I recently described my initial impression of the New York cap and invest program and noted that it was not clear what the target revenue cap would be. This post looks at some alternative revenue projections.
I submitted comments on the Climate Act implementation plan and have written over 270 articles about New York’s net-zero transition 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. I also follow and write about the Regional Greenhouse Gas Initiative (RGGI) market-based CO2 pollution control program for electric generating units in the NE United States. I have extensive experience with air pollution control theory, implementation, and evaluation having worked on every cap-and-trade program affecting electric generating facilities in New York including the Acid Rain Program, RGGI, and several Nitrogen Oxide programs. 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 “Net Zero” target (85% reduction and 15% offset of emissions) by 2050. The Climate Action Council is responsible for 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 gride 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 that was revised in 2022 and the Final Scoping Plan was approved on December 19, 2022. Unfortunately, the revisions only addressed the language of the draft plan and not the substance of the numbers used from the Integration Analysis.
My initial impression of the New York cap and invest program post calculated a revenue projection for the proposed cap and invest program. From 2025 to 2030 I estimate that emissions will have to go down 14.76 million tons per year to meet the 2030 GHG emissions target. New York’s investments in the Regional Greenhouse Gas Initiative yield an expected cost per ton reduced of $537 for a total of $7.9 billion. Governor Hochul proposed “legislation to create a universal Climate Action Rebate that, subject to a stakeholder and rulemaking process, is expected to drive more than $1 billion in annual cap-and-invest proceeds to New Yorkers”. If the $1 billion is added then the total revenues would be $9 billion per year.
Scoping Plan Cost Projection
The primary documentation for the numbers presented in the Scoping Plan is the Tech Supplement Annex 2. Key Drivers Outputs spreadsheet. 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 spreadsheet is worse. Not only is the information provided buried in a massive spreadsheet but the authors of the Integration Analysis presented misleading, inaccurate, and biased data to support the narrative that the costs of inaction are more than the costs of action. I have extracted the relevant tabs from the massive reference spreadsheet into my analysis spreadsheet to address the first concern.
The data in the Integration Analysis that is used in the Scoping Plan is misleading. On one hand as many numbers are possible are only provided relative to a Reference Case instead of a status quo or business-as-usual case that represents the full costs of the control strategies necessary to meet the net-zero by 2050 Climate Act goal. I maintain that the true cost of New York’s net-zero transition by 2050 should include all costs associated with all programs designed to reduce GHG emissions. The authors of the Integration Analysis and Scoping Plan excluded decarbonization costs that I believe should be included and provided insufficient documentation to enable anyone to determine what is in or out of the Reference Case. For example, consider the supporting data for Figure 48 (Fig 48 tab in my spreadsheet).
Note the transportation investments in the Reference Case total $1.056 trillion but that the cost for the Low-Carbon Fuels scenario is only $3.4 billion more. That means most of the costs associated with capital and operating expenses for light-duty vehicles, medium- and heavy-duty vehicles, and buses as well as charging infrastructure costs are buried in the Reference Case because these costs are a lot more than $3.4 billion.
The cost data in the Integration Analysis that is used in the Scoping Plan is inaccurate. For example, in the calculations for the new wind, solar, and energy storage resources needed to replace existing fossil-fired resources it is assumed that none of the existing or newly developed resources reach their effective life expectancy. Wind, solar, and energy storage resources all have expected lifetime less than 25 years and it is more than 25 years to 2050 so this inaccurately underestimates the cost of electric generation.
The data in the Integration Analysis that is used in the Scoping Plan is biased. Wind and solar resources are intermittent so the assumption of the amount of energy produced affects the projected capacity of resources needed. Without exception the future amount of energy from wind and solar resources is biased high relative to the New York Independent System Operator projections. As a result, the costs projected are unreasonably low. Based on my evaluation the Integration Analysis biased every choice to make the zero-emissions replacement resources cheaper.
I emphasize that the annual revenue numbers that I believe should be clearly listed in the Integration Analysis and Scoping Plan are not provided so I can only make an estimate. Given all the limitations described above, the revenue values in the final row in the Figure 48 table shown above should be used cautiously. The annual expenditure values listed are the difference between the mitigation scenarios and the Reference Case divided by the number of investment years (27) from 2024 to 2050. The values range between $10 and $11 billion.
Other Cost Projections
I have heard other numbers tossed around so I did a bit of research to find other values.
In testimony regarding the environmental provisions of Governor Cuomo’s Executive Budget Proposal for SFY 2020-2021, Peter Iwanowicz, Executive Director, Environmental Advocates of NY, January 27, 2020 stated:
The costs of inaction are enormous. Based on the widely accepted social cost of carbon pollution of $50 per ton, New York has $10.2 billion dollars in costs per year attributed to the pollution we emit that is fueling climate change. This is a staggering blow to our health, our environment, our communities, and our economy.
Back calculating this projection assumes 204 million tons which is about the total CO2 emissions for 2017. The problem is that social cost of carbon parameter can only be applied once because it represents all the impacts from the time of the reduction to 2300. Counting them more than once is the same as claiming that because I lost ten pounds five years ago that I lost 50 pounds.
New York Lawyers for the Public Interest Nov. 8 Elections show that New Yorkers Overwhelming Support Climate Funding:
The Bond Act is a good start—but it’s not enough. It’s been three years since New York passed our landmark climate law, the Climate Leadership and Community Protection Act (CLCPA), and we’re far from achieving the law’s mandate of largely decarbonizing the state economy by 2040. The state’s own analysis shows that we’ll need to invest roughly $15 billion a year by 2030, and $45 billion a year by 2050.
The Integration Analysis does include annual projections for net direct costs of between $10.4 and $12.2 billion for 2030 and between $41.0 and $41.3 billion in 2050.
New York Renews: Climate Coalition launches campaign for state action
Among NY Renews’ key goals for the upcoming legislative session is the creation of a $10 billion Climate and Community Protection Fund, modeled after the state’s Environmental Protection Fund. It’s an amount in line with the Climate Action Council’s estimates of what meeting the goals in the climate plan will cost: $10 to 15 billion a year, whether the costs are paid by the state, the federal government, industry, ordinary New Yorkers, or a mix of all of the above.
There are enough options for guessing what the Council estimates as costs that these numbers are consistent.
I found a couple of independent estimates of the total costs to meet the net-zero target by 2050: An article by Ken Gregory critiques a report by Thomas Tanton “Cost of Electrification: A State-by-State Analysis and Results”. In Tanton’s analysis the estimated total installed cost (overnight) is approximately for New York is $1.465 trillion or $54.3 billion per year. Gregory’s total national capital cost of electrification is $433 trillion and New York’s proportional share based on Tanton is $22.2 trillion. Overbuilding solar and wind by 21% reduces New York overall costs to $18.2 trillion. Allowing fossil fuels with carbon capture and storage to provide 50% of the electricity demand reduces New York’s estimated costs to $1.2 trillion or $44.4 billion per year.
The New York Senate held a public hearing to examine legislative and budgetary actions necessary to implement the Climate Act Scoping Plan on January 19, 2023. One of the primary concerns of the legislative and budgetary actions has to be how much money is required. I modified the draft of this post to submit as a comment. The main point I wanted to make is that it is very important that the Legislature understand that the numbers presented in the Scoping Plan are inappropriate for any future legislative actions. Those actions must be based on the total costs of implementation and not just the costs relative to a Reference Case. Beyond that I offered no substantive recommendation for revenues needed because of the inadequate documentation in the Scoping Plan.
I determined the emissions reduction trajectory needed to meet the 2040 GHG emissions target, calculated the control cost per ton removed based on the RGGI auction proceed investments, and found that a total of $7.9 billion per year is needed. That is the low-end cost of the projections. At the upper end three projections exceed $45 billion a year. All these estimates will impose extraordinary cost burdens on New Yorkers. No one in the Hochul Administration has owned up to these costs. When will this news become public knowledge?
Finally, all the cost per ton reduced estimates in these projections exceed the New York State Value of Carbon guidance. The Frequently Asked Questions guidance states:
The term value of carbon is any representation of monetary cost applied to a unit of greenhouse gas emissions, expressed in terms of the net cost of societal damages (i.e., the “social cost of carbon”), marginal greenhouse gas abatement cost, or using another approach. DEC recommends that State agencies use a damages-based value of carbon for cost-benefit analysis, for describing societal benefits, and evaluating other types of decisions, such as state procurement, contracts, grants, or permitting.
This means that all these projected costs exceed the cost-benefit analysis for describing societal benefits. New York’s greenhouse emissions are less than one half of one percent of global emissions and global emissions have been increasing by more than one half of one percent per year. The facts that the expected investments exceed the societal benefits values and that all New York emission reductions will be replaced by emissions from elsewhere in a year does not mean that we should not do something, but it does mean we should take the time to do it right.