the Obama era Social Cost of Carbon value which is $50 in 2019.  The best NYSERDA investment program category cost benefit ratio is three times greater than that value.  The cost benefit ratio for all the NYSERDA investments is over nine times greater than the $50 SCC value.  If a mix of investments has this poor a record of cost efficiency then how could can an indirect price signal at that level trigger any response?  It may well be that the carbon price SCC value is not a strong enough signal to drive investment.

Before New York commits to this “bright and shiny object” that advocates can brag about, someone should do some analysis of market price signals for actual investments.  While the theory might sound grand, if the proposed signal does not actually drive investments the only thing this will do is raise electricity prices. Among the many logistical implementation issues is how the money collected will be equitably returned to ratepayers.  Even if there were a logical and equitable way to apportion costs back across the state, the Cuomo Administration has a record of diverting funds intended for climate mitigation to suit its purposes.