Category: Climate Act Cap & Invest

Basis of New York Cap and Invest Health Benefits Claims

For the first two months of 2024 the New York State Department of Environmental Conservation (DEC) and the New York Energy Research & Development Authority (NYSERDA) have been working on the  New York Cap-and-Invest (NYCI) Program stakeholder engagement process.  As part of the stakeholder engagement process there was a webinar describing the Preliminary Scenario Analyses.  One thing that caught my attention was the claim that health benefits could be as much as $15.7 billion in 2035 because of NYCI implementation.

Two recent blog posts described a literature article about the development of the Linear No Threshold (LNT) model for cancer risk that is the basis of the NYCI health benefits claim. This post describes the Journal of Occupational and Environmental Hygiene paper by Edward Calabrese “Cancer risk assessment, its wretched history and what it means for public health”   and the NYCI health benefits claims.

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 post 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.

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) is responsible for preparing the Scoping Plan that outlines how to “achieve the State’s bold clean energy and climate agenda.”  In brief, that plan is to electrify everything possible 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.  In 2023 the Scoping Plan recommendations were supposed to be implemented through regulation, PSC orders, and legislation.  Not surprisingly, the aspirational schedule of the Climate Act has proven to be more difficult to implement than planned.  NYSERDA and DEC are attempting to promulgate rules for NYCI so that the program starts in 2025 and the regulatory package will claim significant health impacts that I think are unjustified.

Linear No Threshold Model

The weekly newsletter “The Week That Was: 2024-03-23” produced by the Science and Environmental Policy Project includes a section titled “Lack of Science Integrity” that describes the Edward Calabrese “Cancer risk assessment, its wretched history and what it means for public health”   paper.  That post walks the reader through the paper with extensive quotes including the introduction:

The story about to unfold in this commentary will be disturbing but perhaps not too surprising now in contemporary society. You will be taken on a path of discovery that explores the history of cancer risk assessment for radiation and chemical carcinogens. This commentary is about a history of errors made by scientific leaders that have long remained hidden and uncorrected. The evidence shows that major biases led to deliberate misrepresentations (i.e., blatant dishonesties) of the scientific record by the very people society was supposed to trust, including multiple Nobel Prize winners. Equally troubling have been the dishonest actions of organizations, such as major advisory bodies, including the US NAS and the journal Science that have repeatedly succumbed to violations of the public trust. As disappointing and upsetting as such statements are, it is hard to believe that this historical record could get even more corrupt, but it does. It has become known that major US scientists conducting important mutation and cancer studies hid data and deliberately withheld results from the public and scientific community. Why? Because the findings didn’t fit their preconceived beliefs and would not enhance opportunities to obtain more funding for themselves and their programs. Yes, the destructive self-interest of the research community, especially governmental and university scientists, in this case, presents a prominent but long hidden dimension that unfolds in a complex journey of discovery.

Society is faced with questions over who can be trusted in today’s world: government, scientists, prestigious advisory groups, like the United States National Academy of Sciences (US NAS), and major journals like Science, Nature, The Lancet, and others. These have historically all been the entities that society has trusted for decades. The historical record presented here, therefore, involves powerful and high-profile individuals and groups that manipulated the public for personal gain and is presented in the following eight-part expose.

If you are interested, then I encourage you to read the rest of the SEPP newsletter and the article itself but the implications are not immediately obvious without background.  Originally, I thought I would use this post as the basis for describing the background of problems identified in the Calabrese paper.  However, Francis Menton wrote a post doing just what I was planning to do. 

Menton notes that:

Calabrese’s article is long (18 two-column single-space pages) and goes into detail of the names involved, the particular pieces of evidence suppressed along the way, the manipulation of members of committees to get to desired outcomes, and so forth. It has a lengthy bibliography, including references to multiple prior articles of his own where he has been piecing together and building the story of the LNT fraud for years. If you are interested in this subject, I highly recommend this article.

Menton argues that this approach is a candidate for the greatest scientific fraud of all time.  He writes:

This fraud goes by the common acronym of “LNT,” which stands for the “linear no threshold” hypothesis of causation of diseases, particularly cancer, from environmental factors. The LNT hypothesis is the basis for huge swaths of enormously costly regulation, probably the large majority of environmental regulatory cost outside the sphere of “climate.” In a March 7 article in the Journal of Occupational and Environmental Hygiene, a guy named Edward Calabrese makes the case that the LNT hypothesis has been advanced by means of intentional fraud since its inception nearly 100 years ago. The title of the article is “Cancer risk assessment, its wretched history and what it means for public health.”

He describes the basis of the approach:

The LNT hypothesis theorizes that if a chemical or phenomenon (e.g., radiation) is established as dangerous at some dosage, no matter how high, then it must also be dangerous at small dosages, no matter how tiny. That conclusion follows if the relation of dose to danger is linear, with no threshold below which the danger goes away. A tiny dose may have a tiny danger, but as long as the dose/danger relationship is linear without threshold, then there is no safe dose.

This approach was originally developed to address cancer risk from nuclear radiation exposure, but the principle is now applied in other ways.

Calabrese’s article provides a thorough history of the origins of the LNT hypothesis, and how it was advanced and promoted by the suppression of definitive contrary evidence. By the 1970s the LNT hypothesis had the backing of the National Academy of Sciences and had been adopted by the EPA as the basis for regulating hazardous chemicals and radiation. The EPA continues to use the LNT approach in its regulatory efforts today, even as evidence accumulates that it is wrong and has been based on fraud from the outset. And thus, the LNT hypothesis is the fundamental reason why nuclear power plants are so expensive and difficult to build; why no long-term solution for storage of spent nuclear fuel can be found; why EPA constantly proposes new regulations lowering allowable levels of emissions of chemical substances like mercury or PCBs; why pesticides and herbicides like glyphosate become the subject of multi-billion dollar liability disasters; and so forth.

Menton goes on to explain:

The LNT hypothesis may at first seem intuitively likely to be true. For example, it is established that large doses of radiation can induce mutations that can lead to cancer. So why then couldn’t a single item of radiation, like one alpha particle or a single gamma ray, induce the mutation that initiates the disease? But Calabrese points out that the LNT hypothesis presumes that mutations are rare, and that the body has no capacity to repair ongoing mutations. What research has revealed is that, far from being rare, mutations are extremely common; and the body has a large capacity to repair them. Thus, a small external source of mutations, like background or low-dose radiation, is easily dealt with, and if anything helps to stimulate and exercise the body’s natural repair system. Only when an external force causes very extensive mutations exceeding the body’s capacity to repair — i.e., when some threshold is crossed — does the external force increase the risk of cancer or other disease. From Calabrese, page 16:

[T]he most dominating cause of evolution is our metabolism which induces millions of mutations per day in each cell, with 99.99999% being repaired each day. If our repair systems were not so exceptionally good, life would not exist. Our metabolism produces about 200 million times more genetic damage events per cell per day than that induced by background radiation. There is no contest between the two. What this means is that our body is our biggest enemy; it also means that it is also our best friend. The body’s great repair mechanisms evolved not to prevent and repair damage from background radiation but to fix the damage that our metabolism induces each day. Thus, the body’s repair systems are designed by nature to protect our bodies against ourselves, with background radiation being a very tiny and insignificant factor.

Sadly, this approach is widely used and now provides “justification” for many environmental regulations.  Proponents calculate a relationship between health effects at two high levels then extrapolate the dose response curve to ridiculously low levels.  Even though there is a tiny effect multiplying the impact over a large population provides scary projections for things like asthma exacerbation.  Menton explains why it has become so pervasive.

So how did the LNT hypothesis gain such enormous sway, and become the basis for extensive and destructive government decision-making for decades? Calabrese points out that, by contrast to the threshold hypothesis, the LNT hypothesis has the potential to induce great fear in the public, and thus to stimulate large opportunities for funding and career advancement:

[T]he experts got the radiation and chemical mutation idea wrong from the start but they convinced many that they were correct and created debilitating fear in the population at the same time. We also learned that one of the reasons that these great scientists created such fears was to advance their careers and to get a constant flow of government grant monies.

In the next section I will show how NYSERDA and DEC have used this approach for NYCI.  Menton provides a good segue to that section:

Meanwhile, our government and its “experts” merrily go forth regulating on the basis of the LNT hypothesis, and imposing enormous costs on society for no benefit. From Calabrese’s Conclusion:

[The scientists who promoted the LNT hypothesis] were driven by ideological and self-serving professional biases that would lead to both falsifications of the research record and suppression of key scientific findings, all to establish the LNT model for hereditary and cancer risk assessment, replacing the threshold dose-response model. This troubling history has now been revealed in a long series of peer-reviewed publications by the author and summarized in a broad conversational manner in this Commentary. This troubling history remained hidden from regulatory agencies around the globe since its inception. These groups simply and uncritically accepted a flawed and corrupt history, assuming that it was accurate and reliable. Yet this path of historical ignorance led the US EPA, and other national regulatory agencies, to accept a dishonest foundation upon which to base and frame cancer risk assessment, terribly failing in their public service mission.

New York Cap and Invest Health Impacts

The purpose of this article is to show the basis for the projected health effects of NYCI. At the January 26, 2024 webinar the methodology for the health effects was described.   In brief, fuel consumption changes by sector projected by their modeling were used to estimate changes in emissions.  The changes in emissions reduce ambient air quality levels and this leads to the alleged health benefit improvements.  Because the emissions estimates cannot be broken down into detail the air quality impacts also are broad estimates.  EPA’s CO-Benefits Risk Assessment Health Impacts Screening and Mapping Tool uses the LNT approach to estimate health impacts, primarily for improvements in inhalable particulate matter that is 2.5 microns or smaller.

The projected health impacts description claims that there are substantial benefits.

The NYCI Preliminary Analysis Data Annex spreadsheet includes supplementary health effects data for the webinar presentation and  a table that estimates impacts on air quality and health.  The following table excerpts some of the health benefits projections.  Frankly, I think that all these improvements are well within normal variation so the whole exercise has little value.  Note that I expected that each of the benefits would be linearly proportional to the change in concentrations but applying the ratio of 2025 to 2030 improved concentrations to the health benefits did not match exactly.  In all cases the assumed proportional benefit was less than the benefits shown.

Despite the lack of an exact linear match, I believe the results are close enough to use them to project health benefits between the inhalable particulate concentrations in 2000 relative to 2022.  The Department of Environmental Conservation runs a network of inhalable particulate monitoring stations across the state and summarizes the results in its Ambient Air Quality Reports.  I extracted the annual average concentrations for seven widely ranged sites with the longest records.  All the stations show significant improvements in the inhalable concentrations over the period of record.  I calculated the average of these sites in 2000 11.4 micro grams per cubic meter and 2022 6.0 micro grams per cubic meter for a statewide improvement of 5.4.

New York State Annual Average Inhalable Particulate Air Quality (micro grams per cubic meter) Trend

The following table compares the observed improvement in air quality and projects health benefit improvements proportional to the change in inhalable particulates.  If there has been an observed reduction of over one million emergency room visits for asthma between 2000 and 2022 then I will believe the NYCI health benefit projections.  I have never seen anyone verify this health benefit model which should be easy to do.  I expect that the results would be inconvenient, and proponents of this methodology know this so it has never been done.

Conclusion

In every instance I have checked the Hochul Administration has overstated the benefits and understated the costs of the net-zero transition.  New York’s cap-and-invest projected health benefits are a vivid example of how NYSERDA manipulates the narrative to claim benefits that far exceed any reasonable interpretation.  I think Menton’s conclusion is an appropriate: “As of today, there is no evident retreat by EPA or other U.S. regulatory agencies from the LNT model. Fear sells, and they have no ability or incentive to self-correct.” 

Howarth’s Adverse Impact on New York Cap-and-Invest

In January 2023 I wrote an article describing Dr. Robert Howarth’s statement supporting his vote to approve the Climate Leadership and Community Protection Act (Climate Act) Scoping Plan.  Roger Pielke, Jr. recently did an interesting piece on the Biden Administration decision to halt the permitting of the continued expansion of U.S. liquified natural gas (LNG) export capacity that featured a link to Howarth and his position on methane.  It provides more evidence that a “Professor of Ecology & Environmental Biology” is unqualified to be considered an expert on methane emissions.  His misleading guidance adversely impacts the New York Cap-and-Invest program.

I have followed the 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 post 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.

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) is responsible for preparing the Scoping Plan that outlines how to “achieve the State’s bold clean energy and climate agenda.”  In brief, that plan is to electrify everything possible 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.  In 2023 the Scoping Plan recommendations were supposed to be implemented through regulation, PSC orders, and legislation.  Not surprisingly, the aspirational schedule of the Climate Act has proven to be more difficult to implement than planned and many aspects of the transition are falling behind, and the magnitude of the necessary costs is coming into focus. 

Howarth and the Climate Act

Howarth takes pride in his role in the Climate Act.  I previously explained that the statement of Robert W. Howarth, Ph.D., the David R. Atkinson Professor of Ecology & Environmental Biology at Cornell University was very illuminating relative to the motives of the Climate Act authors.  He reiterated his claim that he played a key role in the drafting of the Climate Act, developed the methane requirements, and credited one politician for getting the Act passed:

Assembly Person Steven Englebright was hugely instrumental in the passage of the Climate Leadership & Community Protection Act that established the Climate Action Council. I thank him for his leadership on this, and particularly for his support of the progressive approach on greenhouse gas emissions that is a central part of the CLCPA. I originally proposed this to Assembly Person Englebright in 2016, and he enthusiastically endorsed and supported it through multiple versions of the bill that finally led to passage of the CLCPA in 2019. In this accounting for greenhouse gases, a major government for the first time ever fully endorsed the science demonstrating that methane emissions are a major contributor to global climate change and disruption. Further, in passing the CLCPA New York recognized that consumption of fossil fuels (and not simply geographic boundaries) is what matters in addressing the climate crisis. New York wisely banned the use of high-volume hydraulic fracturing (“fracking”) to develop shale gas in our State. But since the time of that ban, the use of fossil natural gas has risen faster in our State than any other in the Union. Methane emissions from this use of shale gas are high, but much of that occurs outside of our boundaries in the nearby states of Pennsylvania, West Virginia, and Ohio. Through the CLCPA, the citizens of New York are taking responsibility for these out-of-state emission caused by our use of fossil fuels, particularly for fossil natural gas. The way to reduce these emissions is to rapidly reduce our use of fracked shale gas.

Unfortunately, Howarth’s influence on Climate Act implementation also extended into the Climate Action Council. As a member of the Climate Action Council, Howarth was considered a subject matter expert and most members unquestioningly accepted whatever he said.  This deference to his concerns is also apparent in the Integration Analysis and Scoping Plan.  In my previous article I explained why many of his claims were not supportable.

Methane

At the time the Climate Act was written it incorporated unique emissions accounting requirements that elevate the importance of methane to Climate Act compliance.  In particular, the Climate Act specifies that the global warming potential (GWP) must be calculated over a 20-year time horizon.  The Inter-governmental Panel on Climate Change (IPCC) describing time horizons and the GWP[1] notes:

“The GWP has become the default metric for transferring emissions of different gases to a common scale; often called ‘CO2 equivalent emis­sions’ (e.g., Shine, 2009). It has usually been integrated over 20, 100 or 500 years consistent with Houghton et al. (1990). Note, however that Houghton et al. presented these time horizons as ‘candidates for discussion [that] should not be considered as having any special sig­nificance’. The GWP for a time horizon of 100 years was later adopted as a metric to implement the multi-gas approach embedded in the United Nations Framework Convention on Climate Change (UNFCCC) and made operational in the 1997 Kyoto Protocol. The choice of time horizon has a strong effect on the GWP values — and thus also on the calculated contributions of CO2 equivalent emissions by component, sector or nation. There is no scientific argument for selecting 100 years compared with other choices (Fuglestvedt et al., 2003; Shine, 2009). The choice of time horizon is a value judgement because it depends on the relative weight assigned to effects at different times.”

Howarth and others argued that it was necessary for the Climate Act to use 20-year global warming potential (GWP) values because methane is estimated to be 28 to 36 greater than carbon dioxide for a 100-year time horizon but 84-87 GWP over a 20-year period.  Because of these high potentials they assumed that meant that the effect of methane on expected warming would be significant.

I have noted that this irrational obsession with methane that is incorporated in the Climate Act is inappropriate. The fundamental flaw with the basis for vilifying methane is that it is based on selective choice of the science and ignores inconvenient aspects of radiation physics which indicate that the laboratory measurements of global warming potential do not translate to the atmosphere where it counts. 

LNG Export Terminal Pause

I originally was going to include this link in my fortnightly “Articles of Note” post but decided to elevate it into a focused post because of a reference to Howarth.  Roger Pielke, Jr did an interesting piece on the Biden Administration decision to halt the permitting of the continued expansion of U.S. liquified natural gas (LNG) export capacity.  He describes the activist rationale for the LNG export expansion halt “included in a letter to President Biden from a group of activists, including the University of Pennsylvania’s Michael Mann and Stanford’s Mark Jacobson”:

Taken together, if all U.S. projects in the permitting pipeline are approved, they could lead to 3.9 billion tons of greenhouse gas emissions annually, which is larger than the entire annual emissions of the European Union. A forthcoming study by Cornell University climate scientist Robert Howarth shows that, even in the best-case scenarios, LNG is at least 24 percent worse for the climate than coal. Increasing LNG exports will mean increased extraction of fossil fuels and climate pollution and directs us away from a renewable energy future.

[1] Reference: Myhre, G., D. Shindell, F.-M. Bréon, W. Collins, J. Fuglestvedt, J. Huang, D. Koch, J.-F. Lamarque, D. Lee, B. Mendoza, T. Nakajima, A. Robock, G. Stephens, T. Takemura and H. Zhang, 2013: Anthropogenic and Natural Radiative Forc­ing. In: Climate Change 2013: The Physical Science Basis. Contribution of Working Group I to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change [Stocker, T.F., D. Qin, G.-K. Plattner, M. Tignor, S.K. Allen, J. Boschung, A. Nauels, Y. Xia, V. Bex and P.M. Midgley (eds.)]. Cambridge University Press, Cambridge, United Kingdom and New York, NY, USA.

Pielke, Jr. writes that this policy decision raises three concerns. 

  1. “The Biden Administration made a decision before producing the evidence on which such a decision is supposed to be based.
  2. The Biden Administration decision ignores the “geopolitical and security implications of the decision”.
  3. Finally, there appears to be no consideration of the economic impacts of the decision.

I recommend reading the article in its entirety.

The reason I turned this into a focused post is because Pielke, Jr. included a previously unknown to me reference regarding Howarth. His quote from the activist letter mentions a forthcoming study by Howarth which Pielke, Jr. described as follows:

The study referenced above suggesting that LNG is worse than coal in terms of greenhouse gas emissions is by Robert Howarth of Cornell University, and is both contrary to a broad scientific consensus on this issue and a lone outlier.

Of particular interest is the footnote associated with the “lone outlier” label.  Pielke, Jt. states:

The story behind the new Howarth study is for another day. I’ll just note here that in 2012 Howarth told a reporter that he was performing anti-fracking research for hire — The reporter explained: “In an interview, Howarth told me his goal was to make the anti-fracking movement mainstream and fashionable. He said he met with the Ithaca-based [Park] foundation two years ago, agreeing to produce a study challenging the conventional wisdom that shale gas is comparatively clean…Howarth hired an aggressive PR firm, the Hastings Group, to promote his politicized viewpoint.”

This is smoking gun evidence that New York’s unique characterization of methane and Climate Act policy requirements is based on the politicized and financially advantageous work of a for hire scientist. 

Discussion

On January 23, 2024, the New York State Department of Environmental Conservation (DEC) and the New York Energy Research & Development Authority (NYSERDA) hosted the first webinar of this year’s New York Cap-and-Invest (NYCI) Program stakeholder engagement process.  One of the points made in the first webinar was that under Governor Hochul’s direction, New York’s cap & invest program will incorporate these guiding principles:

  • Affordability. Craft a program to deliver money back to New Yorkers to ensure energy affordability
  • Climate Leadership: Catalyze other states to join New York, and allows linkage to other jurisdictions
  • Creating Jobs and Preserving Competitiveness: Protect existing jobs and support new and existing industries in New York
  • Investing in Disadvantaged Communities: Ensure 35%+ of investments benefit Disadvantaged Communities
  • Funding a Sustainable Future: Support ambitious clean energy investment

There are ramifications of the reliance on Howarth’s work for the first two principles: affordability and climate leadership links to other jurisdictions.

Last spring I described a Climate Act Revisions Kerfuffle when the Hochul Administration floated the suggestion to revise the emissions accounting methodology to use the Global Warming Potential over 100 years instead of 20 years because of a concern with cost.  Climate Action Council co-chairs Doreen Harris and Basil Seggos argued that:

“First and foremost, the governor is trying to maintain New York’s leadership on climate. It’s a core principle that she brought into office and we have been carrying that out for several years,” said Seggos.

But Gov. Hochul instructed both the DEC and NYSERDA to look at the affordability of Cap & Invest.

“We began running the numbers on that, based on some of the metrics being used by Washington state and some of our own, and revealed some…potentially extraordinary costs affiliated with the program,” Seggos explained. “So that’s really what this is.  It isn’t a focus necessarily on methane itself, or any particular pollutant. It is how do we implement the CLCPA in a way that doesn’t put extraordinary costs on the pockets of New Yorkers.”

The climate activist organizations went ballistic and the Administration bowed to the pressue.  Activists claimed:

“When Governor Hochul tried to sneak in a fossil-fueled methane accounting method that would gut New York State’s Climate Act during the final push of budget negotiations, New York’s climate and environmental justice movement responded swiftly and powerfully. NY Renews is proud to stand with a movement that stopped—for now—changes to New York’s progressive 20-year methane accounting method as written in law.” 

The Summary Report for the 2023 Statewide GHG Emissions Inventory  explains the effect of GWP-20 accounting and other policy requirements of the Climate Act on emissions:

When considering emission sources only within New York State and using a GWP100, CO2 is a much greater component of total emissions (Figure 3). The main difference is the CLCPA’s focus on shorter-lived methane and HFCs, which appear much larger using the 20-year GWP, although the actual mass of these emissions has not changed. The other key difference between the accounting frameworks is out-of-state emissions. Over time, New York State has imported more natural gas and has exported more waste. Methane is a major source of emissions for both the natural gas system and waste management.

In 2021 total GHG emissions were 367.87 million metric tonnes of CO2 equivalent using the Climate format (GWP-20) and to the best of my review of the data (it does not appear to match Figure 3) the GWP-100 total is 214.4 million metric tonnes of CO2 equivalent.  If the allowance costs per ton for NYCI remain the same, then costs to the state will be 72% higher using the Howarth inspired accounting.

The second Hochul principle is “climate leadership” which is described as “catalyze other states to join New York and allow linkage to other jurisdictions”.  I think it is a heavy lift to catalyze other states to join New York if most of the rest of the world is using a different accounting system, particularly when the rationale for that approach does not stand up to scrutiny.  I know that it will likely be impossible for New York to link to the California/Quebec and Washington cap-and-invest programs.  The different accounting methodology is a high hurdle and when combined with the upstream emissions accounting with the potential for double counting, it just won’t happen.

Conclusion

With all due respect to Dr. Howarth, it is appropriate to consider why a “Professor of Ecology & Environmental Biology” is qualified to be an expert on methane emissions.  Combined with the revelation that he set out to “make the anti-fracking movement mainstream and fashionable” in conjunction with the Park Foundation, the motives for his methane obsession suggest his analyses are biased to get a particular answer.  The State of New York has failed to rein him in so reconciling the inconsistencies with his pseudo-science and Hochul’s principles is a problem of their own making.  It matters to all New Yorkers because it will increase costs directly and indirectly because links to other jurisdictions could make the allowance market stronger and cheaper.

New Year’s Resolution – Methane Response

Happy New Year!

I wrote an article for Watts Up With That  that described my New Year’s resolution: I resolve that when I hear anyone say that methane is more potent than carbon dioxide because the radiative forcing produced is greater, I will say that is only true in the laboratory on a dry molecular basis.  In the atmosphere, where it counts, methane is not nearly as potent.  I had hoped to get feedback and recommendations and I was not disappointed.  This post provides the rationale for my resolution.

I have followed the Climate Leadership and Community Protection Act (Climate Act) since it was first proposed, submitted comments on the Climate Act implementation plan, and have written over 380 articles about New York’s net-zero transition. The opinions expressed in this post 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.

Rationale

I have heard the methane scare story everywhere but my primary concern is New York.  As part of New York’s Climate Act methane is irrationally disparaged as part of the war on natural gas.  The rationale used always revolves around the potency of methane relative to CO2.  I believe that the preponderance of information shows that the argument is incorrect.  I have developed a page that consolidates reasons why methane should not be vilified and updated it based on comments made.  The following summarizes my rationale.

Clyde Spencer explained that changes to radiation effects occur on a molecule-by-molecule basis in the atmosphere in an article titled The Misguided Crusade to Reduce Anthropogenic Methane Emissions.  The Climate Act tracks emissions by weight.  In the atmosphere CO2 is more than two orders of magnitude more abundant than CH4 on a molecular basis. The Climate Act uses the global warming potential that estimates the mid-range, long-term warming potential of CH4 is 32 times that of CO2.  However, that equivalence is for equal weights of the two gases!  Using a molecular basis (parts per million-volume mole-fraction) to account for the lighter CH4 molecule reveals that the annual contribution to warming is a fraction of that claimed for CO2.  Methane emissions on a molecular basis are increasing at a rate of 0.58% of CO2 increases.   Therefore, changes in methane emissions have insignificant effects.

Several commenters pointed out that that methane and water vapor affect the same area of the spectrum of outgoing radiation thus reducing the effect of any changes in methane concentrations. .Rud Istvan explained that:

Methane is a potent GHG in the lab because the lab uses a standard dry atmosphere.  I”n the real world methane’s two main infrared absorption bands (at about 3.5 and 8 microns) are completely overlapped by two of the several broader and much stronger water vapor absorption bands, specifically those from about 2.5-4 and 6-9 microns. In a world averaging about 2% specific humidity, any methane effect is literally swamped by water vapor effect.

Cyan quantified the effect of the spectral overlap “Water vapor reduces the potency of methane by about 82 percent at 80%RH. At 46% RH (from the US Standard Atmosphere) the reduction is less, at 75%.”

Andy May’s excellent summarization of Wijngaarden and Happer’s important paper “Dependence of Earth’s Thermal Radiation on Five Most Abundant Greenhouse Gases” takes a slightly different approach.  He explains that the greenhouse effect of methane is not only related to the effect on longwave radiation itself but also the concentration in the atmosphere.  Because the atmospheric concentration of methane is so small doubling concentrations change the “outgoing forcing by less than one percent”.  In other words, doubling emissions or cutting emissions in half of methane will have no measurable effect on global warming itself. A comment by “It does not add up” pointed out that Wijngaarden and Happer also produced a separate paper concentrating specifically on methane.

Ralph B. Alexander describes another molecular consideration ignored in the Climate Act.  Each greenhouse gas affects outgoing radiation differently across the bell-shaped radiation spectrum   One of the reasons that CO2 is considered the most important greenhouse gas is that its effect coincides with the peak of the bell shape.  On the other hand, the effect of CH4 is down in the tail of the bell shape.  As a result, the potential effect of CH4 is on the order of only 20% of the effect of CO2.

The residence time of the two gases is different.  Methane only has a lifetime of about 10-12 years in the atmosphere.  The “consensus” science claim is that 80% of the anthropogenic CO2 emissions are removed within 300 years.  (Note however that there are other estimates of much shorter residence times.) This means that CO2 is accumulating in the atmosphere.  CH4 is converted to CO2 and is then counted in the monthly CO2 measurements as part of the CO2 flux.  Because methane does not accumulate the same way as CO2 it should be handled differently.  However, the Climate Act doubles down.  Climate Act authors claimed it was necessary to use 20-year global warming potential (GWP) values because methane is estimated to be 28 to 36 greater than carbon dioxide for a 100-year time horizon but 84-87 greater GWP over a 20-year period.

Conclusion

The Climate Act uses explicit language to magnify the accounting for methane emissions that make the use of natural gas more expensive.  Last spring I described legislation that was proposed and endorsed by the Hochul Administration that would have changed the accounting to be consistent with the Intergovernmental Panel on Climate Change, the Environmental Protection Agency, and most other jurisdictions.  The climate activist community went nuts and the legislation never progressed. 

The problem is that I show here that the basis for their indignation is flawed as I point out in my resolution.  Methane does not have greater impacts than carbon dioxide and should not be treated as mandated by the Climate Act.  My recent article about righteous risks noted that the activists who push the evil methane narrative are driven more by moral idealism than pragmatic concerns.  In this instance, their demand for different treatment means that the proposed New York Cap-and-Invest program cannot join other jurisdictions because the emissions accounting will be different.  New York will have to develop all the infrastructure and regulations for its program on its own.

Washington State Net-Zero Transition Update

Washington state resident Paul Fundingsland has provided information for posts describing local experience with the implementation of Washington’s version of New York’s  Climate Leadership & Community Protection Act (Climate Act).  In this update, he describes his thoughts related to a petition to repeal the Washington Climate Commitment Act.

Paul describes himself as “An Obsessive Climate Change Generalist”.   Although he is a retired professor, he says he has no scientific or other degrees specific to these kinds of issues that can be cited as offering personal official expertise or credibility. What he does have is a two decades old avid, enthusiastic, obsession with all things Climate Change related. 

I have followed the Climate Act since it was first proposed, submitted comments on the Climate Act implementation plan, and have written over 380 articles about New York’s net-zero transition.  The opinions expressed in this post do not reflect the position of any of my previous employers or any other organization I have been associated with, these opinions are mine alone.

Overview

The Climate Act established a New York “Net Zero” target (85% reduction 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) is responsible for preparing the Scoping Plan that outlines how to “achieve the State’s bold clean energy and climate agenda.”  In brief, that plan is to electrify everything possible 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.  After a year-long review, the Scoping Plan recommendations were finalized at the end of 2022.  In 2023 the Scoping Plan recommendations are supposed to be implemented through regulation, PSC orders, and legislation. 

Washington’s Climate Commitment Act appears to be even more aspirational than New York.  The Washington Department of Ecology (“Ecology”) web page explains:

The Climate Commitment Act (CCA) caps and reduces greenhouse gas (GHG) emissions from Washington’s largest emitting sources and industries, allowing businesses to find the most efficient path to lower carbon emissions. This powerful program works alongside other critical climate policies to help Washington achieve its commitment to reducing GHG emissions by 95% by 2050.

The state plans in Washington and New York aim for net-zero emissions where greenhouse gas (GHG) emissions are equal to the amount of GHG that are removed.  Washington’s emission reduction target is 95% by 2050.  New York’s target is 85% by 2050.  In addition to the target levels and dates there are differences in what GHG emissions are included, how the mass quantities are calculated, and which sectors of the economy must comply.  Nonetheless, I am sure a case can be made that Washington is more aspirational than New York. 

Both New York and Washington plan to use a cap-and-invest program as part of the net-zero transition.  These programs set an annual cap on the amount of greenhouse gas pollution that is permitted to be emitted and offer allowances to emit in an auction.  The declining cap ensures annual emissions are reduced and the proceeds of the auction are supposed to be invested in funding emission reduction programs and reducing adverse impacts of the regressive energy tax.  The Washington State Department of Ecology cap-and-invest program held their first auction in February 2023 and there was an immediate jump in energy prices.  The New York cap-and-invest program is still in the development phase.  It is supposed to be implemented in 2025 but progress has been slow.

Repeal Petition

I contacted Fundingsland for his thoughts about the petition to repeal the state’s cap-and-dividend program.  Not surprisingly the increase in costs has sparked a response.  According to the Columbian:

Advocacy organization Let’s Go Washington is gathering signatures on a petition to ask the Washington Legislature to repeal the state’s new carbon pricing system.

Conservatives are saying the new program is causing Washington to have the highest gasoline prices in the nation. Oil companies with refineries in Washington must buy carbon allowances to keep emitting carbon dioxide. They appear to be passing those costs onto customers at the gas pump.

The new carbon pricing program went into effect on Jan. 1, 2023. Washington posted the highest gas prices in the nation in June and July.

“It’s such a scam. It’s a hidden tax,” said Brian Heywood, head of Let’s Go Washington, at a Republican candidates festival in Redmond on July 29.

Heywood says Gov. Jay Inslee and Democratic lawmakers downplayed the potential impact on Washington’s carbon auctions on gas prices. Inslee and his administration predicted in 2021, when the Legislature passed the program, that gasoline prices would rise only a few pennies. “He lied to begin with,” Heywood said.

It amuses me when writers act surprised that the companies who have to pay for the allowances pass those costs on to consumers.  In my decades-long experience affected companies just treat these programs as a tax and, in order to stay in business, pass those costs along.

The Seattle Times explains that backers of the petition had to get signatures:

They submitted more than 400,000 signatures for Initiative 2117, which would repeal the climate law, they said. The initiative will require 324,516 valid signatures to make it to the ballot and the signatures must be verified by the Secretary of State’s Office.

Thoughts on the Petition

I asked Fundingsland what was going on and for his thoughts. He responded:

As far as I can tell, if there are enough (324,516) valid registered voter signatures on the repeal petition, the legislature has to either adopt it as law or put it on the ballot. The legislature isn’t about to adopt it and most probably the last thing they want to see, given what has happened to our gas prices, is to have it before the general public on the ballot. They also don’t want their proposed changes to include Quebec and California in the Climate Commitment Act to be voted on by the general public either. 

From my point of view, there is just way too much money (1.5 billion and counting) coming into the state through the CCA-Cap & Invest scheme and this repeal petition creates way too many unwanted adverse circumstances to let it get before the legislature or allowing the general public to make a determination.

The simple key to making this sticky problem go away is to find or manufacture a way to invalidate or somehow sidetrack the repeal petition keeping it from getting before the legislature.

So I’m betting on the Secretary of State’s Office creatively finding ways to prove there are not enough valid signatures or finding some other magical legal or semi-legal way of derailing the repeal petition. This makes the issue disappear, at least for the meantime. It keeps the Climate Commitment Act intact while continuing the flow of monies into the state coffers and allows for the Legislature to make changes to include Quebec and California into the scheme without a public vote.

Maybe this issue will play out somewhat like this, maybe not. I will be very surprised to see the petition end up on the 2024 ballot. If it does, that will make for a very interesting vote.

As for amending our CCA to include Quebec and California in the “Cap & Invest” (Tax & Reallocate) scheme, it looks to be our version of your RGGI.

I find the claim that making the changes to Washington’s CCA to include a foreign province and a dysfunctional US state of 30 million people that is currently facing a 68 billion dollar deficit and who lost 800,000 residents since 2020 is going to reduce prices for Washington consumers and businesses, as highly suspect.  

Not surprisingly it is all about the money.  When politicians and money mix, citizens suffer.

Other Thoughts

Paul included some other thoughts about what is going on.  He said he thought that Richard Ellenbogen’s presentation detailing his concerns with the Climate Act was “illuminating”.  Based on his work he concluded that the Climate Act was a “convoluted dysfunctional quagmire.”  The rest of his description is too good not to share. 

A few overall issues stood out to me. One is the universal extreme disconnect between politicians making decisions and creating mandates in a vacuum without regard to researching any practical expertise or input from the entities that will ultimately be tasked with implementing them nor paying attention to the kinds of problems other states or countries who are further down the line have or are running into.

The most glaring example of disconnect on the international scale would be the current defective, hypocritical neo-colonialist climate clown show of 80,000 attendees at COP 28 making it the largest emissions conference in their history. This includes our own Climate Envoy (John Kerry) making the emphatic statement at this venue that “no coal plants should be permitted anywhere in the world”. 

He’s completely disregarding what is occurring with the massive build out of coal plants on the international scene in the developing countries being led by China and India. And because these plants have a life span of 40-60 years, he seems to be totally clueless, dismissive or just plain oblivious as to how that will play out for CO2 emissions going forward.

I find Kerry’s and other’s strident and condescending efforts immoral in attempting to prevent developing countries, especially in Africa, from obtaining the necessary financing they need for their grid and other infrastructure developments, forcing them instead to use expensive, unreliable intermittent sources they are told they must use. These countries have every right to develop and use their own same affordable, reliable, secure energy sources the developed countries have been using since the 1850s.

Other disconnect issues would be the complete lack of any kind of cost/benefit research or the building of a demonstration renewable only energy project of any size to verify concept, effectiveness and cost.

And then there’s “the settled science” issue. Never mind that is not how science works. Examples are the work of AMO physicists Will Happer and William van Wijngaarden proving both mathematically and with a replicable experiment that there is no “climate crisis” or “emergency” because the atmosphere is already saturated with CO2 and a doubling will add at most 0.7 degrees C. Or Nobel laureate physicist John Clauser pointing out the IPCC’s disregarding of the primary role clouds play in affecting the temperature of the planet.

In a realistic energy world the findings of these physicists and others (Koonin, Lindzen, Hayden, Giaever to name a few) would be big, important scientific news to consider. But sadly, in the developed countries we are not living in a scientifically realistic energy news world. 

Except maybe for Norway whose premier governmental agency (Statistisk Sentralbyrå) published their own incredibly thorough research finding “the effect of man-made emissions does not appear to be strong enough to cause systematic changes in the temperature fluctuations during the last 200 years”. 

As a goodly number of astute people like yourself, Ellenbogen and numerous others have pointed out, itis becoming starkly apparent that politicians and bureaucrats pushing the sorts of rushed dysfunctional plans like Climate Act here and abroad did not and are not seeking, possessing, obtaining or understanding the technical knowledge needed for functional energy policies. Instead, they blindly push these sorts of disorderly rushed unworkable plans containing a high probability for failure which can ultimately result in some sort of major blackout catastrophe precipitating a significant loss of life. 

In the US it looks like it’s a race between CA, NY, (and maybe TX) or one of the other East Coast cities/states to set this horrid example. Abroad it looks like it’s either Germany or the UK. 

Given the current politically fanatical push to eliminate all fossil fuels from our grid despite the serious warnings from NERC and FERC that such a pathway has a very serious chance of causing a major catastrophic grid failure, I’m guessing such an event has a good chance of occurring sooner rather than later.

I’m not hoping for a significant loss of life energy grid failure but perhaps this is what it will take to snap the US out of its hysterical myopic “climate crisis” stampede towards Net Zero. Such an event could affect a reassessment towards a more measured, rational, practical, user friendly reliable energy strategy. 

Perhaps such an event could even precipitate an enlightened reappraisal of the role of atmospheric CO2 and humanity’s additions to it. 

Naw, that’s probably not going to happen (except in Norway). It’s just my overly optimistic wishful thinking side revealing itself.

Maybe a national political administrative change in the US would elicit a reassessment and create a more rational, sensible energy policy pathway going forward. 

Naw, that’s probably just more overly optimistic wishful thinking on my part.

Conclusion

I concur with everything that Paul said.  It is not a question if these aspirational virtue-signaling plans will end disastrously but when.

Citizens Budget Commission on New York Cap and Invest

On November 28, 2023, the Citizens Budget Commission released Keys to a Cap-and-Invest Design That’s Earth- and Economy-Focused (“Keys Report”) that examines the potential benefits and problems associated with the New York Cap-and-Invest Plan (NYCI).  If you want a summary of this program I recommend reading the report.

NYCI is a primary tool for the Climate Leadership & Community Protection Act (Climate Act or CLCPA) net zero transition mandate.  This report does an excellent job describing the basics of cap-and-invest programs, issues that need to be considered during NYCI implementation, and makes recommendations that I believe should be incorporated.  My comments on this report support their work and provide context that shows that their concerns are warranted. 

I have followed the Climate Act since it was first proposed, submitted comments on the Climate Act implementation plan, and have written over 380 articles about New York’s net-zero transition including a number on various New York cap-and-invest proposals.  In addition, I have been associated with every cap and trade control program affecting the electric generating sector in New York including the Regional Greenhouse Gas Initiative (RGGI) which is frequently touted as a successful prototype for NYCI.  I have written about the details of the RGGI program because very few seem to want to provide any criticisms of the program.  I think that background enables me to provide some added value to the CBC report.  The opinions expressed in this post 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.

Overview

The Climate Act established a New York “Net Zero” target (85% reduction 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) is responsible for preparing the Scoping Plan that outlines how to “achieve the State’s bold clean energy and climate agenda.”  In brief, that plan is to electrify everything possible 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.  After a year-long review, the Scoping Plan recommendations were finalized at the end of 2022.  In 2023 the Scoping Plan recommendations are supposed to be implemented through regulation, PSC orders, and legislation.  NYCI is one of these components.

The Keys Report describes the status of NYCI:

New York is currently developing the rules and regulations for NYCI. Very few details are known; almost all programmatic details of NYCI will be determined by forthcoming regulations developed by the Department of Environmental Conservation (DEC), as directed by the CLCPA. The Final Scoping Plan (FSP) provides some insight into potential design parameters. The FSP envisioned a program that would cover all major sectoral emissions sources that can feasibly be regulated and an emissions cap designed to be consistent with CLCPA emissions limits. Furthermore, the New York State Fiscal Year 2024 Enacted Budget established three distinct accounts within a newly created special revenue fund into which any proceeds raised by NYCI would be transferred.

The Keys Report addresses key aspects of NYVI and “provides guidance on how to design and evaluate the effectiveness of NYCI by:

  • Providing context and background on the development of cap-and-invest programs;
  • Explaining major risks to cap-and-invest programs;
  • Identifying the goals that should be used to guide NYCI design choices;
  • Describing the design choices that need to be made; and
  • Recommending specific design choices and features.”

This article supplants that guidance with additional context. Note that I emphasize the issues associated with the electric sector but similar issues will occur in all sectors. I highlight their main points and provide my insights below.

The Basics of Cap-and-Invest

The overview in the Keys Report does a good job describing the fundamental aspects of market based emission reduction programs.  It notes:

The theory behind cap-and-invest is relatively simple: the State sets a cap on allowable emissions, distributes allowances—the permits that allow firms to generate a specified amount of emissions—to large-scale emitters via auction, and uses the proceeds of the auction (and penalties for non-compliance) to invest in programs to reduce emissions. Companies that can reduce their marginal emissions at a lower cost than purchasing allowances will be incentivized to do so, while emitters that cannot reduce their emissions as easily will opt to purchase allowances to cover all of their emissions.

There are three things that should be kept in mind about the theory relative to NYCI. The Keys Report states: “Companies that can reduce their marginal emissions at a lower cost than purchasing allowances will be incentivized to do so.”  In the Environmental Protection Agency trading programs for sulfur dioxide (SO2) and nitrogen oxides (NOx), the allowances are allocated for free but that does not mean that affected companies don’t have to pay anything.  A company can invest in pollution control equipment to reduce their emissions and if they believe that allowances might not be available or could be more expensive than investing in control equipment, then their compliance strategy would be to install control equipment.  If a company does not have a cost-effective control option, then they can decide to purchase allowances as their compliance strategy.  There are some caveats.  This only works if the companies that can install control equipment can create reductions beyond their compliance requirements so that they can sell to those who don’t have that option.  If the compliance obligation or emissions cap is too tight, then too few sources can over-comply and there will not be enough allowances available.  There also are technological considerations to cap limits that must be considered.

The second nuance is that in the proposed cap-and-invest program the allowances must be purchased.  There is no direct incentive to over-control and sell allowances to fund the installation of additional control equipment. You can argue that installing controls to exceed the limits will affect the market price of allowances that will incentivize over-control but that is an indirect effect.  In my opinion, that makes the business case more difficult to justify added expenses for over-control.  The requirement to purchase allowances in cap-and-invest programs adds a complication to the economics of compliance strategies.

The final and most important issue that must be kept in mind is that CO2 compliance strategies are different than SO2 and NOx.  There are no cost-effective add-on control systems for CO2 so affected sources have fewer options to comply.  It boils down to operate less or retire.  In the electric sector, that is only appropriate if an alternative source of electricity is available.  The Scoping Plan proposes to use the revenues from the cap-and-invest program to fund the infrastructure to produce “zero-emissions” generation or reduce the electric load so not as much generation is needed.  If the investments in wind and solar resources are insufficient to deploy the necessary resources, then it is impossible to shut down or reduce operations at electric facilities by limiting allowances.  If existing fossil-fired units cannot run because they don’t have allowances then there will be an artificial energy shortage and a real blackout.

Emissions Leakage and Related Adverse Economic Impacts Can Threaten Effectiveness of Cap-and-Invest Programs

The Keys Report explains the problem of leakage:

Cap-and-invest programs impose new direct or indirect costs on businesses and individuals. In response, those businesses or individuals may seek to avoid costs by looking beyond the borders of the cap-and-invest program. This is called leakage; economic activity continues elsewhere but avoids emissions reduction policies. When leakage occurs, it appears that emissions reductions have taken place, but they have simply been exported outside the borders of the program.

In my opinion, this is an insurmountable flaw to NYCI.  Because of the limited opportunity to reduce GHG emissions, New York companies will simply treat the allowance requirement as a tax and raise their prices to account for the increased cost of doing business.  If the cost of the allowances is sufficient to fund the emissions reductions, then everything I have observed indicates that the costs will be so high that economic activity will be forced to leave in order to stay competitive with jurisdictions that don’t have this tax.

As noted in my introduction I have spent a lot of time analyzing RGGI.  I do not agree with all the discussion of RGGI leakage:

Leakage can affect all emissions trading schemes to some degree, but it is a pronounced threat to the effectiveness of RGGI due to its confinement to the electricity generation sector. Given the interconnected nature of electricity grids, power generated in non-member states can replace generation in member states when their relative costs change. It is difficult to measure leakage, but clearly some occurs. For example, one analysis estimated that between 43 percent and 86 percent of emissions reductions benefits within the RGGI region were offset by increased emissions in neighboring states.

I disagree with the cited analysis that claims emission reductions benefits were largely offset by leakage.  If that were true, then there should be a substantive increase in generation imports displacing RGGI sources.  In late November RGGI released CO2 Emissions from Electricity Generation and Imports in the Regional Greenhouse Gas Initiative: 2020 Monitoring Report.  According to this report: “Annual average net imports into the nine-state RGGI region from 2018 to 2020 increased by 19.4 million MWh, or 34.7 percent, compared to the average for 2006 to 2008.”  However, import levels have not changed over the last seven reporting periods.  The report also notes that: “Changes in these data over time may point to potential CO2 emissions leakage as a result of states implementing the CO2 Budget Trading Program, or a lack thereof, but may also be the result of wholesale electricity market and fuel market dynamics unrelated to the implementation of the CO2 Budget Trading Program, or a combination of these factors.” 

Furthermore, my analysis of RGGI emissions over time directly contradicts the referenced paper and shows that the primary reason for RGGI emission reductions has been fuel switching from coal and residual oil to natural gas.  Most of the load reductions at the coal and oil plants was offset by increases from in-state natural gas production.  Consequently, I believe that while leakage may be occurring its effect on emissions is small relative to wholesale electricity market and fuel market dynamics unrelated to RGGI.

Program Goals to Guide the Design of a Successful Cap-and-Invest Program The Keys Report states that:

NYCI’s primary objective is to reduce greenhouse gas emissions by increasing costs to emit GHGs and spending the proceeds to facilitate further emissions reductions. These higher costs are spread across the economy, and the program must be designed well to prevent possible unintended adverse effects.

I agree that the program must be designed well to prevent adverse effects but think the problem is even more difficult than described because of the differences between a CO2 allowance trading program and other pollutant programs described previously.  NYCI is a blunt pollution control approach.

The report describes five critical goals should be considered when assessing the design choices and proposed NYCI program.

  • Maximize GHG emissions reduction: Cap-and-Invest is likely to be the primary regulatory vehicle for accelerating GHG emissions reduction in New York. The success of the program will largely hinge on how effectively it incentivizes the mitigation of emissions that can feasibly be reduced. However, there are practical limits to what can be achieved, especially in the near-term, due to technological constraints and the availability of low-emissions energy.

This is an excellent summation of the problem.  Unfortunately, the practical limitations may be insurmountable on the mandated schedule.

  • Minimize the financial cost to businesses and households: Regulators should consider how much the program will cost businesses and households, to avoid putting New York’s economic competitiveness and affordability at risk. Pushing to achieve overly aggressive environmental goals would result in substantial and unproductive direct financial costs. Emissions reductions should be brought on by the lowest-cost decarbonization, energy efficiency, and conservation strategies, rather than being the result of declines in economic activity or population.

I completely agree with this recommendation.  In order to implement the recommendation, the Hochul Administration should set affordability standards now and incorporate a feature to modify the auction if the standard is exceeded.

  • Prevent emissions leakage: NYCI’s environmental benefits and cost-effectiveness could be undermined if emissions leakage is not adequately limited. If the emissions reduction targets are set too aggressively, economic activity, jobs, and emissions could be pushed out of the state to neighboring regions with less stringent regulation.

I do not think that emissions leakage can be prevented in any cap-and-dividend program in a small jurisdiction if the allowance prices are high enough to reduce emissions.

  • Minimize adverse economic impacts: Beyond the direct financial costs, wider economic disruptions such as reduced employment or instability in emission-intensive industries must also be considered. The program should aim to prevent these adverse effects to ensure that the energy transition does not come at the cost of economic vitality.

I agree.  The problem is that the prevention program should lay out a plan to prevent the adverse effects which is easier said than done.

  • Maximize benefits to disadvantaged communities: Low-income households spend a greater share of their income on energy, making them more vulnerable to the costs imposed by a cap-and-invest program. At the same time, disadvantaged communities are likely to feel more of the effects of emissions. NYCI should (and is required to) minimize the burden imposed on the communities that are most sensitive to increased costs of necessities, like home heating and transportation, and maximize economic and environmental benefits within those communities.

There will be a balancing act relative to disadvantaged community funding.  In the first place NYCI necessarily will increase energy costs that will affect those least able to afford those increases the most.  Therefore, there is a moral imperative to reduce those affordability impacts as much as possible.  The tradeoff is that funding for low- and middle-income citizens is not a particularly effective way to reduce emissions.  Consequently, there might not be enough funding available to make the reductions necessary to meet the Climate Act mandated schedule.  If the allowance auctions follow the schedule and not the actual emission reduction trajectory, then there might not be enough allowances available which could lead to an artificial energy shortage that will cause blackouts.  Blackouts disproportionately impact the disadvantaged communities so the balancing act must consider this interaction.

Design Parameters

The Keys Report program identified seven program design parameters that will be critical to NYCI’s success.  I agree that these parameters are important.  However, there are aspects of these parameters that run contrary to the climate activist constituency that appear to be driving the Climate Act implementation bus.  It will be fascinating to see how the Hochul Administration resolves the differences between activist demands and the reality of a functioning cap-and-invest program.

Sectoral and Geographic Scope

NYCI will be designed to cover a range of economic sectors, and its rules will determine whether it can be expanded geographically. The geographic and sectoral scope of a cap-and-invest program significantly affects both its emissions reduction potential and imposed costs. An emissions-trading system with broad coverage will be able to tap into a wider array of emissions reduction opportunities that can be achieved at a lower cost, because the tools available to reduce emissions vary across economic sectors or across regions. Including more jurisdictions can also help to reduce the risk of emissions leakage, which arises when regulatory conditions differ among regions. Including more sectors is preferable, as it spreads the cost of emissions reduction, minimizing the financial burden on any single sector.

The reality is that there are advantages to a New York program that is included with programs in other jurisdictions.  In addition to the reasons mentioned, if New York could join the California program, then it would not be necessary to develop a reporting system, an auction system, or a compliance tracking system.   The time, effort, and expense for those three components is significant.

GHG Emissions Accounting and Linkage

New York’s CLCPA employs a unique method for GHG emissions accounting, utilizing a Global Warming Potential (GWP) over a 20-year horizon (GWP-20) and including emissions from electricity imported from other states, exported waste management services, and from biogenic sources. The GWP-20 accounting method emphasizes the short-term impacts of greenhouse gases and is particularly sensitive to gases like methane that have a higher warming potential but shorter atmospheric lifespan.

This is a significant reality slap for NYCI.  New York’s unique GHG emission reporting requirements are incompatible with other jurisdictions so we cannot take advantage of increasing the geographical scope.  I believe that it would be impossible to incorporate New York’s reporting approach into any other cap-and-invest program.  As proof note that last spring the Department of Environmental Conservation floated the idea of changing the GWP approach and the usual suspects melted down.  If this idea is suggested again, the outcry will be the same. 

Emissions Cap Setting

The level of the initial emissions cap and its trajectory over time will play a large role in shaping the price of allowances and the cost of compliance with NYCI. To incentivize investment in emissions reduction, the cap must decline over time. A steeper decline increases the rate of emissions reduction, but also likely leads to a higher price of emissions allowances in auctions and in trade, increasing the financial cost imposed on businesses complying with the program.

This is another reality tradeoff has already been addressed.  Clean energy resources need to be deployed to displace existing sources of GHG emissions.  There are a whole host of reasons that those resources may not be deployed on the schedule necessary to meet the Climate Act legal mandates.  If the emission cap reduction trajectory blindly follows the legal mandate with no provision to account for deployment delays, then there will be insufficient allowances necessary to meet energy demand.  The resulting shortfall would result in consequences more severe than the alleged problems the Climate Act is supposed to mitigate.

Allowance Allocation Method

NYCI regulations must determine how the program will allocate allowances. While that is almost certain to include an auction, it could also include various methods of free allocation. Early cap-and-invest programs, including the European Union ETS, primarily allocated allowances for free to regulated businesses. Over time this has changed; most existing emissions trading systems now utilize auctions to allocate most emissions allowances, while distributing a portion for free to alleviate leakage risk or consumer costs. The benefits of allocation by auction from the perspective of governments is obvious: cap-and-invest can generate substantial revenue. Since it began operating in 2013, California’s system has generated more than $38 billion.

I think this description addresses the issues associated with allowance allocations correctly. 

Price Stability Mechanisms

NYCI’s design can also affect the volatility of allowance prices in the market. Cap-and-invest gives the government some certainty over the level of emissions within the scope of the program, but the price of allowances will be variable. Allowance price volatility is a concern because it adds risk to the decision to invest in technologies that could reduce emissions—especially investments that have high upfront fixed costs. Extreme allowance prices on the high end raise the costs imposed on businesses and households. While businesses may be primarily concerned with high allowance prices, sudden price swings may discourage them from making investments if they expect the cost of compliance in the long-run to change. An excessively low allowance price indicates that the supply of allowances (the emissions cap) may closely mirror, or exceed, market demand for allowances, meaning there’s a weak incentive to invest in emissions reduction. Mechanisms to rein in excessive auction volatility and price extremes can mitigate these risks.

Price stability is important and this description accurately points out why.  However, controversy is inevitable for this mechanism. It appears that NYCI is being modeled after the California cap-and-trade program with many of the same features mentioned for potential inclusion.  California incorporates automatic allowance adjustments to address cost volatility that may be incompatible with the Climate Act and are certainly at odds with an allowance distribution that meets the Climate Act schedule.  The article CA Carbon Cap it not really a cap explains:

You see, the so-called emissions “cap” in the program automatically adjusts so that it is actually very unlikely to set a hard limit on emissions. If the state’s greenhouse gas (GHG) emissions are lower than the emissions cap, the program puts a floor on the price of the tradable emissions allowances, essentially shrinking the cap to soak up extra allowances at the floor price. And if emissions are high, it automatically expands the cap by selling all allowances demanded at a pre-determined ceiling price.

Also see The Limits of Carbon Trading Limits that argues that the cap is elastic for good reasons:

California’s CO2 market has the most sophisticated, and arguably most successful, system of emissions price-collars of any cap-and-trade market. The price-collars are designed to regulate the CO2 price so that it doesn’t reach economically – or politically – unacceptable extremes by making the cap elastic. If the price is too low, the system automatically withholds additional CO2 allowances to tighten supply. If the price is too high, it supplies more of them. This means, as Severin Borenstein and I have laid out in the past, that California’s CO2 “cap” is more accurately thought of as a progressive carbon tax, where the price of CO2 goes up at higher levels of statewide CO2 emissions.

I think these features may be incompatible with the Climate Act law if the Climate Action Council interpretation is followed.

Emitter Compliance Flexibility

Providing emitters with various ways to achieve compliance can improve the overall cost-effectiveness of NYCI without compromising its objective of emissions reduction. Allowance trading, carbon offsets and allowance banking can help to lower compliance costs and enhance the efficiency of the program. These flexibility mechanisms allow the artificial market created by the cap-and-invest program to emulate real market behavior. This can help to ensure that sudden changes in the market don’t lead to extreme price volatility, making the program more predictable and manageable for participating businesses. This adaptability has been key to the success of existing emissions trading systems.

This is another inevitable reality confrontation.  These are absolutely necessary components of any cap-and-invest program but they are opposed by New York’s climate activist constituency.  It is unclear how the Hochul Administration can continue to cater to those folks when they demand to remove the tools that make market trading programs work. 

One of the demands by this constituency is to forbid the use of offsets as noted in the Keys Report description.  I think this is flawed.  The Climate Act is net-zero which is defined as an 85% reduction in GHG emissions with the remaining 15% of emissions counterbalanced by offsetting emissions.  I guess they want to limit offsets to particular sectors, but the following description explains all the benefits that prohibiting offsets will prevent:

Carbon offsets can also be a valuable flexibility tool in a cap-and-invest program. Offsets allow regulated entities to meet a portion of their compliance obligation by investing in or purchasing emission-reduction credits from projects outside of the capped sectors. These might include forestry projects or agricultural practices that sequester carbon, or methane capture from landfills. If the agriculture and waste sectors are not required to comply with NYCI, creating a secondary market for offsets could incentivize these sectors to improve their efficiency. Offsets can provide an affordable alternative for compliance, but they have been the subject of frequent scrutiny due to concerns that the emission benefits they generate would have occurred regardless of investment in the credited activity.40 Research on offsets does indicate establishing equivalency of offset projects to more direct emissions reduction is a challenge. Despite their imperfection, offsets can provide a real value, especially in the near term when strategies to reduce emissions are more limited. The CLCPA addresses these concerns by requiring that DEC verify that any emissions offsets used to comply with environmental regulation are, “real, additional, verifiable, enforceable, and permanent.”

Tradeoffs from Limiting Flexibility

The possibility of including a trading mechanism in NYCI, rather than setting facility-specific caps in the program, has drawn scrutiny. This is largely out of concerns that polluters in or near Disadvantaged Communities (DAC) would be able to continue polluting, and instead simply buy allowances and maintain their current emissions levels. Historically, these communities have often been disproportionately exposed to air and water pollution, giving reasonable rise to this concern.

Another reality is that allowance market programs are trading programs.  The idea that there should be limits on trading is inimical to the very concept of a trading program.  This is a GHG emissions trading program that is appropriate to use for pollutants that influence global warming. The location within New York State for the GHG emissions does not matter.  In order to curry favor with more political constituencies, the Climate Act includes provisions to address disadvantaged communities.  This includes the idea from members of the Climate Action Council who had no trading program experience to somehow include site-specific limits on trading.  I personally see no practical way to implement such a scheme.  As noted below there are other regulations in place that ensure that all regions in the state meet air and water quality standards that protect health and welfare so the idea that GHG emissions trading should also address local effects is counter-productive and unnecessary.

Revenue Management and Use

Ensuring the transparent, accountable, and efficient use of the revenue generated is critical to the success and legitimacy of a cap-and-invest system. If auction prices are similar to those in the state-level cap-and-invest systems in California and Washington, NYCI could generate billions of dollars annually.

I have no doubt that NYCI will generate billions of dollars.  Unfortunately, New York’s record of RGGI investment proceeds has been dismal. According to the New York State Regional Greenhouse Gas

Initiative-Funded Programs report, since the inception of the program, total investments from New York’s RGGI auction proceeds programs is $825 million and the claimed savings are 1,731,823 tons of CO2e with a calculated cost per ton reduced of $476/ton.  At that rate, investments to provide the reductions necessary will be unaffordable.

Monitoring, Evaluation, and Modification

All existing GHG emissions trading systems began operating in the last two decades, and significant changes have been made to all of their structures since being implemented. While evidence supports many of the design parameters discussed in previous sections, it is limited by the short time these policies have been in operation and the unique environmental and economic characteristics within each region. It is crucial that robust monitoring and evaluation mechanisms be incorporated with cap-and-invest to assess the program’s performance over time and inform any adjustments to the program as necessary.

I agree with these comments.

Recommendations

The Keys Report includes recommended cap-and-invest design features.  The following paragraph sums up the issues I believe must be addressed.

While the Cap-and-Invest program proposed by the State could reduce emissions more cost-effectively than other regulatory approaches, its success will depend greatly on its design. Efforts to make the program more stringent by limiting trading of allowances, or imposing source-specific emissions limits, while well intentioned, would ultimately increase the costs imposed on New Yorkers and may exacerbate emissions leakage and economic competitiveness risks.

It is important to also recognize NYCI would not exist in a vacuum. NYCI is a central component of New York’s efforts to reduce emissions, but alone, is unlikely to ensure CLCPA goals are met. If additional regulations are pursued that include facility-specific limits or energy standards, the interaction with cap-and-invest could render it less cost-effective. Traditional regulatory standards could require some firms to reduce their emissions beyond what they otherwise would have under only cap-and-invest. This would reduce demand in the allowance market, pushing down prices and undermining the incentive for businesses only covered by cap-and-invest to reduce their emissions. Facility-specific regulations may still be appropriate if there are local health impacts or other negative externalities not adequately covered by the emissions market.

I want to make one point about the final sentence.  The Climate Action Council health impact arguments ignore the fact that there already are regulations in place to address local impacts.  Every facility in New York has had to prove that its emissions do not cause exceedances of the National Ambient Air Quality Standards.  This condition is ignored in these arguments.  The Department of Environmental Conservation is developing regulations and guidance to deal with these concerns and this has to be considered as NYCI is implemented.

The CBC recommends the State follow these approaches when designing the Cap-and-Invest program:

  1. Allow and pursue linkage with other emissions trading programs. While a national cap-and-invest program that covers all economy-wide emissions is optimal, broadening the scope of Cap-and-Invest beyond the boundaries of New York, by linking with other programs, would enhance the program’s cost-effectiveness by providing a larger pool of emissions reduction opportunities. The State should ensure that NYCI regulations are designed to be consistent with emissions trading systems in other states to enable future linkage.

I agree with this recommendation.

  • Keep sectoral coverage as broad as possible. NYCI should cover emissions from as many sectors as is feasible. Exceptions should only be made if inclusion is exceedingly difficult or expensive to administer. Excluding certain sectors could shift the entire burden of reducing economy-wide emissions onto sectors with a compliance obligation. Sectors that face a greater emissions leakage risk could instead be given a share of allowances for free to alleviate this risk, but they should still have an obligation to comply with the program.

I agree with this recommendation.

  • Maintain flexibility in compliance through trading, banking, and verifiable offsets. An efficient Cap-and-Invest program should provide businesses with multiple options for compliance to accommodate the differences in their conditions. Trading should not be restricted; limiting this critical component of cap-and-invest would add uncertainty to the market, and potentially drive up the price of allowances without increasing the environmental benefits of the program. Permitting banking of allowances can encourage early emission reductions and help companies smooth out their compliance costs over time. Allowing the use of verifiable offsets to meet a portion of firms’ compliance obligation can reduce the cost of compliance and incentivize emissions reduction in non-regulated sectors.

I agree with this recommendation,  If these are not accepted, this is no longer a market trading program and none of the observed benefits of previous successful programs should be expected.

  • Allocate revenue on budget, but free from capture. Revenues generated through NYCI should be included and appropriated within the State’s regular budget process, as other taxes and fees are within the financial plan, to promote transparency and accountability and ensure that funds are not spent wastefully. Furthermore, this revenue should be allocated to costs related to administering and evaluating the program, and investments that further the goals of the program, such as energy efficiency programs, development of low-carbon energy infrastructure, and incentives for the adoption of clean technologies. These investments can accelerate the transition towards a low-carbon economy, reduce the burden of compliance costs, and deliver additional environmental and economic benefits. The revenue generated by NYCI should be free from capture and diversion to short-sighted spending endeavors and unrelated political priorities.

I also agree with this recommendation.  I did not mention that New York has diverted the RGGI allowance proceeds in the past.  In addition, to the overt diversion to the general fund, the Agencies continue to use RGGI revenue as a slush fund to cover costs more appropriately covered by other programs.  Importantly this means less money for the stated purpose of the program.

  • Regularly monitor, publicly report, and evaluate program data and modify the program based on evidence. Effective monitoring and evaluation are key to the success of the Cap-and-Invest program. Regularly reporting on the program outcomes, including emissions reduction progress, the functioning of the allowance auction and secondary market, and the use of auction revenues, can ensure transparency, accountability, and inform adjustments to improve NYCI. Data collected from auctions and programs receiving revenue should be publicized to allow for adequate public scrutiny.

I agree with this recommendation.

  • Align the program with other regulations implemented in accordance with the CLCPA. Any additional climate policies that may be pursued to meet CLCPA goals should be considered holistically when designing Cap-and-Invest to minimize overlapping regulatory costs and improve overall policy effectiveness. This approach can help ensure that the program complements rather than conflicts with, or inappropriately compounds the costs of, other measures.

I think this recommendation makes sense.

  • Finalize clear and comprehensive rules and give adequate time for businesses to prepare. Predictability and certainty are necessary for businesses to plan their compliance and emissions reduction investments. Finalizing clear and comprehensive rules in a timely manner can reduce uncertainty and facilitate a smooth transition for the carbon market. The State should finalize regulations well in advance of the first compliance period.

This is a common sense recommendation but I fear the desire to get something up and running as soon as possible will mean that implementation will be rushed.

Conclusion

The Keys Report is an excellent summation of NYCI and I recommend reading the original document.  I know how much work went into this report because have tried to describe the issues covered in this report myself. I find it encouraging that a non-partisan organization with no preconceived notions on the benefits and risks of the cap-and-invest programs is in close agreement with my concerns.  My comments on this report support their work and provide context that shows that their concerns are warranted.  If anything, their concerns are understated. However, because there are significant differences between their recommendations and the Hochul Administration narrative I am not optimistic that their recommendations will be considered and implemented.

Personally, I think NYCI is not going to work as its supporters think. I agree with Danny Cullenward and David Victor’s book Making Climate Policy Work  that the politics of creating and maintaining market-based policies for GHG emissions “render them ineffective nearly everywhere they have been applied”.  I have no reason to believe that NYCI will be any different even if all the recommendations suggested by the Keys Report are implemented.  Because I think that political considerations will preclude those recommendations, I think that NYCI will cause a dramatic increase in New York energy costs, fritter the revenues away on politically convenient projects, and fail to support renewable energy resource development sufficient to meet the mandated goals of the Climate Act.  I expect no good outcomes.

Washington State Hints At New York Climate Act Future

Paul Fundingsland has been sending me his thoughts on the implementation of Washington State’s experiences with their cap-and-invest scheme.  His latest correspondence points to a local news article that confirms our suspicions that companies will simply pass additional costs on to their consumers. Furthermore, the companies will not be allowed to clearly explain why the costs are going up.

Paul describes himself as “An Obsessive Climate Change Generalist”.   Although he is a retired professor, he say he has no scientific or other degrees specific to these kinds of issues that can be cited as offering personal official expertise or credibility. What he does have is a two decades old avid, enthusiastic, obsession with all things Climate Change related. 

New York Climate Leadership and Community Protection Act  

The Climate Leadership & Community Protection Act (Climate Act) established a New York “Net Zero” target (85% reduction 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 is responsible for preparing the Scoping Plan that outlines how to “achieve the State’s bold clean energy and climate agenda.”  In brief, that plan is to electrify everything possible 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.  After a year-long review, the Scoping Plan recommendations were finalized at the end of 2022.  In 2023 the Scoping Plan recommendations are supposed to be implemented through regulation and legislation.  New York’s cap-and-invest program is supposed to address one of those recommendations.

The New York State Department of Environmental Conservation (DEC) has developed an official website for cap and invest.  It states:

An economywide Cap-and-Invest Program will establish a declining cap on greenhouse gas emissions, limit potential costs to New Yorkers, invest proceeds in programs that drive emission reductions in an equitable manner, and maintain the competitiveness of New York businesses and industries. Cap-and-Invest will ensure the state meets the greenhouse gas emission reduction requirements set forth in the Climate Leadership and Community Protection Act (Climate Act).

Washington Climate Commitment Act

Washington’s Climate Commitment Act appears to be even more aspirational than California or New York.  The Washington Department of Ecology (“Ecology”) web page explains:

The Climate Commitment Act (CCA) caps and reduces greenhouse gas (GHG) emissions from Washington’s largest emitting sources and industries, allowing businesses to find the most efficient path to lower carbon emissions. This powerful program works alongside other critical climate policies to help Washington achieve its commitment to reducing GHG emissions by 95% by 2050.

The state plans in Washington, California, and New York all aim for net-zero emissions where greenhouse gas (GHG) emissions are equal to the amount of GHG that are removed.  Washington’s emission reduction target is 95% by 2050.  California is shooting for 85% by 2045 while New York’s target is 85% by 2050 but covers the whole economy.  In addition to the target levels and dates there are differences in what GHG emissions are included, how the mass quantities are calculated, and which sectors of the economy must comply.  Nonetheless, I am sure a case can be made that Washington is the most aspirational.

According to the Washington State Department of Ecology description of their cap-and-invest program:

In 2021, the Washington Legislature passed the Climate Commitment Act (or CCA) which establishes a comprehensive, market-based program to reduce carbon pollution and achieve the greenhouse gas limits set in state law. The program started on Jan. 1, 2023, and the first emissions allowance auction was held on Feb. 28.

Businesses covered by the program must obtain allowances equal to their emissions and submit them to Ecology according to a staggered four-year compliance schedule. The first compliance deadline is Nov. 1, 2024, at which time businesses need to have allowances to cover just 30% of their 2023 emissions.

Washington State Implementation

I published several articles (Washington State Gasoline Prices Are a Precursor to New York’s Future, Do Washington State Residents Know Why Their Gasoline Prices Are So High Now?, and Washington State Gasoline Prices and Public Perceptions) about the experiences of Washington State as they implement their cap-and-invest program because I think it is likely that New York’s experiences will be similar.   I posted material by Paul based on his  “bit of research with some comments, thoughts and a more or less rough idea of what seems to be going on in the Washington State cap-and-invest scheme” that addressed the impact of their cap-and-invest scheme on gasoline prices.  Subsequently he wrote up more research results in a second article.  He concluded:

At the end of the day, the goal of any meaningful, measurable reduction of CO2 emissions or theoretical effective pathway to stop “climate change” looks to become a glazed over afterthought in this quagmire of a Washington State bureaucratic money-making machine. 

With this scheme, Washington State Government now joins the lucrative profit side of the climate industrial complex at the expense of its constituents while giving a completely different connotation to the term “Net Zero”.

In this post Fundingsland provides another update. I provide his thoughts with my commentary below.

Cap and Hidden Tax

Earlier this year I described the book Making Climate Policy Work that shows how the politics of creating and maintaining market-based policies render them ineffective nearly everywhere they have been applied.  Despite these warning signs these programs are much in favor.  Washington’s program began this year and the cost signals are showing up.  Fundingsland writes:

Here is a local news update example on how Washington’s “Cap & Invest” (Tax & Reallocate) scheme is currently functioning. Natural Gas company Puget Sound Energy (PSE) just announced a 3% rate price hike due to their mandated “Cap & Invest” auction allowance costs. 

Just as surmised, the companies required to participate in the auction allowances are simply passing these costs to their bottom line along to their customers. In essence, the State taxes the company and the company taxes its customers. 

I believe that New York utilities asked the Public Service Commission to include cost details for state mandated programs.  Not surprisingly that request was denied.  The same thing is playing out in Washington.  Fundingsland explains what is happening and the ramifications:

What makes this particular example more disgusting than usual is the fact that PSE wanted to simply include a line item on the customer’s bill identifying this cost but the Washington Utilities and Transportation Commission (UTC) actually made it illegal to do so claiming that would make for a “lengthy confusing” bill. 

I just looked at my latest PSE bill. It has only three line items for charges: Electric Charges, Natural Gas Charges and Total Charges. There is plenty of room for one more line item called “Cap & Invest” charges. 

There are rightful allegations that preventing PSE from including this one line item is deceptive, dishonest, lacks transparency, and smacks of censorship while giving the perception that PSE is just raising the prices to gouge their customers to make more money. 

Contradictorily UTC requires PSE to include in their bills extra line item charges and credits beneficial to some of their customers such as “carbon reduction credits”, whatever those are.

In other words, UTC would have us believe adding one factual consumer financially detrimental line item to the bill would make it lengthy and confusing but adding beneficial line items for some consumers to the same bill would not. This reeks of deliberately deceptive, opaque practices.

Paragraph 19 under “Discussion and Decision” from DOCKET UG-230470 Order 01

“Second, we agree with Public Counsel that PSE should not include the proposed “carbon reduction charge” as a line item on customer bills. Public Counsel correctly observes that including all program charges on customer bills would quickly result in lengthy and confusing bills. Additionally, only those charges or credits that inure to the benefit of customers should be included as line items on customer bills. For that reason, we require the Company to include the “carbon reduction credit on customer bills, which will also signal an economic incentive for consumers to reduce their own carbon emissions.”

There is plenty of room on the PSE bill for all the line items deemed necessary to give customers a fair, comprehensive, transparent understanding of what all the charges and credits are. I’m sure any number of PSE employees or their junior high school aged kids possess the necessary skills to successfully modify the look of their one page bill in less than an hour including all the pertinent line items making it factual, legible, understandable and transparent.

New York State has prevented transparent pricing for previous government mandates.  They are unlikely to start clearly admitting the costs for the New York Cap-and-Invest boondoggle now.  The similarities to Washington are clear.  Paul writes:

It’s fairly obvious that UTC is aggressively censoring the fact that the “Cap & Invest” scheme is costing Washington State PSE customers money. 

This fits right in with our Governor’s claim that the recent jump in Washington State gasoline prices has nothing to do with the “Cap & Invest” scheme. Rather it is just big oil gouging the public. In fact these companies are just pragmatically passing along the business costs of their state mandated financial participation in “auction allowance purchases” to their customers just like PSE is doing. 

PSE is only one company among the multitude in Washington State that has been forced to purchase “emission allowances”. There are most many more stories involving these companies simply making the most logically, sensible, efficient business adjustment when they are confronted with additional mandated costs to their bottom line: just pass their added costs on to their consumers. 

Fundingsland concludes:

It just got more expensive to live in Washington State. And based on how this “Cap & Invest” scheme is actually playing out in the real world, it looks like this scheme will continue to make it more expensive with each passing year.

The original idea that this scheme would significantly reduce CO2 emissions is turning out to be just another way for the State Government to extract considerable monies from the general public, sweeping those monies into their coffers by washing it through companies who have been forced to buy emission allowances and are merely passing along their state mandated costs while rendering an imperceptible if any reduction of emissions.

Discussion

The Climate Act requires the Public Service Commission (PSC) to provide a summary of the implementation status.  In July the first annual informational report was published but there hasn’t been a lot of coverage.  This report notes that Climate Act costs that have been authorized and were in the 2022 residential bills total $1.2 billion.  The Report notes that in 2022 the costs already associated with the Climate Act increased the Upstate residential monthly electric bills 7.6% or $7.15 per month for NYSE&G customers; 7.7% or $7.54 for RG&E customers; and 9.8% or $9.38 for Niagara Mohawk customers.   The report does not attempt to project future ratepayer costs of the authorized Climate Act funding to date that total another $43.8 billion so this is just the start of expected costs.    There is no comparison between the transparency that putting this specific information on ratepayer bills relative to burying it in an obscure PSC proceeding.  This approach also reeks of deliberately deceptive, opaque practice.

I have not been able to keep up with all the cost increase news associated with the net zero transition.  The New York Post notes that “In a fresh sign that New York’s state climate agenda is pure fantasy, contractors key to making good on a major piece of the so-called plan just filed to charge 54% more to build their offshore wind farms. “  I have heard that other projects are also saying that inflation and supply chain issues means that they too need more money.  These are all costs that show up in ratepayer bills as part of the delivery component.  The cap-and-invest costs will show up in the supply component and we have no idea how much that will be.  The only thing that I am sure of is that the Hochul Administration will go to great lengths to hide the cause of the inevitable increased costs and blame the innocent just like Washington State regulators are doing.

Conclusion

I am grateful to Fundingsland for his research and commentary on the rollout of the Washington State cap-and-invest program.  Everything that is happening there will very likely happen here.  He notes that “It just got more expensive to live in Washington State”.  That is the inevitable outcome in New York too.

New York Cap-and-Invest Update and Another Conundrum

One of the planned implementation components of the Climate Leadership & Community Protection Act (Climate Act) is a cap-and-invest program that sets a price on Greenhouse Gas (GHG) emissions.  The first round of stakeholder comments were due in early July and this post provides an update on the process. There also is another upcoming advocacy dogma and reliability conundrum that must be addressed.  I recently noted that the retirement of peaking power plants is considered non-negotiable by environmental justice advocates but those facilities are needed for electric system reliability.  The same advocates are demanding removal of certain components that are in every emissions trading program variation, such as the New York cap-and-invest, that must be included or the claimed affordability and cost-effectiveness benefits will not be produced.

I have been following the Climate Act since it was first proposed. I submitted comments on the Climate Act implementation plan and have written over 350 articles about New York’s net-zero transition.  I have extensive experience with air pollution control theory, implementation, and evaluation having worked on every cap-and-trade program affecting electric generating facilities in New York including the Acid Rain Program, Regional Greenhouse Gas Initiative, and several Nitrogen Oxide programs since the inception of those programs. I follow and write about the RGGI cap and invest CO2 pollution control program so my background is particularly suited for the cap-and-invest plan.   I have devoted a lot of time to the Climate Act because I believe the ambitions for a zero-emissions economy embodied in the Climate Act outstrip available renewable technology such that the net-zero transition will do more harm than good.  The opinions expressed in this post do not reflect the position of any of my previous employers or any other company I have been associated with, these comments are mine alone.

Climate Act Background

The Climate Act established a New York “Net Zero” target (85% reduction and 15% offset of emissions) by 2050 and an interim 2030 target of a 40% reduction by 2030. The Climate Action Council is responsible for preparing the Scoping Plan that outlines how to “achieve the State’s bold clean energy and climate agenda.”  In brief, that plan is to electrify everything possible and power the electric grid with zero-emissions generating resources by 2040.  The Integration Analysis prepared by the New York State Energy Research and Development Authority (NYSERDA) and its consultants quantifies the impact of the electrification strategies.  That material was used to write a Draft Scoping Plan.  After a year-long review the Scoping Plan recommendations were finalized at the end of 2022.  In 2023 the Scoping Plan recommendations are supposed to be implemented through regulation and legislation.  The cap and invest initiative is one of those recommendations.

The New York State Department of Environmental Conservation (DEC) and NYSERDA have developed an official website for cap and invest.  It states:

An economywide Cap-and-Invest Program will establish a declining cap on greenhouse gas emissions, limit potential costs to New Yorkers, invest proceeds in programs that drive emission reductions in an equitable manner, and maintain the competitiveness of New York businesses and industries. Cap-and-Invest will ensure the state meets the greenhouse gas emission reduction requirements set forth in the Climate Leadership and Community Protection Act (Climate Act).

I have written other articles that provide background on NYCI.  I recently posted a Commentary overview for the New York Cap & Invest (NYCI) program that was written for a non-technical audience. In late March I summarized my previous articles on the New York cap and invest proposal in a post designed to brief politicians about the proposal if you want more technical information.  There also is a page that describes all my carbon pricing initiatives articles that includes a section listing articles about the New York Cap and Invest (NYCI) proceeding.

NYCI Status

Recently there was an update on the status of the NYCI process at the Equity & Climate Justice Roundtable (Equity and Climate Justice Roundtable Presentation [PDF] and Session Recording).  Jonathan Binder showed the regulation development timeline that shows that DEC is near the end of the “assess input and develop pre-proposal phase” shown in the slide below.  I think there are two takeaways from this update. To date DEC has not given any indication of any particulars regarding implementation and there will be an opportunity to provide comments on the preproposal details.  This is important because once the official regulatory proposal is released the agencies can no longer discuss the contents.  The other point is that this timeline confirms that there is no way this program is going to be issued this year.  Binder said the goal is to have revenue coming in during 2025.

In June DEC hosted a series of webinars designed to spur discussion and get input on specific questions.  The comments received are available and now DEC is assessing the input.  After giving an overview of the general plans Binder described what they have heard in the comments.  His presentation listed the following points that they have been hearing from environmental justice, climate justice, and equity-related shareholders.  Note that there was no substantive discussion of the following in the presentation:

  • Prohibit or limit emissions trading solutions
  • Set caps with timetables
  • Minimize cost, emissions, and other impacts on DACs
  • Ensure adequate investments
  • Ensure emission reductions are verifiable & enforceable
  • Track GHG and co-pollutant emissions from all sources
  • Provide transparent demonstration of emissions and investments
  • Ensure Disadvantaged Community representation in oversight and program review
  • Consider burdens and job impacts on businesses located in or near DACs

In addition. he noted that stakeholders had proposed the following recommended steps:

  1. Identify stakeholder groups
  2. Establish robust communication
  3. Implement target programs based on stakeholder feedback
  4. Track and measure progress
  5. Conduct regular reviews

The primary point I want to make in this post is that there are tradeoffs that I do not think the environmental justice, climate justice, and equity-related shareholders understand.  Binder mentioned that stakeholder expectation setting is important but the rhetoric of these stakeholders is at odds with that goal.  Binder emphasized that DEC is trying to prioritize disadvantaged community (DAC) concerns saying that they need to “ensure emission reductions are prioritized in DACs while also:

  •            Raising revenue to adequately fund investments into DACs,
  •            Keeping high quality jobs and businesses available within DACs, and
  •            Decreasing energy burden and maintaining reliability.

He went on to summarize a few of the specific regulatory provisions and options being considered.  He said the following are under consideration:

  • Prohibit DAC sources from purchasing allowances from outside of the DAC.
    • Set source specific caps on DAC sources (declining caps)
    • Require DAC sources to surrender allowances at some multiple of GHG emissions rather than 1:1

He did note that there have been requests to prohibit allowance trading but that DEC expects that  there will be some allowance trading.  Allowance trading is a key to ensure “overall affordability and cost effectiveness of the program”.

Emissions Market Program Overview

Earlier this year I published an overview of cap-and-invest programs and the proposed New York program.  I concluded that New York policy makers have glommed on to Cap and Invest because they think it is a solution that will easily provide revenues  and compliance certainty.  Unfortunately, that presumption is based on poor understanding of market-based emissions programs.  The reality is that successful programs used emissions reduction strategies that are not available in the quantity or quality necessary for New York to meet its emission targets.

The deference being given to environmental justice, climate justice, and equity-related shareholders further endangers any hopes that the program will work. The proposed New York Cap-and-Invest policy is a type of an emission trading pollution control program.  EPA explains that:

Emissions trading programs have two key components: a limit (or cap) on pollution, and tradable allowances equal to the limit that authorize allowance holders to emit a specific quantity (e.g., one ton) of the pollutant. This limit ensures that the environmental goal is met and the tradable allowances provide flexibility for individual emissions sources to set their own compliance path. Because allowances can be bought and sold in an allowance market, these programs are often referred to as “market-based”.

Points Heard

In this section I will address the environmental justice, climate justice, and equity-related shareholders points that DEC has been hearing. 

At the top of the list was  “prohibit or limit emissions trading solutions”.  Binder did note that DEC expects that there will be some allowance trading.  EPA notes that this is a key component of any market-based program.  Binder admitted that allowance trading is a key to ensure “overall affordability and cost effectiveness of the program”.  Obviously if there is no trading then this cannot be called a cap-and-invest program and it won’t work as expected.

The suggestion that there will be “some” trading necessarily means that there will be “some” limitations.  One slide notes that the following are under consideration:

  • Prohibit DAC sources from purchasing allowances from outside of the DAC.
  • Set source specific caps on DAC sources (declining caps)
  • Require DAC sources to surrender allowances at some multiple of GHG emissions rather than 1:1

It is one thing to consider these options but it is an entirely different thing to implement any of them.  For starters note that there are several thousand DACs.   In order to prohibit DAC sources from purchasing allowances from outside of the DAC it would be necessary to label the ownership of each allowance which is unprecedented.  Setting source specific caps on DAC sources is another can of worms; what basis for each cap would be used and would there be different caps for different sectors within the DAC.  A requirement that DAC sources would have to surrender allowances at some multiple of GHG emissions rather than 1:1 sounds simple enough but the unintended consequences on the market would be immense.  In my opinion implementing something to address these options would necessitate an independent market for each DAC.  That way you could limit trading from outside the DAC, set source specific caps, and structure the market to address the multiple surrender concept.   However, given that there are several thousand DACs this clearly is not workable.

There are unappreciated problems associated with setting caps with timetables.  I have previously written about setting caps that do not account for potential strategies for making the reductions.  In other programs such as the EPA Cross State Air Pollution Rule (CSAPR) the cap was set based on historical emissions, existing control technology, and potential improvements or additions for all the sources in the CSAPR-affected states.  The CSAPR cap was determined using this control technology evaluation to set a feasible limit.  The NYCI will be a binding cap set by the Climate Act mandates that did not include any such feasibility evaluation.  GHG emissions are closely associated with energy use so a NYCI binding cap essentially limits energy use.

Another of the recommendations heard was to “minimize cost, emissions, and other impacts on DACs”.  I think this is a general goal that should apply  to the entire state.  The tradeoff between trying to address past injustices while meeting these goals will be challenging. 

The “ensure adequate investments” recommendations is important.  In order to address it the first thing needed is to define what to fund.  Presumably, the priority is providing the funds necessary to implement the control strategies necessary to make the emission reductions.  The Hochul Administration must provide an estimate of how much these investments will cost in order determine how much money must be raised by the Cap-and-Invest program.  If the investments are insufficient then the energy system will fail to meet the cap limits.  Also needed is a feasibility analysis for the transition schedule that considers supply chain and trained labor constraints.  Even if the money is available, it may not be possible to build it fast enough to meet the arbitrary CLCPA schedule.

There are several recommendations that are all characterized by a lack of understanding of what regulatory requirements are already in place.  The “ensure emission reductions are verifiable & enforceable”; “track GHG and co-pollutant emissions from all sources”; and “provide transparent demonstration of emissions and investments” all fall into this category.  There are regulations in place such that affected sources report GHG and co-pollutant emissions that are verifiable and enforceable and in the case of power plant emissions the CO2 data are completely transparent.  The whole economy requirements of the Climate Act mean that additional reporting will be necessary.  I agree that transparency for emissions and investments is important and have recommended that in my comments.

I do not disagree that the program should “ensure Disadvantaged Community representation in oversight and program review”.  Unfortunately, from what I have observed to date, environmental justice, climate justice, and equity-related shareholders believe this means that they get to set the policies.  They should have a voice but their unconditional demands have no place in the development of a pragmatic program.  Simply put there are tradeoffs that must be incorporated in a rational program.

The Bider presentation emphasized the need to “ensure emission reductions are prioritized in DACs while also: “keeping high quality jobs and businesses available within DACs, and “decreasing energy burden and maintaining reliability”.  These are related to the last recommendation, “consider burdens and job impacts on businesses located in or near DACs”.  These statements exemplify my concern about tradeoffs.   All of the proposed trading limitations mentioned above necessarily impact businesses located in or near DACs and would increase the costs to do business relative to the costs of businesses outside of DACs.  How can those affected businesses keep high quality jobs and stay in business when confronted with extra costs inherent in the allowance limitations?

There is another aspect of the emphasis on emissions within DACs that is apparently not recognized by the environmental justice, climate justice, and equity-related shareholders.  While emissions are related to the air quality impacts in a particular location, there are other factors that affect impacts.  Air quality is determined by the transport and diffusion of emissions.  At any one time, the wind direction determines which areas are impacted while the state of the atmosphere (stable or otherwise) and the characteristics of the emissions (height of release, type of release (stack or over an area), and temperature of the effluent determines how much of an impact is observed.  Importantly, there are laws in place that ensure that all sources consider these factors when proving compliance with the National Ambient Air Quality Standards.  It is unclear how these stakeholders can be placated in this regard.

Discussion

I do not think that NYCI is going to live up to the expectations of its proponents.   This program is supposed to provide funding for Climate Act implementation and ensure compliance with the Climate Act emission targets.  Earlier this year I described the book Making Climate Policy Work that shows how the politics of creating and maintaining market-based policies render them ineffective nearly everywhere they have been applied.  I think that proponents of NYCI should read that book to understand what needs to be done to make the proposed program work.

In my earlier post I noted that I agreed with the authors that the results of RGGI and other programs suggest that the NYCI will generate revenues.  However, we also agree that the amount of money needed for decarbonization is likely more than New Yorkers will accept.  The problem confronting the Administration is that in order to make the emission reductions needed they have to invest between $15.5 and $46.4 billion per year.  I don’t think that range is politically palatable.

The use of Cap and Invest as a compliance mechanism is more of a problem.  The Hochul Administration has not acknowledged or figured out that the emission reduction ambition of their Climate Act targets is inconsistent with technology reality.  Because GHG emissions are equivalent to energy use, limiting GHG emissions before there are technological solutions that provide zero-emissions energy means that compliance will only be possible by restricting energy use.  Unless a miracle occurs in 2030 when there are insufficient allowances someone must choose who gets to operate.

When the concerns of the environmental justice, climate justice, and equity-related shareholders are layered on top of these design flaws, the challenge to make a workable cap-and-invest program is increased.  I fear that the louder voices among these stakeholders will demand that their concerns be incorporated.  If that happens then I am sure that the program will fail.  Allowance costs will soar and those costs will get passed on to consumers disproportionally affecting the DACs.  If the insane idea to limit allowances within specific DACs is implemented then an artificial energy shortage within DACs is possible.

Conclusion

The New York cap-and-invest program is slowly coming together.  Implementation of something this complicated takes time (California took several years to set up their program) and must be developed by people with technical expertise.  Unfortunately, as was the case with the Scoping Plan development, the State’s approach is to excessively defer to ideologues with little relevant background experience. 

Consider this example from the Scoping Plan.  The Scoping Plan electric system recommendations rely on the ideological belief that existing technology is sufficient for the transition.  The Hochul Administration allowed a few ideologues to push that narrative despite conflicting information in the Integration Analysis and arguments from the New York Independent System Operator to the contrary.  The New York State Public Service Commission (PSC) recently initiated an “Order initiating a process regarding the zero-emissions target” that will “identify innovative technologies to ensure reliability of a zero-emissions electric grid” that recognizes a new technology that can be dispatched without generating emissions is necessary if the state is to not go nuclear.  Failing to acknowledge this requirement means that there is no “Plan B” if this new resource cannot be developed and deployed as needed to maintain the Climate Act schedule.

The Hochul Administration appears to be doing it again in the cap-and-invest process.  Presuming that past performance of emissions trading programs would be indicative of future reduction success and establishing an arbitrary emissions target that is incompatible with realistic emission reduction trajectories has established a very difficult challenge.  Addressing ideological concerns about emissions trading programs and trying to incorporate social justice concerns makes the challenge that much more difficult.  The environmental justice, climate justice, and equity-related shareholders are demanding removal of certain components that are in every emissions trading program and that were essential to past success.  Deferring to ideology rather than historical precedent can only end in failure.

Guest Post: Washington State Cap and Invest Update

Last month I published several articles about the experiences of Washington State as they implement their cap-and-invest program because I think it is likely that New York’s experiences will be similar.  In one I elevated a comment from Washington resident Paul Fundingsland into a post.  He recently did “a bit of research with some comments, thoughts and a more or less rough idea of what seems to be going on in the Washington State cap-and-invest scheme” that I have converted into a guest post.

Paul describes himself as “An Obsessive Climate Change Generalist”.   Although he is a retired professor, he say he has no scientific or other degrees specific to these kinds of issues that can be cited as offering personal official expertise or credibility. What he does have is a two decades old avid, enthusiastic, obsession with all things Climate Change related. 

Last month I published Washington State Gasoline Prices Are a Precursor to New York’s Future, which was a variation of an article published at Watts Up With That – Do Washington State Residents Know Why Their Gasoline Prices Are So High Now?.  I also published Washington State Gasoline Prices and Public Perceptions that consolidated responses from Washington residents in the comments from the Watts Up With That article.  The last article, Feedback from Washington State on Gas Prices was from Paul Fundingsland.  All the articles addressed recent reports that gasoline prices in the State of Washington are now higher than California. 

In this post Fundingsland provides an update after doing a bit of research.  I provide his thoughts with my commentary below.

Initial Thoughts

The focus of my articles was the increase in gasoline prices.  Not surprisingly that has become a hot topic in Washington.  Paul explains:

Pushback on the rise in gas prices associated with the “Cap-and-Invest” scheme (hereafter referred to as “Tax-and-Reallocate” because that is essentially how it works) has caused our Governor to publicly blame the oil companies for price gouging apparently thinking they should absorb the loss of revenue and not pass their state mandated added costs for doing business on to their customers. Apparently he thought these companies should unrealistically absorb the loss of revenue and not pass their state mandated added costs for doing business on to their customers.

The idea that the costs of the program should not be passed on is also present in New York.  When the prices necessarily go up it is a shock to many.  Why I do not know.   It is obvious that the tax-and-reallocate scheme is dealing with a lot of money and not working as planned. 

One of our state legislators claims Washington State is now making more money from the sale of a gallon of gas or diesel than the oil companies.  Our Department of Ecology (which is running this scheme) scrubbed the website original language indicating this scheme would have a minimal effect on gas prices.  The Washington Policy Center claims the proposed climate funding budget is spending 56% of the initial $306 million on expanding government. No real surprise there.

I have concluded that the underlying motive of most of the proponents of these schemes is money.  Legislator Reuven Carlyle was a sponsor of the cap-and-reallocate law and provides an example.

Carlyle who chaired the Washington State Senate Environment, Energy & Technology Committee and was a member of the Ways and Means Committee, lead the charge in the Senate for passage of the Climate Commitment Act, Clean Energy Transformation Act, Clean Fuel Standard, hydrofluorocarbon standards, building standards and much more.  He left the legislature this year to cash in on his legislative work founding a startup called Earth Finance to “help businesses hit climate goals” based on his legislative accomplishments.

Program Evolution

Fundingsland’s experience with the researching the program is similar to mine:

A cursory review of how this “tax-and-reallocate” scheme is evolving in Washington and what kinds of claims and actual emissions reductions result going forward reveals a quagmire of incredibly convoluted intertwined moving parts. Trying to unravel the threads is proving to be very difficult and quite frustrating. 

He notes that descriptive information is not available.  That is a common trait in cap-and-invest programs in my experience:

For example under the Department of Ecology one can find a list of the companies who participated in the 2nd auction under “Washington Cap-and-Invest Program Auction #2 May 2023 Summary Report” but no data on how many allowances each company bought or what their total costs were. Interestingly, high profile Washington businesses missing from this list include Boeing, Microsoft, Amazon and Starbucks to name a few.

As to how the monies received from the program are going to be distributed, as of the moment one can find only broad generalized categories with aspirations as to how they will be applied subject to future legislative decision making.  For example: “these proceeds will be used to increase climate resiliency, fund alternative-transportation grant programs, and help Washington transition to a low-carbon economy” (my bold).

“Cap-and-Invest Auction Proceeds, consists of these generalized categories with percentages and sub accounts filled with somewhat more specific wish lists of where and how the monies are supposed to be spent. Under “Auction Public Proceeds Report” there is only broad information as to how much money was received.

Nowhere is there documentation of how much CO2 has been or is projected to be reduced by this plan in comparison with past years or how much less warming this plan has resulted in or is projected to result in.

Unfortunately, the problems he described are also present in New York’s implementation of the Climate Leadership & Community Protection Act (Climate Act).  The Public Service Commission just published a summary of the implementation status of the Climate Act and the lack of specificity noted here is present in that report.

Washington Emissions

Paul notes that he is “somewhat new at sorting through government bureaucratic documents”.  He caveats the following as what “might be better viewed as a rough approximation, subject to revision once more detailed and specific information is obtained.”  He does think the following is approximately correct.

According to the Washington State Department of Ecology, the 2019 breakdown of Washington State greenhouse gas emissions is: Residential, Commercial, Industrial heating 25%, Transportation 39%, Electricity 21%, Other 14%. 

Electrical power is 64.6% hydro supplied by eight hydro plants owned and operated by the Federal Government. Natural gas is currently at 14.4%, nuclear at 7.8%, wind 8.7%, coal at 2.9%, biomass at 1.3% and a small contribution of solar.

Washington’s natural gas utilities and electric utilities receive a determined (revisable) amount of their required emissions allowances for free. Washington’s only coal fired plant’s emissions are grandfathered in as it will be fully decommissioned in 2024. 

So, unlike the lower emissions resulting from a coal to natural gas switch as fortuitously happened during the initial years of the east coast RGGI scheme, there is not a lot of low hanging CO2 emissions fruit to begin with to harvest or claim as a success from the electricity sector in Washington. And with the free emissions allowances the emissions reduction pool from this sector is even further diluted. 

When I skimmed through the Washington regulations one of the things that jumped out to me was the following figure.  The 2030 limit is a 45% reduction below 1990 levels.  The chart indicates that 2020 emissions were equal to or slightly more than the 1990 emissions.  A 45% reduction in ten years seems ambitious.  Based on the information from Fundingsland, I cannot imagine this target will be achieved.

In addition, the “tax-and-reallocate scheme” contains all sorts of other emissions exemptions. One classification is termed “EITEs” consisting of over 40 facilities and businesses that qualify as Emissions-Intensive, Trade-Exposed industries even though they qualify for mandated participation in emission allowance auctions. 

There are also ”tax-and-reallocate-offsets” being run thru what is designated as an Offset Project Registry that looks to be a California based company called Climate Action Reserve. 

That leaves the bulk of the emissions reductions to be garnered from the other three sectors (transportation, residential-industrial-commercial heating, and “other”). At this time, it is difficult to determine how the actual 25% breakdown within the residential-industrial-commercial heating sector works. For instance, residential energy use has been reported as being 60% electric. 

I have long argued that a basic flaw in the New York net-zero transition plan is that there was no feasibility analysis.  Given this information about Washington I think New York is comparatively better off.  Both states need to document how they plan to get where they want to go but the reduction trajectory for New York is lower than Washington.

New York is starting to come to grips with similar sector target issues.  If the cap-and-reallocate scheme is supposed to provide significant funds for implementation but there are a limited number of affected sectors, then the price impacts on those sectors is going to be magnified.  That is exactly what happened in Washington.   It is not price gouging when that happens, it is simply supply and demand.

Assuming the industrial-commercial may be mostly gas, the amount of emissions by individual businesses will be affected by whether they are in the EITEs classification or not, whether they have “offsets” and how many tons of CO2 they emit (250,000 tons being the “trigger” amount for mandatory participation in the tax-and-reallocate emissions auctions). So the number of emissions reduction areas possible in this sector are rather “squishy” and difficult to determine. They most probably will land on the low side of 25%.

The political origins of these rules should not be overlooked.  The Progressive backers of both plans cater to the labor union constituencies so both New York and Washington carve out EITE exemptions.  Because the net-zero transition plans will necessarily increase the cost of energy I expect that the inevitable result is that the increase will make industries in both states uneconomic relative to other locations whatever the intent of these efforts.

The “other” classification of this sector consists of: agriculture (manure, fertilizer, livestock digestion), industrial processes (aluminum, cement), waste management (landfills, waste water treatment), and natural gas distribution. Of these, waste management and natural gas distribution are negligible. 

Agriculture represents a very difficult to find pathway toward lowering emissions without adversely affecting the food supply. That leaves cement and aluminum production which are essential to modern society, are both part of the EITEs exemption legislation and have, as of yet, no known practical, workable, scaleable emission free alternatives.

So the residential-industrial-commercial-heat and “other” sectors also look not to bear much in the way of emissions reductions for various mitigating reasons.

Again, the political calculus affects the treatment of these sectors.  I think the decisions are based more on what they think they can get away with than a pragmatic emission reduction plan.

 At 39%, transportation is the largest emissions sector. It has been reported that in the latest emissions allowances auction held last May, energy and utilities purchased the bulk of the allowances. With utilities (probably the gas plants) garnering a certain amount of unspecified free allowances from the State, that leaves the energy companies supporting transportation to shoulder the bulk of the latest allowance purchases. 

There are five refineries located in our state that serve Washington, Oregon and to a small degree California. Their products include on-road gasoline and diesel,  marine fuel, jet fuel and aviation gasoline, railroad fuel, and natural gas used in transportation. However, there are some big allowance exemptions that cover fuels involving watercraft (shipping, cruise ships, navy etc.), agricultural, aviation and exported fuels.

Personal car and truck fuels in Washington have no exemptions and make up over half of the total fossil fuel emissions in this category. With the energy companies probably buying the bulk of emission auction allowances, and with all the exemptions in the other fuel use areas, it’s not a stretch to see why the costs of the allowances were passed along to the personal car and truck consumers causing the rather massive jump in gas prices at the pump.

Overall, a good guess is the Legislature will be more than satisfied for some time with the amount of monies coming in that can be used to fund the expansion of the State bureaucracy and all their manufactured future wondrous climate mitigating projects to help save the world from future computer modeled bad weather. So they will feel they are basically doing their job. It’s doubtful they will want to cause gas prices to accelerate much more in the near future for fear of garnering the wrath of the electorate.

Often the simplest answer is correct. Fundingsland makes a good argument that this is just the start of the cost impacts to transportation in Washington.  The mix of sector reductions in New York is different but not enough that fuel prices won’t spike when the New York auctions begin.  I agree that the revenue target is entirely a political decision.

If and when a transparent “project report” comes out, it will no doubt tout all the money received (the easy headline grabbing part), be filled with all the virtuous climate change related project accomplishments the monies were or are going to be used for (the hyped glossy political part), with the actual emissions reduction data either completely missing, obscured, massaged, tortured, or glossed over and probably relegated to some vague or indeterminant area of the document with accompanying convoluted language (the important forgotten and reason for the scheme in the first place part).

Based on current Ecology Department documents available and reports from various sources, this already seems to be the case.

New York’s participation in the Regional Greenhouse Gas Initiative (RGGI) portends what will happen in Washington and his description is apt.  I have been evaluating the RGGI reports for years and can confirm that the wording and information provided is designed to claim unqualified success.  Digging into the numbers shows a much different story.

Questions

Fundingsland lists the following bottom-line questions.

*How much did each “qualified” company pay for the allowances? 

*What were the financial consequences to the constituents of these added costs to the companies? 

*Which areas and projects did the monies actually go to and how much did each receive? 

*What was the overall cost per ton of CO2 reductions (total allowance participant proceeds versus total reduction in CO2 tons). 

And the four most important questions: 

*How much reduction in emissions compared to recent years has resulted from this scheme? 

*How much less global warming has been projected to occur by these emission reduction results? 

*How much is this scheme going to cost the residents to completion or are the costs never ending? 

*What metric has been identified that will be used to indicate this program is no longer needed because it has done it’s job?

I agree with his take on responses to the questions:

It will be surprising if any of these kinds of questions are going to be addressed. It is looking more and more like just another never ending, forever growing government bureaucratic convoluted way to extract more funds from their constituents for some worthwhile, some okay, and some questionable projects that may or may not have a quantifiable bearing on reducing CO2 emissions.

Summation

Fundingsland summarizes the likely results of the program:

It’s going to be extremely difficult and may not even be possible for Washington State to be able to claim any meaningful or significant emission reductions based on this tax-and-reallocate scheme given the state’s overall energy use configuration combined with all the various emission allowance exemptions. 

In fact, there is a very high probability there will be next to zero emission reductions and perhaps even an increase.

The easiest and most efficient way for the 54 companies/businesses listed under the auction #2 May 2023 summery report that have been forced to participate (“qualify” in bureaucratic terminology) in the allowance auctions or face a $10,000 per day fine, is for them to just purchase the allowances, add it to their cost of doing business and pass the increase along to their customers. So in effect they won’t be reducing their emissions at all. And all will be adding their additional State forced costs for doing business on to their customers.

This the ultimate flaw in the cap-and-reallocate plan.  The costs to implement emission reductions are greater than the costs of allowances.  Moreover, emission reductions may only be possible by displacing fuels.  The transportation fuel providers have limited means to reduce their emissions so the sector reductions will come primarily from the introduction of electric vehicles.  In the meantime, the fuel providers will simply pass the costs along and if the allowance cap limits the availability of allowances too much then they will stop selling fuel or pass the $10,000 per day fine along to their customers.  

Fundingsland concludes:

At the end of the day, the goal of any meaningful, measurable reduction of CO2 emissions or theoretical effective pathway to stop “climate change” looks to become a glazed over afterthought in this quagmire of a Washington State bureaucratic money-making machine. 

With this scheme, Washington State Government now joins the lucrative profit side of the climate industrial complex at the expense of its constituents while giving a completely different connotation to the term “Net Zero”.

Conclusion

I think New York’s plan for an economy-wide cap-and-invest program will be a similar disaster.  Earlier this year I described the book Making Climate Policy Work.  I focused on their discussion about RGGI and the implications for New York’s cap-and-invest program.  I noted that I agreed with the authors that these programs generate revenues.  However, we also agree that the amount of money needed for decarbonization is likely more than any such market can bear.   I highly recommend this book to anyone interested in potential issues with these programs.

Fundingsland picked up on the affordability issues but did not address the compliance implications.  Advocates for cap-and-invest tout the claim that as the allowance cap declines, compliance with the program targets is assured.  Proponents have not acknowledged or figured out that the emission reduction ambition of the reduction targets is inconsistent with technology reality.  Because GHG emissions are equivalent to energy use, limiting GHG emissions before there are technological solutions that provide zero-emissions energy means that compliance will only be possible by restricting energy use.  I don’t think that New York can meet its emission reduction targets but compared to Washington’s emission inventory and targets New York has a much better chance.  Washington plans to rely primarily on the transportation and building sectors for its reductions and needs to make sharper cuts.  I see no scenario where that will end well.

In conclusion, I believe Fundingsland did a good job describing the issues associated with cap-and-invest in Washington.  New York’s program will have the same issues.  It will be interesting to see how these state programs work out and which one will be the bigger flop.

NY Cap-and-Invest Reference Case vs PSC First Annual Informational Report

Two proceedings are dancing around the issue of affordability associated with the Climate Leadership & Community Protection Act (Climate Act or CLCPA) emission reduction mandates.  The New York State Department of Public Service First Annual Informational Report on Overall Implementation of the Climate Leadership and Community Protection Act includes cost estimates for existing programs. The New York State Department of Environmental Conservation (DEC) and New York State Energy Research & Development Authority (NYSERDA) are implementing the New York Cap-and-Invest (NYCI) proposed by Governor Hochul which is a market-based program to raise revenues for the strategies necessary to meet the mandates.  This post compares the costs associated with programs considered in the two proceedings.

I have been following the Climate Act since it was first proposed, submitted comments on the Climate Act implementation plan, and have written over 300 articles about New York’s net-zero transition.  I have devoted a lot of time to the Climate Act because I believe the ambitions for a zero-emissions economy embodied in the Climate Act outstrip available renewable technology such that the net-zero transition will do more harm than good.  The opinions expressed in this post do not reflect the position of any of my previous employers or any other company I have been associated with, these comments are mine alone.

Climate Act Background

The Climate Act established a New York “Net Zero” target (85% reduction and 15% offset of emissions) by 2050 and an interim 2030 reduction target of a 40% reduction by 2030. The Climate Action Council is responsible for preparing the Scoping Plan that outlines how to “achieve the State’s bold clean energy and climate agenda.”  In brief, that plan is to electrify everything possible and power the electric grid with zero-emissions generating resources.  The Integration Analysis prepared by the New York State Energy Research and Development Authority (NYSERDA) and its consultants quantifies the impact of the electrification strategies.  That material was used to write a Draft Scoping Plan.  After a year-long review the Scoping Plan recommendations were finalized at the end of 2022.  In 2023 the Scoping Plan recommendations are supposed to be implemented through regulation and legislation. 

Cap-and-Invest Background

According to the Cap-and-Invest Analysis Inputs and Methods webinar (Inputs and Methods Webinar Presentation and View Session Recording) on June 20, 2023, the New York State Department of Environmental Conservation (DEC) and the New York State Energy Research & Development Authority (NYSE$RDA) are developing the New York State Cap-and-Invest (NYCI) Program to meet the greenhouse gas emission limits and equity requirements of the Climate Act.

The NYCI feedback webinars all included the following slide that describes the program.  Setting a cap is supposed to provide compliance certainty and the revenues generated “will minimize potential consumer costs while supporting critical investments” in the control strategies necessary to meet the Climate Act targets.

NYCI Policy Modeling

The Analysis Inputs and Methods webinar mentioned above described the modeling analyses planned to support the development of the program: “This analytics study will assess potential market outcomes and impact from the proposed New York Cap-and-Invest (NYCI) program.” 

In order to evaluate the effects of different policy options, the Hochul Administration has proposed policy modeling.  This kind of modeling analysis forecasts future conditions for a baseline or “business-as-usual” case, makes projections for different policy options, and then the results are compared relative to the business-as-usual case. I disagree with the presumptions in the proposed modeling associated with which programs should be included.

The Scoping Plan modeling used a reference case that included “already implemented” programs and the NYCI Cap-and-Invest Analysis Inputs and Methods webinar proposed to use the same framework.  Starting with the reference case developed for the Scoping Plan, the NYCI modeling proposed to add policies enacted since then.  This reference case approach is misleading because it under estimates the total cost to meet the Climate Act emission reduction mandates.

I maintain that it is more appropriate to compare the policy cases to a base case that excludes all programs intended to reduce GHG emissions.  NYCI revenues are supposed to “minimize potential consumer costs while supporting critical investments”.  I believe that statement argues that NYCI proceeds are intended to fund all the control programs necessary to meet the Climate Act mandates and not exclude programs that were already implemented.

PSC Informational Report

On July 20, 2023 the first annual informational report (“Informational Report”) on the implementation of the Climate Act was released.  According to the press release:

The Climate Act’s directives require the Commission to build upon its existing efforts to combat climate change through the deployment of clean energy resources and energy storage technologies, energy efficiency and building electrification measures, and electric vehicle charging infrastructure. In recognition of the scale of change and significant work that will be necessary to meet the Climate Act’s aggressive targets, the Commission directed DPS staff to assess the progress made in line with its directives under the Climate Act and to provide guidance, as appropriate, on how to timely meet the requirements of the Climate Act.

The Department of Public Service presentation on the Informational Report notes in the following conclusion slide that “ the estimates of total funding authorized by the Commission to date for various clean energy programs in some instances reflect actions that pre-date the enactment of the Climate Act.”  This is the only reference to “already implemented” programs.  The conclusion states that the information presented “represents  direct effects of CLCPA implementation only, and only the portion of direct effects of programs over which the Commission has oversight authority.”  I interpret that to mean that they are not concerned with which program implements the necessary control strategies but only the results of all the programs relative to the Climate Act mandates. 

The Informational Report also notes that “It is difficult to pull out exactly what costs we would have otherwise incurred for infrastructure investment vs. the cost of CLCPA.”  This is the reason a base case is necessary.  You need some estimate of investments that would have occurred were it not for the policy.  In my opinion if they were worried about the difference between pre-CLPA investment costs vs. CLCPA-mandated investments they would have mentioned it here.   Because the Investment Report does not distinguish between costs for programs that pre-date the Climate Act and programs that are mandated by the Climate Act itself, I conclude that the NYCI modeling analyses should follow that precedent and not include “already implemented” control strategy programs.

Implementation Report Costs

I converted the tables in the Implementation Report to a spreadsheet so that I could combine the data from multiple tables.  Three tables are of particular interest: Table 4: 2022 Electric CLCPA Recoveries, Table 7: 2022 Typical Monthly Electric Bills with CLCPA related costs disaggregated, and Table 8: Authorized Funding to Date.

Table 4: 2022 Electric CLCPA Recoveries summarizes costs recovered in 2022 by utilities for electric programs.  The costs recoveries include: CES (electric only), CEF (electric only), certain VDER (electric only), Electric Vehicle Make Ready Program (electric only), Clean Heat programs (electric only), Integrated Energy Data Resource (electric only), and Utility Energy Efficiency programs (electric and gas). The table states that $1,175,788,000 in Climate Act costs were recovered in 2022.

Table 7: 2022 Typical Monthly Electric Bills with CLCPA related costs disaggregated is the first admission by the Hochul Administration of potential costs of the Climate Act to ratepayers.  The basis for the

typical electric delivery and supply bills for 2022 was provided for the following customer types:

A.           Residential customers (600 kWh per month),

B.           Non-residential customers (50 kW & 12,600 kWh per month),

C.           Non-residential customers (2,000 kW & 720,000 kWh per month), and

D.           Non-residential high load factor customers (2,000 kW & 1,296,000 kWh per month).

PSC Staff requested the utilities disaggregate the cost components reported in Table 2 (electric) to determine CLCPA related impacts on customers.  Climate Act costs added between 9.8% and 3.7% to residential monthly electric bills in 2022.

Table 8: Authorized Funding to Date “gives a sense” of expenditures that will ultimately be recovered in rates. The Implementation Report explains:

This annual report is a review of actual costs incurred by ratepayers to date in support of various programs and projects to implement the CLCPA and does not fully capture potential future expenditures, including estimated costs already authorized by the Commission but not yet recovered in rates. To complement this overview of cost recoveries incurred to date, we also present below a table of the various programs and the total amount of estimated costs associated with each authorized by the Commission to date. Table 8 gives a sense of expenditures that ratepayers could ultimately see recovered in rates. These values are conservative and reflect both past and prospective estimated costs.

It is important to note that the Commission authorized some of the estimated costs in Table 8 prior to CLCPA enactment and that the cost associated with these authorized programs will be recovered over several years to come, based on the implementation schedules for these projects or programs and will mitigate the cost impacts to ratepayers year over year. These estimated costs represent either total program budget, estimated total cost for the program over its duration, or costs incurred to date in support of the program. Additionally, these initiatives will result in a variety of other changes that will impact how much consumers pay for energy. A number of these would put downward pressure on costs, including benefits in the form of reduced energy usage and therefore reduced energy bills to consumers. The Department has also previously described market price effects that are a result of these investments. When load is reduced or more low-cost generation is added, it would be anticipated that energy prices would fall because the market would rely less on higher cost generators. In addition, investments in transmission infrastructure not only unbottle renewable energy but also yield production cost savings and reliability benefits.

In sum, the total estimated costs associated with these programs or projects should not be considered as entirely incremental costs to what ratepayers would otherwise pay. Subsequent annual reports may include additional information about costs recovered relative to the funding previously authorized by the Commission in these programs, including funds already expended in support of these programs.

The takeaway message from Table 8 is that the authorized funding to date of program costs that will eventually make their way to ratepayer bills totals $43.756 billion.  Note that the spreadsheet version of this table details the footnote costs.

The following table (Summary tab in the spreadsheet) combines Table 4: 2022 Electric CLCPA Recoveries and Table 8: Authorized Funding to Date.  This represents my best estimates of where the cost categories coincide but it represents my opinion only.  Given all the caveats in the preceding description I don’t think anyone has a definitive handle on these numbers.  The thing that jumps out is the difference between the relatively paltry $1.176 billion in estimated Climate Act costs collected in 2022 relative to the $43.756 billion in authorized funding.  Table 4 data is for one year and Table 8 data is over multiple years. The caveats in the previous quotation should be kept in mind.

Buried in a footnote is an admission that these are not all the costs authorized.  Footnote 7 in Table 8 states:

Not included in this table is the Propel NY transmission project, selected by the NYISO Board in June 2023 in response to the Commission’s declaration of a public policy transmission need (PPTN) to support injections of offshore wind energy to the Long Island system by 2030 at an estimated cost of $3.36 billion. Since the Commission did not directly approve this project, the estimated cost is not captured in the table above.

The bottom line is that this is just the start of the costs.  The Propel transmission project is one example.  I described this project and its costs earlier this year.  I noted that the costs associated with this project are for 3,000 MW of offshore wind.  The Climate Act goal is for 9,000 MW and the Scoping Plan Integration Analysis projects that 12,675 MW of offshore wind will be needed by 2040 in the Strategic Use of Low-Carbon Fuels mitigation scenario.  If the transmission costs are proportional that would mean that transmission costs will be three to four times higher than the $3.36 billion listed for the program that is not included.  I am sure that there are many more examples of programs that will be needed to satisfy the regulated utility obligations for Climate Act emission reduction mandates.

NYCI Reference Case Scenario

The proposed modeling methodology for NYCI proposes to follow the same policy modeling approach as the Scoping Plan where a business-as-usual baseline is not used as the comparison standard for the policy scenarios.  Instead, they propose to use the Scoping Plan Reference Case described as “Business as usual plus implemented policies” that includes the following:

  • Growth in housing units, population, commercial square footage, and GDP
  • Federal appliance standards
  • Economic fuel switching
  • New York State bioheat mandate
  • Estimate of New Efficiency, New York Energy Efficiency achieved by funded programs: HCR+NYPA, DPS (IOUs), LIPA, NYSERDA CEF (assumes market transformation maintains level of efficiency and electrification post-2025)
  • Funded building electrification (4% HP stock share by 2030)
  • Corporate Average Fuel Economy (CAFE) standards
  • Zero-emission vehicle mandate (8% LDV ZEV stock share by 2030)
  • Clean Energy Standard (70×30), including technology carveouts: (6 GW of behind-the-meter solar by 2025, 3 GW of battery storage by 2030, 9 GW of offshore wind by 2035, 1.25 GW of Tier 4 renewables by 2030)

Business-as-usual in my opinion should only include: growth in housing units, population, commercial square footage, and GDP; Federal appliance standards; and economic fuel switching.  All the other programs only exist as part of electrification strategies to reduce GHG emissions.

The Analysis Inputs and Methods webinar presentation stated that the Scoping Plan’s Reference Case will be updated with policies adopted since the original modeling was completed. The webinar asked for input on which policies to include from the following list:

  • NYC Local Laws
  • Statewide new construction codes
  • IRA Incentives
  • Advanced Clean Cars II/Advanced Clean Trucks
  • 100% sales MHDVs by 2045
  • 100% ZEV school buses by 2035, 100% transit buses by 2040
  • IRA Methane Charge
  • EPA Supplemental Rule
  • NYS Part 203
  • AIM Act (EPA Technology Transitions)

All of these programs also exist solely to reduce GHG emissions.  In order to determine the cost to meet the Climate Act targets they should be included as part of the policy case and not the business-as-usual case.

It can be argued that every line item in Table 8 could be considered part of the proposed Reference Case because some component of each category started before the Climate Act was enacted.  Recall that the Informational Report did not try to differentiate between pre-Climate Act and post-Climate Act programs so there are portions of the programs listed that will likely not be considered appropriate for the reference case.  However, using this definition most of these costs will be in the reference case and I would bet that the rationale and costs will not be documented well enough to determine which specific control programs are included.

One other way to differentiate between pre-Climate Act and post-Climate Act enactment is by the case number.  The first two digits are the year the proceeding began.  In my summary table there is only one case number 20 or higher.  Strategic Use of Energy Related Data (Case 20-M-0082) has $72 million funding authorized to date.  Using this approach, the proposed Reference Case would include $43.684 billion program costs as opposed to the $43.756 billion of total authorized costs.  I believe that they can pick and choose programs to include or exclude based on this reference case approach to satisfy the political motivations of the Hochul Administration.

Discussion

The Scoping Plan has been described as “a true masterpiece in how to hide what is important under an avalanche of words designed to make people never want to read it”.  The quantitative documentation supporting the document hides relevant information even better.  The single number that most New Yorkers want to know is how much will this cost.  The Scoping Plan cost numbers did not answer that question.

I addressed the Scoping Plan cost and benefit numbers in my Draft Scoping Plan comments and the verbal comments I presented at the Syracuse public hearing.  The issues I raised and summarized in this post have never been addressed.  In that post I compared the Scoping Plan cost presentation to a shell game.  A shell game is defined as “A fraud or deception perpetrated by shifting conspicuous things to hide something else.”  In the Scoping Plan shell game, the authors argue that energy costs in New York are needed to maintain business as usual infrastructure even without decarbonization policies but then include decarbonization costs for “already implemented” programs in the Reference Case baseline contrary to standard operating procedure for this kind of modeling.  Shifting legitimate decarbonization costs to the Reference Case because they are already implemented without adequate documentation fits the shifting condition of the shell game deception definition perfectly. 

Anyone who has not spent much time following the Climate Act implementation process might ask why was this done for the Scoping Plan analysis and why is it being proposed for the NYCI modeling analysis.  One of the justifications for the Scoping Plan was that the “costs of inaction are more than the costs of action”.  Shifting implementation costs away from the Climate Act program reduced the costs of actions to the point that they could make that claim.

Why are they doing it again?  One of the great unknowns in the NYCI implementation process is the revenue target.  The rational approach would be to calculate expected total costs, revenues from Federal programs, revenues from utility ratepayers, and personal and business investments for required infrastructure then calculate the difference between costs and those revenues as the amount necessary for the cap-and-invest revenues.  Each of those values is a politically sensitive number that will likely cause public outcry because it is going to be large.  If the NYCI revenue target does not include all the costs necessary to meet the Climate Act targets because those costs are covered elsewhere, then the NYCI modeling can show that the program is “affordable” and will not be a major burden.  Given that this strategy worked for the Scoping Plan “costs of inaction are less then the costs of action” scam I believe they are sticking with a proven strategy.

Conclusion

This past week there were signs of discontent with the potential costs of the Climate Act on utility ratepayer assessments.  Utility bills in New York City will go up significantly next month when Consolidated Edison of New York’s new rate case assessments become effective. Con Ed admitted that renewable energy investments contributed to the cost increases.  “Our customers demand safe and reliable service and increasingly renewable energy. This investment from customers is going to allow us to redesign and rebuild the grid, to move it towards electrification,” Con Ed media relations director Jamie McShane told Fox News Digital.

Comparison of the two state initiatives indicate that these costs are going to get much worse.  The PSC Implementation Report states “The magnitude of change the CLCPA requires is significant and will present challenges related to the need to preserve the resiliency and reliability of the energy systems, and cost mitigation to preserve energy affordability”.  The NYCI modeling assessment proposes to use an inappropriate modeling scenario that hides the true costs of implementation.  I have little doubt that the Hochul Administration analysis team has already determined that this approach is necessary to provide a politically correct NYCI revenue target.

At this point all anyone can do is to ask for a full accounting of the costs and expected emission reductions for all the control strategies necessary to meet the net-zero Climate Act mandate.  This information was not provided in the Scoping Plan but is a prerequisite for the proposed NYCI program.

Finally, note that the costs addressed in the PSC proceeding are ratepayer costs for energy.  The overall strategy for de-carbonization is to electrify everything possible.  The costs for each homeowner to replace their furnace, stove, and hot water heater with an electrical replacement is not included.  There also will be homeowner costs associated with electric vehicles to say nothing of the cost of electric vehicle itself. When everything is added up the costs will be enormous.  I do not think that customer demand for renewable energy is as strong as the desire for affordable energy.  It is past time for the Hochul Administration to supply a full accounting of potential costs to residents and businesses so that people will be able to decide for themselves how much they want to pay.

Goals for PSC Annual Informational Report and NYCI Reference Case

The goals for two proceedings associated with the Climate Leadership & Community Protection Act (Climate Act) are not clear.  The Public Service Commission (PSC) Order on Implementation of the Climate Act  (Case 22-M-0149) is supposed to “both track and assess the advancements made towards meeting the CLCPA mandates and provide policy guidance, as necessary, for the additional actions needed to help achieve the objectives of the Climate Act”. The New York State Department of Environmental Conservation (DEC) and New York State Energy Research & Development Authority (NYSERDA) are implementing the New York Cap-and-Invest (NYCI) proposed by Governor Hochul which is a market-based program to raise revenues for the strategies necessary to meet the mandates of the Climate Act.  The question for both programs is whether their goal is to address the Climate Act itself or the entirety of the effort needed to make the transition targets mandated by the Climate Act.

I have been following the Climate Act since it was first proposed, submitted comments on the Climate Act implementation plan, and have written over 300 articles about New York’s net-zero transition.  I have devoted a lot of time to the Climate Act because I believe the ambitions for a zero-emissions economy embodied in the Climate Act outstrip available renewable technology such that the net-zero transition will do more harm than good.  The opinions expressed in this post do not reflect the position of any of my previous employers or any other company I have been associated with, these comments are mine alone.

Climate Act Background

The Climate Act established a New York “Net Zero” target (85% reduction and 15% offset of emissions) by 2050 and an interim 2030 reduction target of a 40% reduction by 2030. The Climate Action Council is responsible for preparing the Scoping Plan that outlines how to “achieve the State’s bold clean energy and climate agenda.”  In brief, that plan is to electrify everything possible and power the electric grid with zero-emissions generating resources.  The Integration Analysis prepared by the New York State Energy Research and Development Authority (NYSERDA) and its consultants quantifies the impact of the electrification strategies.  That material was used to write a Draft Scoping Plan.  After a year-long review the Scoping Plan recommendations were finalized at the end of 2022.  In 2023 the Scoping Plan recommendations are supposed to be implemented through regulation and legislation.  This post addresses a couple of implementation components.

PSC Order on Implementation of the Climate Act

The order implementing this proceeding explains that:

The changes contemplated by the CLCPA are expected to profoundly transform the State’s regulatory landscape and impact every sector of the economy. The Public Service Commission (Commission) will play a critical role in these efforts as it continues to implement a variety of clean energy initiatives, including those related to the deployment of renewable energy resources to support the State’s transition to a zero emissions electric grid, energy efficiency, building electrification, and zero emission transportation.

The Commission has already begun to implement the many objectives of the CLCPA through a number of existing proceedings. To date, the Commission has authorized the offshore wind solicitations necessary to achieve the CLCPA goal of procuring nine gigawatts (GW), funded programs to support the electrification of buildings’ heating load and the transportation industry, supported both large scale and distributed clean energy project development, funded programs to reduce natural gas and electricity usage in the State, and instituted a coordinated planning process to evaluate local transmission and distribution system needs to support the State’s full transition to renewable generation.

The Commission has quickly taken action related to items within its jurisdiction to help put the State on a path to meet the aggressive CLCPA targets. However, in consideration of the scope of the CLCPA and the extensive work necessary to achieve its mandates, continuous monitoring of the progress made will be crucial to ensure the State remains on track to achieve these objectives. In addition, there are existing policies that will need to be reviewed, and new policies that will need to be developed, to further the enablement of the CLCPA. This proceeding will be the forum for such policy development. By this Order, the Commission institutes this new proceeding to both track and assess the advancements made towards meeting the CLCPA mandates and provide policy guidance, as necessary, for the additional actions needed to help achieve the objectives of the CLCPA.

On July 20, 2023 the first annual informational report for this proceeding was released.  The Power Point presentation summarizing the results includes the following slide describing the purpose, requirements, and goals for the annual report.  It explains that the PSC has statutory responsibilities in implementing the Climate Act that must be consistent with its “core mission to ensure that utilities can provide safe and adequate service at just and reasonable rates along with the reliability and resiliency of the system.”  My interpretation is that the PSC is required to address all actions, both pre-and post-Climate Act enactment by the Commission to achieve the mandates of the Act.

  The report describes the information provided:

The cost recoveries, benefits, and other information reported here are mainly focused on the direct effects of CLCPA implementation. Notably, the estimates of total funding authorized by the Commission to date for various clean energy programs in some instances reflect actions that pre-date the enactment of the CLCPA. With respect to both pre- and post-CLCPA measures, this report focuses only the portion of those direct effects arising from programs over which the Commission has oversight authority and does not account for programs implemented by other state agencies that are funded from other sources (e.g., Regional Greenhouse Gas Initiative (RGGI) funding). Examples of effects not captured here include property tax revenues to localities from newly developed renewable generation facilities, workforce development and job growth, and local air quality impacts, among others. It should also be noted that the benefits and costs of the measures discussed in this report do not accrue uniformly across stakeholders, and in some cases one stakeholder’s benefit is another’s cost. As such, this report generally describes a subset of benefits and costs related to the CLCPA and does so from the perspective of New York as a whole by using the Societal Cost Test. In instances where this report adopts a different perspective, it indicates what that perspective is. For those benefits that are difficult to quantify, this report includes qualitative descriptions of the nature, extent, and incidence of the benefit.

The issue I want to raise in this post relates to this description and the PSC core mission “to ensure that utilities can provide safe and adequate service at just and reasonable rates along with the reliability and resiliency of the system.”  In particular, consideration of just and reasonable rates needs to consider the effect of other programs that directly impact rates.  Although the Commission has no oversight authority for programs like RGGI and NYCI, the costs associated with those programs are passed through to ratepayers.  Therefore, I believe that this report should include those costs and any other programs that directly affect ratepayer costs in its assessment.

New York Cap-and-Invest

In June 2023, DEC and NYSERDA hosted a series of webinars addressing NYCI implementation.  The Cap-and-Invest Analysis Inputs and Methods webinar (Inputs and Methods Webinar Presentation and View Session Recording) on June 20, 2023 described proposed policy modeling.  In order to evaluate the effects of different policy options, this kind of modeling analysis forecasts future conditions for a baseline or “business-as-usual” case, makes projections for different policy options, and then the results are compared relative to the baseline case.

The proposed modeling approach uses a unique approach.  The Scoping Plan modeling used a reference case that included “already implemented” programs instead of the usual practice of a “business-as-usual” base case. The NYCI Cap-and-Invest Analysis Inputs and Methods webinar proposed to use the same framework.  Starting with the reference case developed for the Scoping Plan, the NYCI modeling proposal will add policies enacted since then. 

It is more appropriate to compare the policy cases to a base case that excludes all programs intended to reduce GHG emissions.  Putting the pre-Climate Act programs and costs in the reference case means that the cost forecasts will not include all the measures necessary to meet the Climate Act mandates.  One of the goals of NYCI is to “minimize potential consumer costs while supporting critical investments” but the proposed approach will only consider a subset of the total costs necessary to meet the Climate Act mandates.

Discussion

The question for both proceedings is whether the goal is to consider all the costs and benefits of the Climate Act or some sub-set.  The Hochul Administration has never released its estimate of the total costs to meet any of the Climate Act targets.  Instead of providing the cost and benefit components themselves only net numbers are provided to support the misleading and inaccurate party line statement that the costs of inaction are more than the costs of action.  In order to make that statement the Administration used the reference case approach that hides the total implementation costs.

There are implications for these two proceedings.  In order to provide the total costs, both should cover as many programs as possible.  The PSC has statutory limits on its Climate Act Implementation analysis that precludes many aspects of the transition but I believe that they should incorporate the costs of Climate Act-related expenditures that get incorporated into ratepayer assessments even if they are not in a rate case proceeding.  There was one relevant item not addressed in the PSC Climate Act Implementation Report.  New York Public Service Law  § 66-p. “Establishment of a renewable energy program” has safety valve conditions for affordability and reliability that are directly related to the PSC core mission “to ensure that utilities can provide safe and adequate service at just and reasonable rates along with the reliability and resiliency of the system.”  § 66-p (4) states: “The commission may temporarily suspend or modify the obligations under such program provided that the commission, after conducting a hearing as provided in section twenty of this chapter, makes a finding that the program impedes the provision of safe and adequate electric service; the program is likely to impair existing obligations and agreements; and/or that there is a significant increase in arrears or service disconnections that the commission determines is related to the program”.   I think that this mandate calls for including ratepayer costs that are not related to a rate case proceeding.

With respect to NYCI the question is what is the expectation for the revenues.  The revenues needed to make the necessary changes to the energy system are not related to the legislation or regulation that drives the initiative.  Therefore, the proposed modeling should evaluate the policy scenarios against a business-as-usual base case that excludes any program that exists to reduce GHG emissions.  Furthermore, the proposed approach will not be able to provide an estimate of necessary revenues to meet the Climate Act mandates because it excludes already implemented policies and their associated costs.

Conclusion

The goals for these two programs should be clarified.  I believe that I am not the only resident of New York that wants to know the all-in costs necessary to meet the Climate Act mandates.  In order to provide those numbers both proceedings should address as many program costs as possible for the effort needed to make the transition targets mandated by the Climate Act.

I intend to evaluate the reported costs in the PSC Climate Act Implementation Analysis relative to the NYCI modeling proposal included programs.  At this point I can only say the NYCI approach will be mis-leading for the revenue needs of the Climate Act transition costs but cannot estimate the magnitude of the error.  Arbitrarily eliminating some costs is nothing more than a politically expedient ploy to downplay the total costs of the Climate Act.