Response to My Comments on the New York Value of Carbon Guidance

The Climate Leadership and Community Protection Act (CLCPA) mandates that the state establish a value of carbon for use in the implementation of the law.  On December 30, 2020 New York’s Department of Environmental Conservation (DEC) announced finalization of this guidance.  This post summarizes the final guidance and describes the response to comments on the draft guidance document.  In general, the guidance document and the responses all are consistent with the CLCPA narrative that climate change is an imminent, inevitable disaster that can only be averted by reducing greenhouse gas emissions.

I submitted comments because this law will affect the affordability and reliability of New York’s energy.   I am a retired electric generation utility meteorologist with nearly 40-years of experience analyzing the effects of environmental regulations on electric and gas operations.  I have written a series of posts on the feasibility, implications and consequences of this aspect of the law and another series of posts on carbon pricing initiatives.  The opinions expressed in this post do not reflect the position of any of my previous employers or any other company I have been associated with, these comments are mine alone.

Background

On July 18, 2019 New York Governor Andrew Cuomo signed CLCPA, which establishes targets for decreasing greenhouse gas emissions, increasing renewable electricity production, and improving energy efficiency.  It was described as the most ambitious and comprehensive climate and clean energy legislation in the country when Cuomo signed the legislation.  I have summarized the schedule, implementation components, and provide links to the legislation itself at CLCPA Summary Implementation Requirements.

The CLCPA requires the New York State Department of Environmental Conservation (DEC), in consultation with the New York State Energy Research and Development Authority (NYSERDA), to establish guidance for a value of carbon for use by State agencies. According to the DEC press release:

“The guidance is different than a regulation and does not propose a carbon price, fee, or compliance obligation. It is a metric that will be broadly applicable to all State agencies and authorities to demonstrate the global societal value of actions to reduce greenhouse gas emissions. The guidance establishes a value of carbon focused on the federal social cost of carbon and incorporates public comments DEC received when the draft guidance was proposed earlier this year, including recommending a lower central discount rate of two percent, which should be reported alongside a one and three percent discount rate for informational purposes. In some decision-making contexts, particularly those that have a history of valuing carbon, such as the New York electric industry, the guidance suggests that alternative approaches to valuing carbon may be more appropriate for both resource valuation and benefit-cost analyses.  Use of the lower central discount rate translates into a 2020 central value of carbon dioxide of $125 per ton; methane of $2,782 per ton; and nitrous oxide of $44,727 per ton.”

The Value of Carbon Guidance provides values for carbon dioxide, methane, and nitrous oxide for use by State agencies along with recommended guidelines for the use of these and other values by State entities. Four documents were made available:

In section §75-0113, Value of Carbon the CLCPA states that the “social cost of carbon shall serve as a monetary estimate of the value of not emitting a ton of greenhouse gas emissions” and that “As determined by the department, the social cost of carbon may be based on marginal greenhouse gas abatement costs or on the global economic, environmental, and social impacts of emitting a marginal ton of greenhouse gas emissions into the atmosphere, utilizing a range of appropriate discount rates, including a rate of zero.”  The law states that DEC “shall consider prior or existing estimates of the social cost of carbon issued or adopted by the federal government, appropriate international bodies, or other appropriate and reputable scientific organizations.”

Response to Comments

In general, a major point in my comments was that I believe the focus of the guidance is wrong.  According to the document:

“The purpose of this guidance is to aid State entities in decision making by establishing a monetary value of greenhouse gas emission reductions or increases that reflects global societal impacts. This guidance does not itself establish a price or fee on emissions, and the value of carbon presented here is not the only value that may be used by the State. Alternative methods for establishing a value of carbon may be used by State entities, including the Department, as needed to achieve the goals and requirements of the CLCPA as well as other State goals, such as to protect public safety, welfare, and the environment.”

The guidance does not recognize that the CLCPA has specific targets so the proper way to address social costs is through a cost efficiency approach.  The damages approach recommended in the guidance is an efficiency concept inappropriate when developing control measures.  The emphasis of the guidance is on state agency use and not for supporting the Climate Action Council scoping plan mandate.

DEC’s responses to comments are listed below with my italicized reply below each paragraph.

“The Department received comments from individuals, elected officials, municipal officials, environmental advocacy groups, community groups, academic and other nonprofit research institutions, and private businesses particularly those related to the electricity sector. Most commenters responded to DEC’s specific request for input on the selection of a central discount rate or commented on three other areas: the use of a range of discount rates, the application of other approaches such as marginal abatement, or technical details of the damages-based or marginal abatement approaches. As discussed in the Guidance, DEC is providing guidelines regarding the use of the damages-based approach to enable New York State agencies to use this tool, where needed. DEC is not seeking to develop guidelines for the use of other approaches, such as marginal abatement, at this time.”

My comments explained that there are other metrics that describe ‘equivalences’ between climate-changing species used to determine contributions to climate impacts.  Tol et al (2012) present a unifying framework that clarifies the relationships among four metrics establishing ‘equivalences’ among emissions of various species. Importantly, the framework distinguishes between cost benefits and cost effectiveness. This paper explains that once a cap is set, you should not use the social cost of carbon. The social cost of carbon is an efficiency concept. Establishing a price incentivizes society to develop the most efficient response to that price but does not guarantee specific emission levels. Once a specific target is established in a cap that violates the efficiency principle inherent in the social cost of carbon.  Instead, the cap requires that emissions are valued to the shadow price of the cap. There was no response to this argument.

 “The majority of commenters who responded to DEC’s request for feedback on the selection of a central discount rate support the lower of the two suggested values, i.e., 2% rather than the 2.5% that was previously established as the lower bound of discount rates by the federal government. Some of these commenters suggested that the central rate should be no higher than 2%. Other commenters requested a rate that is lower, such as zero or 1%, or suggested that the DEC should adopt higher rates that would be consistent with that previously used by other New York State agencies and the federal government.”

 A lower discount rate produces higher values which supports the narrative of the CLCPA and likely the majority of the commenters who have a vested interest in climate change catastrophes.  My argument that on a global basis using lower discount rates memorializes the status quo for the world’s poor was ignored.

“While DEC maintains that the public is best informed by reporting a range of discount rates, given the responses received, DEC has revised the Guidance to apply a central 2% discount rate. However, as many commenters pointed out, the damages-based approach is continually refined and improved and DEC will continue to consider incorporating new research. DEC will also consider additional ways to address uncertainty and intergenerational equity issues raised by the commenters, such as through a declining discount rate or the incorporation of a 95th percentile on the central discount rate, as the research continues to improve. While not specifically raised in the public comments, one issue with applying a non-standard discount rate, such as 2%, is that this affects the applicability of published analyses, because the analyses are unlikely to apply the same discount rate.”

I raised problems with damages-based approaches in my comments but one would not know that from this response. 

“Several commenters took issue with the use of a range of discount rates and stated a preference that DEC require all State entities to use one discount rate. DEC has revised the Guidance to clarify the initial intent of the Guidance. Namely, DEC’s guidance follows the federal government’s approach to using the damages-based value of carbon, under which agencies use the central rate, but also report the results for a higher and lower rate. DEC did not intend to suggest that State entities use any discount rate within the range. Instead, DEC suggests that, if State agencies apply a damages-based value of carbon as a part of their decision-making, they should use the 2% discount rate to estimate the value (as opposed to the federal government’s central rate of 3%) and also report the values estimated using the 1% and 3% discount rates. This enables the public to see the effect of the discount rate and, in the case of the 3% rate, compare their assessment to federal actions and previous State policies.”

I agree with the DEC response that the public should be able to see the effect of the discount rate.  The suggestion in my comments that the public should also be able to see the effect of the time horizon, the location of impacts, and equilibrium climate sensitivity was ignored.  I also argued that the one reference used to justify using a lower discount rate was inadequate and that additional justification was needed.  There were no changes to the document to respond to that.

“The remaining comments covered a diverse set of topics, including topics beyond the scope of the Guidance. DEC will use all relevant feedback in refining the Guidance and in developing future guidance. An example is to provide additional guidance on how to consider public health impacts and the social costs for co-pollutants. The CLCPA specifically refers to the social cost of emitting greenhouse gases into the atmosphere, but the Guidance does discuss how the damages-based approach can be used to assess other impacts and other pollutants. The Guidance is a complement to other, more standard methods used.”

Topics beyond the scope of the Guidance are ignored if they don’t fit the narrative.  I raised fundamental issues raised about the mis-use of the value of carbon when emission targets have been chosen and no response.  Instead, they highlight comments that claim the values are too low.  Honestly, if they want to provide New York’s citizens information rather than just propaganda they should describe both sides of the valuation issues, explain why they chose what that chose, and explain why only the negative externalities of fossil fuels are considered without any consideration of the benefits.

Conclusion

Because it appears that a primary goal of this process is to memorialize a value of carbon to justify agency actions, the public deserves to know how the real costs are balanced against the theorized cost benefits.  When CLCPA strategies are announced and cost savings are claimed the public deserves to know that the savings are based on global not New York benefits, savings out to 2300, do not represent the latest climate sensitivity science, and that no consensus exists on what approach or rate to use for discounting uncertain climate impacts over long time horizons.  Instead, the basis is buried in a technical document that does not even acknowledge that there are uncertainties and issues with basis for cost savings based on these values of carbon.

Furthermore, there are fundamental technical considerations overlooked or ignored by the guidance and response to comments. New York State CLCPA implementation is trying to choose between many expensive policy options while at the same time attempting to understand which one (or what mix) will be the least expensive and have the fewest negative impacts on the existing system. If good picks are made then state ratepayers will spend the least amount of a lot of money, but if they are wrong, we will be left with lots of negative outcomes and even higher costs for a long time.  A value of carbon approach that addressed that concern as its primary goal would be great support to address this problem.

 

 

 

 

 

Response to My Comments on Part 496 – Climate Leadership and Community Protection Act 1990 Emissions Baseline

In late October 2020 I submitted personal comments on the New York Department of Environmental Conservation (DEC) proposed Part 496 that defined the emissions limits for the Climate Leadership and Community Protection Act (CLCPA).  That law sets targets based on 1990 emissions and this regulation developed the emission inventory for 1990.  The rule was recently adopted and the regulatory package included a document that assessed public comments.  This post follows up on the post on my comments and describes their response to my comments.  It is relevant to CLCPA implementation because the DEC did not respond to my primary objective – monitoring data do not support the emphasis on methane emissions in the inventory and the CLCPA.

I am following the implementation of the CLCPA closely because it affects my future as a New Yorker.  If DEC gets the 1990 baseline wrong it will be all the more difficult to get to the aggressive CLCPA targets.  The opinions expressed in this post do not reflect the position of any of my previous employers or any other company I have been associated with, these comments are mine alone.

Background

This 1990 emissions inventory is important because many of the targets of the CLCPA are based on reductions from this baseline.  For example, there is a target to reduce GHG emissions to 60 percent of 1990 emissions levels by 2030.  The CLCPA includes specific requirements for the 1990 emission inventory that I am positive no legislator who voted for the law understood.  

The law mandates an aggressive schedule for developing this inventory.  The CLCPA 1990 baseline is supposed to be set by the end of 2020 but the first statewide greenhouse gas emissions report isn’t due until 2021.  The statewide emissions report is defined as a “comprehensive evaluation of the inventory best available science and methods of analysis, including the comparison and reconciliation of emission estimates from all sources, fuel consumption, field data, and peer-reviewed research”.  It “shall clearly explain the methodology and analysis used in the department’s determination of greenhouse gas emissions and shall include a detailed explanation of any changes in methodology or analysis, adjustments made to prior estimates, as needed, and any other information necessary to establish a scientifically credible account of change”.  The 1990 baseline for the statewide GHG emission limits has similar quality requirements: “In order to ensure the most accurate determination feasible, the department shall utilize the best available scientific, technological, and economic information on greenhouse gas emissions and consult with the council, stakeholders, and the public in order to ensure that all emissions are accurately reflected in its determination of 1990 emissions levels”.

I compared the proposed Part 496 1990 emission inventory with the previous “official” New York greenhouse gas emission inventory that was prepared by the New York State Energy Research and Development Authority (NYSERDA) in two earlier posts.  The Part 496 Regulatory Impact Statement (RIS) includes a section titled Key Requirements of the 1990 Emission Baseline section that explains the CLCPA mandates that required DEC to develop a new official inventory.   These requirements significantly affect the greenhouse gas (GHG) emission total for the State.  According to the latest edition of the NYSERDA GHG emission inventory (July 2019) Table S-2 New York State GHG Emissions 1990–2016 the New York State 1990 GHG emissions were 236.18 MMtCO2e The proposed Part 496 regulation 1990 emissions inventory total is 401.38 MMtCO2e for an increase of 165.2 MMtCO2e.  When the draft Part 496 regulation came out, I described the differences between these two inventories.

Summary of 1990 Emission Inventories   
Final Rule Regulatory Impact Statement Table 1 Inventory in GWP20.
SectorCO2CH4N2OPFCsHFCsSF6Total
Energy259.9671.761.32  4.00337.04
IPPU1.76  0.900.050.012.72
AFOLU0.0513.074.01   17.13
Waste3.0349.350.50   52.88
Total264.80134.195.830.900.054.01409.77
        
NYSERDA July 2019 Table S-2 Emission Inventory in GWP100
SectorCO2CH4N2OPFCsHFCsSF6Total
Energy168.84 3.120.83   172.80
IPPU1.16   0.349.48 0.17 11.15
AFOLU 4.51 4.25   8.86
Waste 12.2 0.61    12.80
Total170 19.835.790.349.480.17205.61

Response to Comments

To its credit New York State requires that DEC respond to comments on proposed regulations.  Unfortunately, too often the answer is in the back of the book and this is considered just a formality.  In my opinion this was the case with the response to my  comment Part 496.  I consolidated and annotated all the responses to my comments in DEC response to Caiazza Comments.  I will just highlight a few of my concerns with their responses.

For a variety of reasons DEC dismissed my comments suggesting that the documentation was inadequate. I claim that in order to “utilize the best available scientific, technological, and economic information on greenhouse gas emissions and consult with the council, stakeholders, and the public in order to ensure that all emissions are accurately reflected in its determination of 1990 emissions levels”, that DEC must document each value listed in the inventory with the emission factor, activity factors or throughput, and the reference and rationale for each.  DEC claims that they provided the information.  I maintain that it is impossible to replicate their numbers with the information provided because the references are so vague that it is impossible to trace the necessary information back to the references provided.

It is particularly troubling to me that the response to comments does not address changes to the draft and final inventory.  As shown below there were substantive changes to the CO2 and CH4 emissions.   As it stands now the council, stakeholders and public just have to accept the numbers without explanation – hardly a hallmark of “best available scientific, technological, and economic information” required by the CLCPA.  Clearly, if there was adequate documentation he derivation of each number and the differences could be easily explained. 

Difference Between the Proposed Total Statewide Greenhouse Gas Emissions in 1990 by IPCC Sector and Gas, in GWP20 and the Final Emissions

SectorCO2CH4N2OPFCsHFCsSF6Total
Energy5.531.640.010007.17
IPPU0.090000.0300.12
AFOLU0000000
Waste01.100001.1
Total5.622.74000.0308.39

My over-arching comment was that there was too much of an emphasis on methane.  DEC summarized my comment as follows: “Some commenters suggested additional or alternative emission limits, including interim limits to maintain momentum or targets that recognize the long-term impacts of GHGs. Otherwise, the law over-emphasizes the role of methane or under-emphasizes the role of carbon dioxide by applying the 20-year rather than the more standard 100-year GWP.”   DEC evaded a direct response by correctly noting that the CLCPA required consideration of the upstream emissions and the 20-year GWP.  The authors of the CLCPA deliberately included those provisions as part of New York’s irrational war against natural gas.  While this accounts for much of the differences between the two inventories, the state’s choice of emission factors also contributes. DEC did not directly respond to a critical question about their inventory.

I have been involved with emissions inventories for over 45 years.   One thing I learned early on was that however much time and effort is spent on an emission inventory the ultimate check on any emissions inventory is comparison of the inventory estimate with observed ambient monitoring.  If there is a high quality, long-term monitoring network that measures the pollutant in the inventory and those measurements do not reflect the trend in the inventory then the inventory is wrong.

Lan et al., 2019 evaluated data from the National Oceanic and Atmospheric Administration Global Greenhouse Gas Reference Network and determined trends for 2006–2015.  This covers the period when the primary target of the CLCPA upstream emissions requirement, Pennsylvania shale-gas production, increased tremendously.  According to the plain language summary for the report: “In the past decade, natural gas production in the United States has increased by ~46%. Methane emissions associated with oil and natural gas productions have raised concerns since methane is a potent greenhouse gas with the second largest influence on global warming. Recent studies show conflicting results regarding whether methane emissions from oil and gas operations have been increased in the United States. Based on long‐term and well‐calibrated measurements, we find that (i) there is no large increase of total methane emissions in the United States in the past decade; (ii) there is a modest increase in oil and gas methane emissions, but this increase is much lower than some previous studies suggest; and (iii) the assumption of a time‐constant relationship between methane and ethane emissions has resulted in major overestimation of an oil and gas emissions trend in some previous studies.”

As a result of the fact that the relevant high quality, long-term monitoring network does not show a trend consistent with the Part 496 presumption that a big source of methane is from Pennsylvania natural gas extraction, I believe that unequivocally shows these calculations of methane emissions from shale gas are invalid.

Conclusion

The CLCPA mandates that the law will be implemented using “best” science.  Part 496 does not meet that condition.  Francis Menton explains the exposition of the scientific method from physicist Richard Feynman’s classic series of recorded lectures: “[W]e compute the consequences of the [hypothesis], to see what, if this is right, if this law we guess is right, to see what it would imply and then we compare the computation results to nature or we say compare to experiment or experience, compare it directly with observations to see if it works.  If it disagrees with experiment, it’s wrong.  In that simple statement is the key to science. . . . “

I found references that directly contradicted the Part 496 methane emissions and, more importantly, a citation that found that the observed monitoring observations of methane do not support the inflated values used in the inventory.  It disagrees, it’s wrong, so the Part 496 inventory fails a basic tenet of science.  DEC’s response to comments did not address this issue.

My Comments on the Cross State Air Pollution Rule Update December 2020

This post describes the comments I submitted to the Environmental Protection Agency (EPA) on their latest proposed revision to the Cross State Air Pollution Rule.  I have only posted once since Thanksgiving because I was called out of retirement to help the Environmental Energy Alliance of New York (EEANY) develop their comments on this rule-making but despite all the time I spent on them I was unable to include everything I thought was important.  So, I submitted my own comments.  This is a simple description.  I have prepared  a detailed summary of my comments on updated Cross State Air Pollution Rule that provides more details.

I am a mostly retired air quality meteorologist who was involved in continuous emissions monitoring system compliance reporting at the start of the Acid Rain Program, regulatory analysis of all the subsequent cap and trade programs affecting New York, and several regional ozone modeling efforts.  I was asked to help develop the EEANY comments on this rule because I was the primary author for the last iteration of their comments.  I submitted the comments to expand on some of their arguments and to address additional issues not in their purview.  The opinions expressed in this post and in my comments do not reflect the position of EEANY, any other of my previous employers or any other company I have been associated with, they represent my personal opinion.

Background

CSAPR was promulgated to address Ozone air quality which is the most intractable air quality problem in the United States.  Despite years of effort, ozone regularly exceeds the national ambient air quality standard.  It is formed in a photo-chemical reaction from nitrogen oxides (NOx,) created in any combustion process, and volatile organic compounds, basically anything with an odor.  As a result, there are many sources, both man-made and natural, that must be considered on a regional scale, which complicates the transport and dispersion of the pollution, in order to develop a control program to limit ozone.  Because the pollution crosses state lines this has become a controversy between states.  In the eastern US, the conditions conducive to ozone formation (Hazy, hot and humid heat waves) also drive-up energy demand and increase emissions from the electric generating sector.

This specific rule was amended because a court ruled that previous attempts still do not reduce observed levels of ozone enough.  According to EPA the rule works as follows:

EPA sets a pollution limit (emission budget) for each of the states covered by CSAPR.  Authorizations to emit pollution, known as allowances, are allocated to affected sources based on these state emissions budgets. The rule provides flexibility to affected sources, allowing sources in each state to determine their own compliance path. This includes adding or operating control technologies, upgrading or improving controls, switching fuels, and using allowances. Sources can buy and sell allowances and bank (save) allowances for future use as long as each source holds enough allowances to account for its emissions by the end of the compliance period.

In the proposed rule, like any other emissions trading program, each affected source is required to submit one allowance for each ton emitted during the trading season.  In CSAPR EPA set a cap for each state and then allocated allowances amongst the affected sources.  There is another complicating aspect of the rule related to interstate pollution.  In order to limit a state’s contributions to downwind exceedances the proposed program includes assurance levels that act as a cap on a state’s NOx emissions during the Ozone Season.  The assurance level equals the allowance allocation plus the variability limit that accounts for the year-to-year differences due to weather, electric demand and disruptions.   If a state exceeds their assurance level then sources that exceed their assurance levels within that state will be assessed a 3-to-1 allowance surrender for each ton emitted above the  assurance level.

My concern and that of the EEANY member companies is that the proposed New York emission budget is so limited and New York sources have such limited opportunities for further reductions that the sources will be forced to rely on the market for the allowances needed to operate throughout the ozone season.  However, there are aspects of the proposed rule that are unprecedented and, especially since the program is not finalized but will start on May 1, 2021, that mean that the market may not be as liquid as EPA assumes.  In the following I will explain these issues from a New York-centric position.

Comments

NYS Electric Generating Units (EGUs) have made significant reductions in NOx emissions as shown in the New York State Ozone Season NOx and Operating Parameters Trends table.  There are two implications to the current observed NOx emissions rates in New York.  Firstly, because emissions are so low the pollution control costs for any further reductions will be very high.  Secondly, there may not be many more reductions possible no the matter the cost.  As a result, it is important that EPA allocate the appropriate number of allowances to New York.

The CSAPR update rule is a cap-and-trade air or emissions trading pollution control program.  The first phase in any such program is to establish how many allowances are to be allocated.  In this rule EPA used a three-step methodology:

      1. Determine a future baseline that represents the current emissions levels with adjustments for retirements and new sources,
      2. Factor in additional mitigation controls that adjust the baseline to account for reductions available at a specified cost threshold, and
      3. Account for shifts in generation caused by the baseline adjustments and additional controls.

My biggest problem with EPA’s methodology is that EPA does not account for the retirement of nuclear generation.  When the last unit at the Indian Point nuclear generating station retires before the 2021 ozone season that means that 12% of the state’s generation will have to be replaced compared to the baseline that EPA used.  In the short term that means replacing zero-NOx emitting generation with generation that does emit NOx.  The EEANY comments explain that nuclear retirements in the 12-state trading system mean that the baseline should be adjusted.  EEANY shows that the authors of the rule did not understand the implications of the metric used to determine whether further controls are possible at their chosen cost threshold so that means EPA over-estimates potential NOx reductions.  EEANY proposed specific recommendations and suggestions for baseline and control technology changes and suggested incorporating a safety valve to offer a compliance pathway in the face of the uncertainties.

My Comments

EEANY discussed potential issues with the emissions trading market.  I included a description of several broad aspects of cap-and-trade programs to expand on the arguments for improving the chances of market success.  Despite the success of all previous EPA cap and trade programs there are aspects of the proposed action that are unprecedented and could conceivably threaten the viability of this trading program.  My comments illustrated the potential impact of the proposed allocations on New York by way of examples.

In my comments I developed an example ozone season emissions scenario to test the EPA allocations that were based on 2019 emissions.  I simply used the preliminary emission estimates from the 2020 ozone season.  Indian Point Unit 2 retired in April 2020 so last summer’s emissions reflect the additional generation needed to replace that retired energy.  In order to account for the retirement of Indian Point Unit 3 I prorated 2020 ozone season emissions by the ratio of generation produced by Indian Point 3 to the total ozone season generation in 2020. That adds 512 tons of NOx to the baseline.  The preliminary 2020 Ozone Season data available from EPA Clean Air Markets Division air markets program data website is 3,563 tons and would be projected to be 4,075 tons when the replacement power emissions are added.

The next step in the projection is to determine how many allowances are available.  EPA proposes a New York emissions budget of 3,137 tons.  The variability limit is 659 tons.  Recall that is supposed to account for year-to-year differences due to weather, electric demand and disruptions and that if state-wide emissions are greater than the sum of the budget and variability limit, or assurance level, that EPA imposes penalties.  The 5% set-aside for New Sources affects this projection in two ways.  Firstly, 157 tons are taken from the budget and not available to existing sources.  Secondly, in this example, the 94 tons emitted by the new sources in New York during 2020 are covered by this set-aside.  The allowances at the beginning of the ozone season equal the emissions budget plus the allowance bank or variability limit less the 157-ton new source set-aside. As a result, there will be 3,639 allowances available at the start of the Ozone Season on May 1, 2021.

In my example I compared 2020 adjusted emissions to the allowances available.  EPA acknowledges that affected sources set aside a contingency to account for monitoring problems and for sources that have to purchase allowances for compliance. I believe a minimum of 2.5% or 102 tons of the 4,075 emissions expected is appropriate for this contingency.  The correct emissions to compare relative to the 3,659 allowances available is the 2020 adjusted emissions plus the contingency buffer minus the 2020 new source emissions or 4,083 tons.  Note that the difference between the total set-aside and the emissions (63 tons) flows back into New York’s available allowance pool but not until after reconciliation so that means that the allowances available for New York sources are effectively reduced by 63 tons in this example.

The allowance margin represents the difference between emissions and allowances.  The difference between the available allowances and effective emissions is -444.  The negative number means that New York State will have to obtain allowances from the market to meet its compliance obligations and monitoring contingency.  Importantly, because the emissions in this example are 279 tons greater than the assurance level two additional allowances for each excess ton would have to be surrendered for compliance for a total of 558 additional allowances meaning that a total of 4,641allowances would be needed to cover the emissions, the CEMS contingency buffer, and the compliance assurance penalty.  In this example New York sources would have to go outside the state for 1,002 allowances for compliance.

In my comments I included a second example that calculated the numbers on a unit-by-unit basis and then determined the allowances need for each facility.  There are 70 CSAPR Group 3 facilities in New York.  In the analogous example case only 31 of the facilities would be able to comply with the proposed allocations.  Seven facilities would be able to comply without exceeding their assurance levels but 32 facilities would be required to surrender additional allowances.  I concluded that New York facilities would have to get 2,534 allowances from the market.

Unquestionably market-based emissions trading programs have been a success to date.  However, past success does not necessarily ensure future success.  I think market certainty is a primary driver for success and believe that the proposed program has enough uncertainty that success is not assured.

 A successful emissions trading program has a robust and liquid allowance market that allows affected sources to operate as needed while meeting the emissions reductions. There are several conditions that lead to a successful program.  I believe the most important key to success is the ability for some sources to be able to over control.  Sources that can install cost-effective controls and reduce emissions below their allowance allocations, can sell excess allowances to sources with more expensive compliance options. In order for that to work the cap has to be set so that over-control is possible.  In addition, in order to be able to use the allowances produced by sources who can over control, the market must be mature enough that those sources have enough market certainty that they are willing to generate those allowances and sell them.  Most programs have included a substantial time period between the final rule promulgation and start of the program that included credit for early reductions such that additional allowances were generated. Finally, the market must be large enough that other trading considerations don’t influence the market.  Many of the states in the affected region are de-regulated so generating companies compete with each other.  It is not unreasonable to expect that might influence a decision to sell allowances.

The proposed rule may not meet all these conditions.  EEANY’s comments showed that unless the baseline includes an adjustment for nuclear retirements it will be set so low that NY generators who have few remaining options to make further reductions will have to rely on the market to match historic operations.  EEANY also described issues with EPA’s assumptions for potential SCR optimization that mean that even meeting the proposed allocation levels may not be possible.  The short time between promulgation and the start of the trading program prevents any early reductions.  In my comments I described other factors affecting trading decisions.  In my comments I explained that there is a disconnect between market-based program theory and industry reality that leads regulators and academics to believe that emissions trading will be driven by economic considerations.  I believe there are regulatory, corporate, and personal reasons for an affected source to treat allowances as a compliance mechanism rather than a commodity for potential sales profit as presumed by market theory.  I described several other practical issues with emissions trading why the program in the proposed rule may not be as successful as past programs.

I also explained that EPA’s proposed allocations reduce the 12-state baseline, allocations and allowance bank for the five-month Ozone Season in an attempt to reduce emissions are fatally flawed. Ozone exceedances are an episodic feature associated with high energy demand lasting no more than several days and there is no guarantee that emissions during the episode are lowered sufficiently to reduce ozone during episodes using a seasonal trading program.  As it stands a higher emitting unit will incorporate a high price for their energy produced reflecting the scarcity of allowances.  As a result, the unit will not be called on to provide power unless the price is high and because high prices occur when demand is high the higher emitting units will still operate during ozone episodes.  In my opinion the only way to address the episodic nature of ozone episodes with a cap-and-trade program is to have a trading program over a time period consistent with the problem.

There is one final aspect of all this that needs to be mentioned.  The electric generation sector is not the only source of ozone precursor emissions.  Emissions from this sector are an easy target because the ultimate costs to the consumer are buried in utility bills so regulators can “hide” from the ramifications of the added costs.  On the other hand, motor vehicle exhaust is a major source of pre-cursors but any limitations on mobile sources directly impact the public so regulators could not deny their culpability.  My point is that even with all realistic electric sector reductions, that there still is no guarantee that the ozone levels will get below the national ambient air quality standard limits.

Conclusion

Despite the success of cap-and-trade air pollution control programs to date, it is inappropriate to expect that future programs will necessarily succeed as well if the reasons for past success are not considered.  The proposed EPA CSAPR trading programs does not consider those factors in its allowance allocations and schedule.

I have concerns about the level of the cap.  New York State has a remarkable record reducing NOX emissions and has a new regulation that will further reduce emissions with new limits on its peaking units.  Nonetheless, EPA’s proposed cap requires half the state’s facilities to rely on trading to meet their compliance requirements if future emissions equal 2020 emissions.  No sources in New York can over-control and provide sufficient allowances for state compliance which means that the inter-state trading is required and that means that the compliance assurance penalty is a concern.  EPA’s proposed baseline does not account for the fixed increase in emissions due to nuclear retirements over and above the inter-annual variability due to weather, demand or disruptions.  In New York the loss of 12% of the state’s nuclear generation means that this will definitely impact future emissions. The theory of cap-and-trade markets does not recognize the reality of industry practices that all lead to the inescapable conclusion that mark liquidity is a real concern in the proposed program.

Therefore, it would be prudent for EPA to revise the baselines to account for nuclear retirements and correct the SCR optimization reductions for new allocations and variability limits.  Furthermore, because of the aggressive schedule a safety valve which allows the use of Group 2 allowances is a reasonable backstop in the event of unexpected developments.  If adjustments are not made to the allowances available and weather, demand or disruptions increase NOx emissions, then there could be situations where the only compliance option available is to limit operations.

 

My Comments on the New York Value of Carbon Guidance Document

The Climate Leadership and Community Protection Act (CLCPA) mandates that the state establish a value of carbon for use in the implementation of the law.  This post describes my comments  on the draft guidance document “Establishing a Value of Carbon, Guidelines for Use by State Agencies” document released on October 29, 2020.  I submitted comments because this law will affect the affordability and reliability of New York’s energy.

I am a retired electric generation utility meteorologist with nearly 40-years of experience analyzing the effects of environmental regulations on electric and gas operations.  I have written a series of posts on the feasibility, implications and consequences of this aspect of the law and another series of posts on carbon pricing initiatives.  The opinions expressed in this post do not reflect the position of any of my previous employers or any other company I have been associated with, these comments are mine alone.

Background

On July 18, 2019 New York Governor Andrew Cuomo signed CLCPA, which establishes targets for decreasing greenhouse gas emissions, increasing renewable electricity production, and improving energy efficiency.  It was described as the most ambitious and comprehensive climate and clean energy legislation in the country when Cuomo signed the legislation.  I have summarized the schedule, implementation components, and provide links to the legislation itself at CLCPA Summary Implementation Requirements.

The CLCPA requires the New York State Department of Environmental Conservation (DEC), in consultation with the New York State Energy Research and Development Authority (NYSERDA), to establish a value of carbon for use by State agencies. The Draft Value of Carbon Guidance provides values for carbon dioxide, methane, and nitrous oxide for use by State agencies along with recommended guidelines for the use of these and other values by State entities.  Three documents were made available:

In section §75-0113, Value of Carbon the CLCPA states that the “social cost of carbon shall serve as a monetary estimate of the value of not emitting a ton of greenhouse gas emissions” and that “As determined by the department, the social cost of carbon may be based on marginal greenhouse gas abatement costs or on the global economic, environmental, and social impacts of emitting a marginal ton of greenhouse gas emissions into the atmosphere, utilizing a range of appropriate discount rates, including a rate of zero.”  The law states that DEC “shall consider prior or existing estimates of the social cost of carbon issued or adopted by the federal government, appropriate international bodies, or other appropriate and reputable scientific organizations.”

My comments explain why I think the focus of the guidance is wrong.  The guidance does not recognize that when the CLCPA chose specific targets that the proper way to address social costs is through a cost efficiency approach.  The damages approach recommended in the guidance is an efficiency concept.  DEC emphasized use of their proposed values “that can be used by State entities to aid decision- making and used as a tool for the State to demonstrate the global societal value of actions to reduce greenhouse gas emissions.”  The emphasis was clearly on state agency use and not for meeting the CLCPA targets and less on providing guidelines for state agencies.

Guidance Comments

An overview of the Value of Carbon Guidance was presented Maureen Leddy at the 24 November 2020 Climate Action Council Meeting. I will annotate the Value of Carbon Guidance slides  below with excerpts from the comments I submitted.

The first slide is titled “Value of Carbon Reduction” and notes that the “CLCPA requires DEC, in coordination with NYSERDA, to establish a Value of Carbon as an evaluation tool for agency decision making”.  The lists the following requirements:

        • Describe damages and marginal abatement cost approaches
        • Consider a range of discount rates, including zero
        • Consider the social cost of carbon in other jurisdictions
        • Provide values for non-C02 greenhouse gases

I think the guidance ultimately provides cost effectiveness justification for the CLCPA.  As a result, I believe that the document should explain the concept of the social cost approach targeted for the general public.  Blastland et al. (2020) describe an approach for evidence communication that I suggested would be an appropriate template for the public primer.  The authors suggest that communications should offer “balance, not false balance”.  I argued that this is a major short-coming in the guidance and supporting memo documents because the full range of opinions on social cost methodologies was not included.

My comments addressed technical aspects of the damages and marginal abatement cost approaches.  The biggest problem with their description and the recommendation to use the damages approach is that they ignored the concept that once a cap is set, you should not use the damages approach exemplified by the social cost of carbon. The social cost of carbon is an efficiency concept. Establishing a price incentivizes society to develop the most efficient response to that price but does not guarantee specific emission levels. Once a specific target is established in a cap that violates the efficiency principle inherent in the social cost of carbon.  I pointed out that in its recent review of the federal IWG social cost of carbon, the U.S. Government Accountability Office referred to the marginal abatement cost approach as a type of “target-consistent approach” to valuing emissions, which reflects the fact that this approach establishes a value that depends in part on the relevant emission reduction target.

Also included in the first slide was the target timeline of milestones to meet CLCPA deadline

Milestone Date
Stakeholder conference July 2020
Public comment period ends November 27, 2020
Final released (CLCPA requirement) January 1,2021

I pointed out that the time between the end of the public comment period and the final release date was very short given the importance of the document.  Importantly the implication that the document was required by the CLCPA is based on a mis-reading of the law that states it was supposed to be released “No later than one year after the effective date of this article”.  The law was signed in July 2019 so this should have been released back in July 2020.  Because the date has been missed delaying release long enough for full evaluation and response is appropriate.

 

The second slide, “Draft Value of Carbon Guidance” stated that the proposed guidance:

      • Provides background on different ways to value greenhouse gas emissions reductions
        • Damages approach and marginal abatement cost
      • Recommends the U.S. Interagency Working Group’s (IWG) damages-based value of carbon, also referred to as the social cost of carbon, as appropriate for most agency decision making
      • Considers a range of discount rates, including zero
        • Recommends 1%-3% ($421-$53per ton of C02 in 2020 dollars)
        • Seeking comment on central value of 2% or 2.5% ($125 or $79 per ton of CO2 in 2020 dollars)
      • Discusses how to value non-CO2 greenhouse gases
        • Values are provided for CO2, N02 and CH4, as per IWG
        • Values for other gases will be added as the research evolves
        • CLCPA20-yr GWP does not change these values
      • Details specific considerations for State agencies on how to use a damages-based approach

I think part of the rationale is that the IWG damages-based value of carbon is a more established concept and that more information would have to be developed to use the marginal abatement approach.  The guidance touts the IWG as the best approach but then goes on to ignore the recommendations of the IWG when it comes to the choice of the discount value.  I argued that they did not provide sufficient justification to recommend the changes proposed.

The guidance document recommends that the non-CO2 greenhouse gases be valued individually.  I agree with that approach but I pointed out that there are ramifications to that relative to methane.  Carbon dioxide is long-lived and accumulates over time because it stays in the atmosphere.  Methane is a short-lived (10 to 12 years) pollutant that lasts in the atmosphere less.  Because the CLCPA targets set a hard cap on methane emissions twelve years after the cap limit is reached the impact of methane on warming is done.  It stands to reason that the economic impact on aspects of the economy, such as energy use, health, and agriculture, projected from these climatic changes is also done.  I suggested that the social cost impacts needed to be revised to reflect that reality.

There is a basic problem with the way the guidance document is framed.  While it is valuable that State agencies have guidance on how to use a damages approach, it is even more important to provide support for the CLCPA implementation process.  The use of the damages approach over the marginal abatement cost approach handicaps CLCPA implementation of the most cost-effective strategies.

The second slide also stated that “This guidance is not a regulation and does not set a carbon price nor impose any fees.”  This caveat has been included in every DEC document on the value of carbon but the reality is that the guidance will be used to set a carbon price for the imposition of fees if the New York Independent System Operator Carbon Price proposal is implemented.  I would expect that it would be also used if New York joins the Transportation Climate Initiative.

The third slide, DEC Draft Value of Carbon Guidance, basically repeated all the points made in previous slides.  Two points do need to be addressed:

      • State agencies may utilize the Value of Carbon to aid many forms of decision-making related to permitting, environmental review, rulemakings, funding, procurement, etc.
      • Guidance does not create a price, fee, or compliance obligation.

It is not clear that if the value of carbon is used in decision-making related to permitting how that cannot be considered a compliance obligation.  Maybe it is just intended to “prove” that the actions can be justified because the costs may be less than the social costs calculated using the recommended values.  That may also explain why the IWG recommended values which yield lower social costs are not recommended.

I specifically suggested that the guidance document incorporate the Blastland et al., (2020) simple tip to display information in a table rather than stating them in the text to address the implications of the assumptions used to develop the recommended values of carbon.  I suggested that a table be included that lists the effects of assumptions on the social cost values.  My comments addressed the effects of location of benefits (guidance benefits are primarily global and not New York specific), time horizon (the benefits extend out to 2300), the sensitivity of the climate to greenhouse gases (IWG estimates do not use the most recent modeled estimates of the sensitivity), and the discount rate.  Of those parameters only the differences in discount rates were discussed.  However, the underlying ramifications of the discount rate choice were not explained.

Finally, I recommended that the evaluation of carbon pricing policies in Canada by McKitrick (2016) be considered.  He explains that “there may be many reasons to recommend carbon pricing as climate policy, but if it is implemented without diligently abiding by the principles that make it work, it will not work as planned, and the harm to the Canadian economy could well outweigh the benefits created by reducing our country’s already negligible level of global CO2 emissions”.  Clearly this is entirely relevant to New York.  Importantly he notes:

“However, a beneficial outcome is not guaranteed: certain rules must be observed in order for carbon pricing to have its intended effect of achieving the optimal balance between emission reduction and economic growth. First and foremost, carbon pricing only works in the absence of any other emission regulations. If pricing is layered on top of an emission-regulating regime already in place (such as emission caps or feed-in-tariff programs), it will not only fail to produce the desired effects in terms of emission rationing, it will have distortionary effects that cause disproportionate damage in the economy. Carbon taxes are meant to replace all other climate-related regulation, while the revenue from the taxes should not be funnelled into substitute goods, like renewable power (pricing lets the market decide which of those substitutes are worth funding) but returned directly to taxpayers.”

Conclusion

Because it appears that a primary goal of this process is to memorialize a value of carbon to justify agency actions, the public deserves to know how the real costs are balanced against the theorized cost benefits.  When CLCPA strategies are announced and cost savings are claimed the public deserves to know that the savings are based on global not New York benefits, savings out to 2300, and do not represent the latest climate sensitivity science.  If the total costs are close to the purported benefits this may be acceptable but I have no doubt that the total costs per ton will far exceed even these conjured values.

Furthermore, there are fundamental technical considerations overlooked or ignored by the guidance. New York State CLCPA implementation is trying to choose between many expensive policy options while at the same time attempting to understand which one (or what mix) will be the least expensive and have the fewest negative impacts on the existing system. If good picks are made then state ratepayers will spend the least amount of a lot of money, but if they are wrong, we will be left with lots of negative outcomes and even higher costs for a long time.  Picking the correct value of carbon metric and values is critical to doing this right.  A comprehensive response to comments justifying the choices made is an integral part of doing this right.

My comments on the FERC Carbon Pricing Policy

Earlier I described the Federal Energy Regulatory Commission (FERC) technical conference regarding Carbon Pricing in Organized Wholesale Electricity Markets held on September 30, 2020.  On October 15, 2020 FERC proposed a policy statement to “clarify that it has jurisdiction over organized wholesale electric market rules that incorporate a state-determined carbon price in those markets. I also described the proposed policy statement that seeks to encourage regional electric market operators to explore and consider the benefits of establishing such rules.”

The post on the policy statement mentioned that I intended to personally comment on the concerns I raised in my personal blog post on the FERC technical conference.   I submitted comments as a private citizen.  The technical conference convinced FERC commissioners that carbon-pricing was an “efficient” market-based tool but nobody asked and no one proved that they work.  In my opinion the first rule of efficient policy is that it works.  I believe that those who support carbon pricing on theoretical economic grounds are overlooking or are unaware of practical issues I have raised.  Cynic that I am, I think the primary value to FERC and the RTO/ISO operators is that the carbon price makes their lives easier.  That it will have significant impacts on consumers and not do anything for the climate is somebody else’s problem.

In order to determine whether any carbon pricing proposal will affect the justness and reasonableness of rates I argued that the Commission must consider whether the proposal will reduce carbon dioxide emissions at a cost below some standard of reasonableness.  There is a cost where the abatement costs exceed any estimates of the cost impacts of CO2 on the climate.  Despite its flaws the Social Cost of Carbon (SCC), the present-day value of projected future net damages from emitting a ton of CO2 today, is a widely used metric to establish a reasonable value.  Because my primary concern is New York’s Climate Leadership and Community Protection Act (CLCPA) I proposed using New York’s proposal to use the Interagency Working Group 2016 estimates that translate into a 2020 value of carbon dioxide of $53-421 per ton, with a central value of $79-125 per ton”.

The FERC notice of the proposed policy statement on Carbon Pricing in Organized Wholesale Electric Markets states that “We agree that proposals to incorporate a state-determined carbon price in RTO/ISO markets could, if properly designed and implemented, significantly improve the efficiency of those markets”.  I argued that there are practical reasons why it is impossible to properly design and implement a carbon pricing scheme that will affect efficiency of those markets in the best interests of the public.

Carbon pricing is a climate policy approach that charges sources for the tons of carbon dioxide that they emit.  A Resources for the Future (RFF) summary lists several attributes that they claim makes carbon pricing more attractive than other potential policies to reduce carbon dioxide emissions:

      • Carbon pricing allows emitters to choose the most efficient method to reduce emissions.
      • An economy-wide carbon price applies a uniform price on CO₂ emissions regardless of the source.
      • A carbon price encourages individuals and businesses to reduce their carbon emissions more than conventional regulations.
      • A carbon price creates a new revenue stream that can be used in a number of ways.

I compared those attributes to the real-world of carbon pricing.

RFF states that “carbon pricing allows emitters to choose the most efficient method to reduce emissions”.  In the context of power plants under FERC jurisdiction this is mostly irrelevant.  In the first place, there are no cost-effective add-on controls for CO2 reductions, so fossil-fired electrical generators only have limited options.  For an individual power plant operator, the only effective approach is to switch to a lower emitting fuel.  Power plants can also be replaced in whole or part by alternative generation, but the business model of most de-regulated generating companies precludes the option to develop replacement generation. I have shown that in RGGI the market participants don’t behave as expected by economic market theory so the markets don’t necessarily behave as the economists think they should.  As a result, all the modeling and laboratory testing economic results “proving” market efficiency should be viewed cynically.  I believe that even though carbon pricing advocates have convinced themselves that somehow carbon pricing is different than a tax, the reality is that because of the limited options for compliance any carbon price is treated just like a tax by electric generating operators.  Because energy taxes are inherently regressive, the carbon price result is not in the best interest of low-income ratepayers.

There is another aspect to carbon emissions reductions that is relevant to FERC.  In order to replace firm, dispatchable fossil-fired capacity the total costs to make in-kind replacement with renewable wind and solar have to be included.  No one at the technical conference addressed how a carbon price signal for generators would lead to the development of the transmission and ancillary grid support services necessary to support intermittent and diffuse wind and solar generation.  An electric system carbon price requires any generator that emits CO2 to include a carbon price in their bid which serves to provide the non-emitting generators with more revenue.  However, solar and wind generators are not paying the full cost to get the power from the generator to consumers when and where it is needed.  Because solar and wind are intermittent, as renewables become a larger share of electric production energy storage or energy now provided by traditional generating sources will be needed but there is no carbon price revenue stream for energy storage.  Because solar and wind are diffuse, transmission resources are needed but solar and wind do not directly provide grid services like traditional electric generating stations.  Energy storage systems could provide that support but they are not subsidized by the increased cost to emitting generators.  When the carbon pricing proposal simply increases the cost of the energy generated, I think that approach will lead to cost shifting where the total costs of fossil fuel alternatives have to be directly or indirectly subsidized by the public.

RFF and the economists at the FERC Technical Conference all agree that an economy-wide carbon price that applies a uniform price on CO₂ emissions, regardless of the source, is the ideal solution.  On the other hand, speakers at the conference admitted that this ideal implementation was unlikely.  Pollution leakage refers to the situation where a pollution reduction policy simply moves the pollution around the globe rather than actually reducing it. Economic leakage is a problem where the increased costs inside the control area leads to business leaving for non-affected areas.  There also is an economic leakage effect in electric systems where a carbon policy in one jurisdiction may affect the dispatch order and increase costs to consumers in another jurisdiction.  As a result, work arounds are necessary to address leakage which complicates the implementation and may lead to unintended consequences.

RFF’s third attribute stated that ‘A carbon price encourages individuals and businesses to reduce their carbon emissions more than conventional regulations”.   There are several problems with this ideal.  In a situation where there is a specific target like New York’s CLCPA 2040 target for zero emissions from the electric sector, it is necessary to consider the total costs and then the necessary carbon price. In order for a carbon price to effectuate this change the carbon price has to equal the cost of the conversion divided by the total tons emitted over the implementation period.  I conservatively estimated the cost for New York to meet the state’s goal of a zero-emissions electric sector by 2040 as $620 per ton.  The cost for converting the country by 2035 as has been proposed would be much higher because the number of years in the implementation period is shorter and the reduction costs themselves would be higher because New York’s starting point for emissions is relatively lower.  Recall that the highest social cost of carbon value that New York is considering is no more than $421 per ton.

The second problem is that individuals and businesses also have limited opportunities to reduce carbon emissions.  One commentator points out that “The only logical reason for a carbon tax is to reduce emissions. Such a tax might help to reduce energy consumption, but only at punitive levels, because energy demand is so inelastic. Therefore, the real intention is to make fossil fuels so expensive that renewables can eventually become competitive, along with carbon capture and sequestration, hydrogen heating etc.”

In order for a carbon price to be more effective than conventional regulation the funds received will have to be spent effectively.   I have evaluated the results of the investments made by regulatory agencies to date in RGGI measured as the cost per ton reduced.  The RGGI states have been investing investments of RGGI proceeds since 2008 but their investments to date are only directly responsible for less than 5% of the total observed reductions.  Furthermore, from the start of the program in 2009 through 2017, RGGI has invested $2,527,635,414 and reduced annual CO2 emissions 2,818,775 tons.  The resulting cost efficiency, $897 per ton reduced, far exceeds the range of SCC values representing the value of reducing CO2 today to prevent damages in the future.

Theory says that the carbon price alone can incentivize lower emitting energy production and that the market choices will be more efficient than government-mandated choices. Ultimately the market signal question is whether the SCC value is sufficient to incentivize the market to invest in zero GHG emitting generation resources.  There is no sign that RGGI motivated the market to act and it is not clear that the carbon pricing schemes proposed under the purview of FERC will provide enough incentive either.

The final RFF attribute stated that “A carbon price creates a new revenue stream that can be used in a number of ways.”  This attribute is more of a concern on the value of the approach than a direct impact on the electric generation sector.  The revenue stream from a carbon pricing stream could be very large.  In the classical theory of carbon pricing those revenues are re-distributed to offset other taxes so that the consumers come out whole.  In practice all or part of the revenues have usually been diverted away from direct consumer rebates to fund carbon reduction programs. If carbon reduction programs are dependent upon a continuing revenue stream there is a fundamental problem.  As CO2 is reduced revenues decrease and eventually either the carbon price has to increase to a very high level or the revenues used to fund mitigation programs will be insufficient to make further reductions.

Conclusion

In order to convince me that carbon pricing has a hope of working in the US electricity market I would need to see an estimate of the cost to convert the nation’s electric system to zero emissions and combine that with recent emissions to develop a cost per ton for the transition.   I believe that the cost for converting the country by 2035 would be much higher than any estimate of the social cost of carbon.

If the estimated emissions reduction cost per ton is higher than the social cost of carbon, then the costs to mitigate climate change effects are greater than the alleged impacts.  A rational alternative response would be to invest in research and development to produce cheaper zero emissions electric generating resources and finance adaptation measures until such time that cost-effective zero-emission resources are available.  I asked if FERC does not hold the States to this just and reasonable standard then who will?

I concluded that RTO/ISO market rules that incorporate a state-determined carbon price in RTO/ISO markets cannot be just and reasonable for the rate payers whatever the value to the RTO/ISO market operators.  I note that among the advocates for carbon pricing at the Technical Conference were RTO/ISO operators who apparently believe that carbon pricing will make their regulatory responsibilities easier.  However, a carbon price will have significant impacts on consumers and not cost effectively reduce CO2 emissions.

My Climate Leadership and Community Protection Act Part 496 Comments

On July 18, 2019 New York Governor Andrew Cuomo signed the Climate Leadership and Community Protection Act (CLCPA), which establishes targets for decreasing greenhouse gas emissions, increasing renewable electricity production, and improving energy efficiency.  I have summarized the schedule, implementation components, and provide links to the legislation itself at CLCPA Summary Implementation Requirements.  On August 14, 2020 New York State Department of Environmental Conservation (DEC) Commissioner Basil Seggos released proposed part 496 regulations that defined the 1990 baseline emissions inventory for the CLCPA.   This post summarizes the comments I submitted on October 26, 2020.

I am following the implementation of the CLCPA closely because it affects my future as a New Yorker.  If they get it wrong it will be all the more difficult to get to the aggressive CLCPA targets.  The opinions expressed in this post do not reflect the position of any of my previous employers or any other company I have been associated with, these comments are mine alone.

Background

This 1990 emissions inventory is important because many of the targets of the CLCPA are based on reductions from this baseline.  For example, there is a target to reduce GHG emissions to 60 percent of 1990 emissions levels by 2030.  The CLCPA includes specific requirements for the 1990 emission inventory that I am positive no legislator who voted for the law understood.

The law mandates an aggressive schedule for developing this inventory.  The CLCPA 1990 baseline is supposed to be set in 2020 but the first statewide greenhouse gas emissions report isn’t due until 2021.  The statewide emissions report is defined as a “comprehensive evaluation of the inventory best available science and methods of analysis, including the comparison and reconciliation of emission estimates from all sources, fuel consumption, field data, and peer-reviewed research”.  It “shall clearly explain the methodology and analysis used in the department’s determination of greenhouse gas emissions and shall include a detailed explanation of any changes in methodology or analysis, adjustments made to prior estimates, as needed, and any other information necessary to establish a scientifically credible account of change”.  The 1990 baseline for the statewide GHG emission limits has similar quality requirements: “In order to ensure the most accurate determination feasible, the department shall utilize the best available scientific, technological, and economic information on greenhouse gas emissions and consult with the council, stakeholders, and the public in order to ensure that all emissions are accurately reflected in its determination of 1990 emissions levels”.

I compared the proposed Part 496 1990 emission inventory with the previous “official” New York greenhouse gas emission inventory that was prepared by the New York State Energy Research and Development Authority (NYSERDA) in two earlier posts.  The Part 496 Regulatory Impact Statement (RIS) includes a section titled Key Requirements of the 1990 Emission Baseline section that explains the CLCPA mandates that required DEC to develop a new official inventory.   These requirements significantly affect the greenhouse gas (GHG) emission total for the State.  According to the latest edition of the NYSERDA GHG emission inventory (July 2019) Table S-2 New York State GHG Emissions 1990–2016 the New York State 1990 GHG emissions were 236.18 MMtCO2e The proposed Part 496 regulation 1990 emissions inventory total is 401.38 MMtCO2e for an increase of 165.2 MMtCO2e.

Summary of 1990 Emission Inventories
Regulatory Impact Statement Table 1 Inventory in GWP20.
Sector CO2 CH4 N2O PFCs HFCs SF6 Total
Energy 254.43 70.12 1.31 4.00 329.87
IPPU 1.67 0.00 0.00 0.90 0.02 0.01 2.60
AFOLU 0.05 13.07 4.01 17.13
Waste 3.03 48.25 0.50 51.78
Total 259.18 131.45 5.83 0.90 0.02 4.01 401.38
NYSERDA July 2019 Table S-2 Emission Inventory in GWP100
Sector CO2 CH4 N2O PFCs HFCs SF6 Total
Energy 208.96
IPPU 3.99
AFOLU 8.37
Waste 14.86
Total 236.18

Comments

In my first comment I addressed the contradiction in the emission inventory requirements in two sections of the CLCPA.  How can § 75-0107, Statewide greenhouse gas emissions limits, establish a limit estimated pursuant to § 75-0105 which is due later than this requirement?  Both sections mandate the use of the “best available” information and consultation with the public, but the timing requirements preclude that from happening.

As shown above there are significant differences in the Part 496 proposed inventory and the July 2019 NYSERDA inventory.  The July 2019 emission inventory relied primarily on Intergovernmental Panel on Climate Change (IPCC) methods but because of CLCPA mandates, GHG emissions that occur outside of the boundaries of New York State have to be included if they are associated with the use of energy within the State and the carbon equivalent emissions have to use a global warming potential time horizon of 20 years instead of 100 years.  One basic flaw in the Part 496 regulation’s supporting documentation is that in order to be complete the emission factor, activity factors or throughput and the reference for those choices made for each value listed in the inventory has to be provided.  That information is not available.

The RIS is the only documentation provided for the proposed Part 496 inventory and it only provides less than ten applicable references justifying the values chosen.  Given the significant departure from IPCC protocols, the documentation is inadequate.  Reading the RIS gives the impression that methane inventorying is without controversy.  However, as shown in the references I provided, Methane Reference Summary, this clearly is not the case. The overview paper  M. Saunois et al.2020: The Global Methane Budget 2000–2017 notes in the abstract: “The relative importance of CH4 compared to CO2 depends on its shorter atmospheric lifetime, stronger warming potential, and variations in atmospheric growth rate over the past decade, the causes of which are still debated. Two major challenges in reducing uncertainties in the atmospheric growth rate arise from the variety of geographically overlapping CH4 sources and from the destruction of CH4 by short-lived hydroxyl radicals (OH)”.  In order to justify the values used in the inventory these issues should be addressed in the documentation.

The major difference in this inventory compared to previous NYS inventories is due to changes in the methane inventory.  I believe that the changes in the inventory due to methane can be traced to Dr. Robert Howarth.  He not only helped draft the Climate Act but also now is a vocal member of the Climate Action Council.  While this accounts for his outsized impact on the inventory that does not necessarily mean that his views justify the changes.  In the Howarth 2020 paper he claims “Some evidence indicates that shale-gas development in North America may have contributed one-third of the total global increase in methane emissions from all sources over the past decade (Howarth 2019).”  This paper and other similar papers claim that “methane emissions can contribute significantly to the GHG footprint of natural gas, including shale gas”.  There is a problem however, because much other evidence contradicts those claims.

In my comments I provided references with other evidence that I think should be included in the documentation.  While it may be that the State will choose to ignore those results, there is a CLCPA mandate to provide a “detailed explanation of any changes in methodology or analysis, adjustments made to prior estimates, as needed, and any other information necessary to establish a scientifically credible account of change”.  Clearly the existing documentation fails to meet that standard.

Based on my experience I believe there is a huge hurdle for Howarth’s methane inventory.  Although I have been involved with emissions inventories for over 45 years, I do not have specific experience with natural gas production emissions.  However, over that time I learned early on that the gold standard check on any emissions inventory is comparison of the inventory estimate with observed ambient monitoring.  If there is a high quality, long-term monitoring network that measures the pollutant in the inventory and those measurements do not reflect the trend in the inventory then the inventory is wrong.  Lan et al., 2019 evaluated data from the National Oceanic and Atmospheric Administration Global Greenhouse Gas Reference Network and determined trends for 2006–2015.  This covers the period when Pennsylvania shale-gas production increased tremendously.  According to the plain language summary for the report:

“In the past decade, natural gas production in the United States has increased by ~46%. Methane emissions associated with oil and natural gas productions have raised concerns since methane is a potent greenhouse gas with the second largest influence on global warming. Recent studies show conflicting results regarding whether methane emissions from oil and gas operations have been increased in the United States. Based on long‐term and well‐calibrated measurements, we find that (i) there is no large increase of total methane emissions in the United States in the past decade; (ii) there is a modest increase in oil and gas methane emissions, but this increase is much lower than some previous studies suggest; and (iii) the assumption of a time‐constant relationship between methane and ethane emissions has resulted in major overestimation of an oil and gas emissions trend in some previous studies.”

As a result of the fact that the relevant high quality, long-term monitoring network does not show a trend consistent with the work of Howarth I believe that unequivocally supports Dr Lewan’s conclusion that his ideas, perspectives, and calculations on methane emissions from shale gas are invalid.  If the State cannot explain this inconsistency then their inventory is wrong.

Conclusion

In order to meet the “best available science and methods of analysis” criteria of the CLCPA, the DEC documentation should address the current methane debate by summarizing articles on both sides of methodology differences, explain how those differences affect the Part 496 1990 emission inventory relative to previous inventories, and then provide the rationale for picking one approach over the other.  Because this level of detail is not provided, I recommended that the Part 496 inventory should be re-proposed with that information.

There is a big issue lurking in these numbers.  Part 496 lists the baseline GHG emissions inventory for 1990 but the State has not provided their estimated inventory for a recent year.  The GHG inventory with the most recent data covers the period 1990 to 2016 and was published in July 2019.  That inventory is not consistent with the requirements of the CLCPA, but in that inventory New York’s CO2 emissions went from 236.2 MMtCO2e to 205.6 MMtCO2e a 13% decrease.  I would not be surprised that the revised inventory’s emphasis on methane will show that there is a much smaller decrease over that time frame.  That will make attaining the 2030 CLCPA 40% reduction from 1990 emissions level harder to meet.

Climate Leadership and Community Protection Act White Paper Comment

In the summer of 2019 Governor Cuomo and the New York State Legislature passed the Climate Leadership and Community Protection Act (Climate Act) and this summer the implementation process is in full swing.  I have written a series of posts on the feasibility, implications and consequences of this aspect of the law based on evaluation of data.  This post documents comments  I submitted to the New York Department of Public Service (DPS) on the White Paper on Clean Energy Standard Procurements to Implement New York’s Climate Leadership and Community Protection Act (White Paper).

I am a retired electric utility meteorologist with nearly 40-years experience analyzing the effects of meteorology on electric operations. I believe that gives me a relatively unique background to consider the potential effects of energy policies related to doing “something” about climate change.  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.

I am following the implementation of the Climate Act because I believe it will affect the affordability and reliability of New York’s energy.  The White Paper outlines how the DPS proposes to provide subsidies to get sufficient renewable resources built to meet the Climate Act targets.  I submitted comments because the definition of “renewable energy systems” as amended in the public service law with the addition of section 66-p is inconsistent with the reliability of the future electric system.

Renewable Energy System Definition

The Climate Act states:

      • 66-p. Establishment of a renewable energy program.
        1. As used in this section:

(b) “renewable energy systems” means systems that generate electricity or thermal energy through use of the following technologies: solar thermal, photovoltaics, on land and offshore wind, hydroelectric, geothermal electric, geothermal ground source heat, tidal energy, wave energy, ocean thermal, and fuel cells which do not utilize a fossil fuel resource in the process of generating electricity.

Problem

At the second Climate Action Council meeting on June 24, 2020 Energy and Environmental Economics (E3) presented results from their report “Pathways to Deep Carbonization in New York State”.  I have analyzed options for the future Climate Act electric system and agree with their concern about multiple-day periods when wind and solar resources could provide negligible power to the grid.  The report notes that “This long-duration (interday) challenge can be solved through a combination of large-scale hydro resources, renewable natural gas (RNG) or synthetic fuels such as hydrogen, Carbon Capture Storage (CCS), and nuclear power”.  During the question and answer period following the presentation, Climate Action Council members argued that RNG was not acceptable because it was not included in the definition of renewable energy systems.  In my opinion, there are two problems with the definition in that light: firm capacity and air source heat pumps.

E3 explains in their report that “Firm capacity is the amount of energy available for power production which can be guaranteed to be available at a given time. As the share of variable resources like wind and solar grows substantially, firm capacity resources will be needed to ensure year-round reliability, especially during periods of low renewables output.”  The options that they included in their deep carbonization pathway included two that are unlikely sources of much additional capacity in New York, large-scale hydro and nuclear, because of development concerns while two others, synthetic fuels and carbon capture storage, are only at the demonstration technical readiness level according to the International Energy Agency.  That leaves RNG as the most likely source of firm capacity.  Based on my work I believe that the alternative approach of using energy storage for this application will be a major technological challenge and surely will be extraordinarily expensive so excluding RNG would make providing firm capacity more difficult.  Therefore, I recommend that this technology not be rejected due to the magnitude of the firm capacity problem.

The argument that RNG is not a “renewable energy system” is based entirely on the fact that it is not explicitly included in the definition.  Note, however, that “geothermal ground source heat” is included but air source heat pumps are not.  As a result, then does that also mean the air source heat pumps are not an acceptable technology to meet the requirements of the Climate Act?  In order to meet the GHG emission reduction targets electrification of heating will be necessary.  Because air source heat pumps are cheaper and easier to install than ground source heat pumps, they are the preferred alternative.  Because this resource is necessary for the Climate Act it should be considered a renewable energy system even though it is not explicitly included in the definition.

Conclusion

It will be interesting to see whether RNG is accepted as a renewable energy system.  I have no doubt that it was deliberately excluded from the Climate Act definition because some well-connected but naïve lobbyist successfully argued to exclude that technology.  I don’t know why this technology is unacceptable but the fact is that in order to provide sufficient electric power during the long-duration low renewable resource periods New York needs as many sources of firm capacity as possible.  I believe that E3 knows this and had to propose the technology in order to reduce the need for energy storage.  They have not provided cost estimates yet but they know the numbers will be staggering if the necessary firm capacity has to be provided by battery energy storage.  The naïve opponents of RNG must not understand this inconvenient truth.

One final note, while I believe that RNG is needed, I do not believe it will solve the problem.  There simply are not enough sources of RNG that can provide enough stored gas to make much of a difference for the critical long-duration low renewable resource period peak load when that load includes electrification of heating and vehicles.

Reply Comments to New York Resource Adequacy Proceeding

The New York State Public Service Commission (PSC) issued an order commencing a proceeding to examine how to reconcile resource adequacy programs and the State’s renewable energy and environmental emission reduction goals. This post summarizes the reply comments I submitted in this proceeding on resource adequacy primarily as an accessible reference.  If this topic interests you then I suggest you read  my initial comments  and my reply comments .  I previously summarized my initial comments here.

Materials and information are available in the Department of Public Services (DPS) resource adequacy matters docket Case 19-E-0530.   According to the Order Instituting Proceeding and Soliciting Comments, the inquiry is “necessitated by the Commission’s statutory obligations to ensure the provision of safe and adequate service at just and reasonable rates. Costs to consumers are a primary and ultimate consideration, recognizing that the necessary investments in resources must have sound economics.”

Summary

A primary point of emphasis in my comments is that I believe that the Commission’s statutory obligations to ensure the provision of safe and adequate service at just and reasonable rates is not being addressed with respect to the Climate Leadership and Community Protection Act (CLCPA). The fact of the matter is that absent a comprehensive evaluation that assesses historical renewable energy resource availability coupled with historical and projected load, no one knows if a 100% fossil-free electric sector is possible in New York.  The legislation that mandated that target naively assumed it was feasible and affordable but those assumptions may violate the laws of physics. It would be far better to determine the consequences of the CLCPA now than to try to muddle through trying to implement something that would have far worse consequences to the citizens of New York than the purported problem.

My reply comments cover several aspects of the comments submitted by others and information that has become available since the initial comment period ended.  I address the lack of representation for the residential consumer in the parties commenting on the proceeding.  My reply comments do not address specifics of any of the initial comments but I do offer cautionary observations on the comments describing the purported success of the de-regulated market and support for the NYISO carbon pricing initiative.

Since the time the initial comments were submitted other feasibility issues came up.  The NYISO had the Analysis Group evaluate winter peak resources for the short-term.  In response to a NYISO press release on a record for wind generation I took another look at the historical wind data.  The Citizen’s Budget Commission did an analysis of the CLCPA that included an estimate of the future load.  I show that all these studies are relevant and underscore the need for the feasibility study.

Finally, I made some recommendations.  I re-iterated my plea for a comprehensive feasibility study and cumulative environmental impact study.  I suggest that the State provide solar energy facility applicants with a site-specific design year database based on the feasibility study meteorological data to improve their applications.   I recommend full payment for renewable resources only if they are dispatchable, i.e., they include energy storage.  I also have a suggestion for the future stakeholder process and recommend that this proceeding endorse energy storage R&D.

 

 

Part 242 Comments on the Regulatory Impact Statement

For the past month or so I have been preparing comments on the New York State Department of Environmental Conservation (DEC)  proposed revisions to their Part 242 CO2 Budget Trading Program rule. I submitted the comments on June 26, 2020. In a companion post I addressed the background for the rule revisions and rationale used for the significant rule changes. This post summarizes my comments on the Regulatory Impact State that justifies the proposed revisions.

I submitted comments because I want my family to be able to afford to continue to live in New York State.  The proposed rule is consistent with the Climate Leadership and Community Protection Act (“Climate Act”) that will necessarily affect the price of energy in New York and based on results elsewhere I believe those costs will ultimately be unacceptable.  I have written a series of posts on the feasibility, implications and consequences of the law.  I am a retired electric utility meteorologist with nearly 40 years of experience analyzing the effects of emissions on the environment.  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.

Introduction

I describe the specifics of the proposed revisions and my concerns in the companion post.  One of the purported benefits of this regulation is that New York’s climate leadership will entice other jurisdictions to emulate New York by setting an example.  However, the justification provided for these revisions provides New York citizens insufficient evidence to support the proposed changes and sets a poor example for others to follow.  I analyzed the claims in the Regulatory Impact Statement (RIS) that were used to justify the proposed actions and I will discuss those comments here.  The RIS has mandatory discussion items and I will not address my comments on items not related to justification of the proposed actions.

Regulatory Impact Statement

The Regulatory Impact Statement (RIS) is a mandated component of DEC rule-making.  It describes the statutory authority and legislative objectives, lists the needs and benefits, estimates costs, changes to paperwork, local government mandates, notes if there is any duplication with other Federal and State regulations, lists alternative, determines if the regulation is consistent with Federal standards and provides a compliance schedule.  I wish I could say that the RIS makes a compelling case for the proposed action but I can’t. This is important because one of the purported benefits of this regulation and New York’s climate leadership is that New York will lead the way for others setting an example that they will emulate.  However, absent compelling arguments, that benefit will not be realized. 

The general approach for current New York energy and environmental rule-making associated with climate change is to unequivocally associate Greenhouse Gas Emissions (GHG) with a litany of climate change impacts that are happening now and will get much worse in the future.  I have been planning to spend time addressing this simplistic argument for a long time and this regulation gave me the opportunity to comment.  In the following sections using the titles from the RIS, I quote text from sections in the RIS and provide my comments in the following italicized, indented sections. 

Introduction

The burning of fossil fuels to generate electricity is a major contributor to climate change because fossil-fuel generators emit large amounts of CO2, the principal greenhouse gas (GHG). Overwhelming scientific evidence confirms that a warming climate poses a serious threat to the environmental resources and public health of New York State – the very same resources and public health the Legislature has charged the Department to preserve and protect. The warming climate threatens the health and well-being of the State’s residents and citizens, the State’s property, and the natural resources held in trust by the State, including, but not limited to, the State’s air quality, water quality, marine and freshwater fisheries, salt and freshwater wetlands, surface and subsurface drinking water supplies, river and stream impoundment infrastructure, and forest species and wildlife habitats. Not only will the proposed Program revisions help to further counter the threat of a warming climate, they will also produce significant environmental co-benefits in the form of improved local air quality, and a more robust, diverse and clean energy supply in the State.

The biggest flaw in the RIS is the failure to quantify the impact of the proposed action on the alleged impacts of a warming climate.  Instead there are vague allusions that the proposed revisions will “help to further counter the threat of a warming climate”.  In order to properly evaluate the benefits and costs of the proposed revisions the RIS should estimate the global warming potential impacts of the proposed action. 

 In the absence of such an evaluation I calculated the effect  of total elimination of New York’s 1990 218.1[1] million metric ton greenhouse gas emissions on projected global temperature rise.  I found there would be a reduction, or a “savings,” of approximately 0.0032°C by the year 2050 and 0.0067°C by the year 2100.  To give you an idea of how small this temperature change is  consider changes with elevation and latitude.  Generally, temperature decreases three (3) degrees Fahrenheit for every 1,000-foot increase in elevation above sea level.  The projected temperature difference is the same as going down 27 inches.  The general rule is that temperature changes three (3) degrees Fahrenheit for every 300-mile change in latitude at an elevation of sea level.  The projected temperature change is the same as going south two thirds of a mile. 

 Of course, the RIS should project what this particular action will do for global temperature.  The RIS Model Rule Policy Case Program Design Assumption description states that CO2 emissions in New York are projected to be 3.41 million tons lower in the Model Rule Policy Case than in the Reference Case in 2031.  Using the same methodology as before I found there would be a reduction, or a “savings,” of approximately 0.00005°C by the year 2050 and 0.00009°C by the year 2100.  The projected temperature difference is the same as going down 3/8 of an inch and the projected temperature change is the same as going south 50 feet. 

 New York’s actions should also be considered relative to the rest of the world.  According to the China Electricity Council, about 29.9 gigawatts of new coal power capacity was added in 2019 and a further 46 GW of coal-fired power plants are under construction.  If you assume that the new coal plants are super-critical units with an efficiency of 44% and have a capacity factor of 80%, the reductions provided by this program will be replaced by the added 2019 Chinese capacity in 16 days or 6 days if the 2019 capacity and the units under construction are combined.  Clearly, in the absence of worldwide commitments this proposal has no tangible value to the citizens of New York.

 The RIS also claims that the emission reductions will also produce significant environmental co-benefits in the form of improved local air quality, and a more robust, diverse and clean energy supply in the State.  I take issue with the environmental co-benefits arguments simply because I have never seen documentation that confirms those benefits relative to the observed air quality improvements in my lifetime (see for example my evaluation of PM 2.5 in New York City).  Combining claimed benefits for robust and diverse energy supply with a clean energy supply is unsubstantiated rhetoric.  In order for the power supply to be robust it has to be dispatchable whereas wind and solar clean energy is not.  In order for the power supply to be diverse it cannot be shut down by a singular event and wind and solar can be shut down by a relatively common singular set of weather conditions at night.

The Greenhouse Effect and the Warming Climate

A naturally occurring greenhouse effect has regulated the earth’s climate system for millions of years. Solar radiation that reaches the surface of the earth is radiated back out into the atmosphere as long wave or infrared radiation. CO2 and other naturally occurring GHG emissions trap heat in our atmosphere, maintaining the average temperature of the planet approximately 60°F above what it would be otherwise. An enhanced greenhouse effect and associated climate change results as large quantities of anthropogenic GHGs, especially CO2 from the burning of fossil fuels, are added to the atmosphere.

There is no question that the greenhouse effect regulates global temperatures, that additional greenhouse gases will enhance that effect, that anthropogenic GHG emissions have added to the observed trend in GHG atmospheric concentrations, that the climate is warming and that the anthropogenic GHG emissions likely contributed to the observed warming.  However, given that there are many factors affecting climate change and that an enhanced greenhouse effect impacts not only temperature but also moisture which could have a negative feedback, it is naïve to assume that all the observed warming is caused solely by the greenhouse gas effect.

 From 1983 until his retirement in 2013, Dr. Richard Lindzen was Alfred P. Sloan Professor of Meteorology at the Massachusetts Institute of Technology.  He published over 200 papers and books and his research is still cited about 600 times per year.  He recently published another scientific paper (Lindzen, 2020) that raises some important points relative to the greenhouse effect as it pertains to New York’s energy policies:

 Doubling the atmospheric CO2 concentration from 280 ppm to 560 ppm results in just a 1-2% perturbation to the Earth’s 240 W/m² energy budget. This doubled-CO2 effect has less than 1/5th of the impact that the net cloud effect has. And yet we are asked to accept the “implausible” claim that change in one variable, CO2, is predominantly responsible for altering global temperatures.

 A causal role for CO2 “cannot be claimed” for the glacial-to-interglacial warming events because CO2 variations follow rather than lead the temperature changes in paleoclimate records and the 100 ppm total increase over thousands of years produce “about 1 W/m²” of total radiative impact.

Since the mid-1700’s, atmospheric concentrations of GHGs have increased substantially due to human activities such as fossil fuel use and land-use change. CO2 has a very long residence time in the atmosphere and, thus, has a lasting effect on the climate. Average atmospheric CO2 concentrations exceeded 407 parts per million in 2018, which according to ice core data, is higher than at any point in the past 800,000 years and the rate of increase is 100 times faster than previous natural increases at the end of the last ice age.

There are two aspects of these claims.  If you look at the CO2 data going further back in geologic time, as shown in the following grapch, there is nothing particularly unusual about the record breaking CO2 levels of the past 800,000 years  The thing that does stand out however is that we are cooler than in the past.

 The second aspect is the rate of increase claim.  The problem is that measurement resolution of proxy measurements of CO2 and temperature are not as finely resolved as today’s instrumental data.  The only way to directly compare the instrumental data to the pre-industrial proxy data is to filter the instrumental data down to the resolution of the proxy data.  This leads to climate reconstructions with “enhanced variability during pre-industrial times” and “result in a redistribution of weight towards the role of natural factors in forcing temperature changes, thereby relatively devaluing the impact of anthropogenic emissions and affecting future predicted scenarios.”[2]

There is clear scientific consensus that anthropogenic emissions of CO2 are contributing to the observed warming of the planet as presented in the Fifth Assessment Report of the Intergovernmental Panel on Climate Change. The large and persuasive body of research demonstrates through unequivocal evidence that the Earth’s lower atmosphere, oceans, and land surfaces are warming; sea level is rising; and snow cover, mountain glaciers, and Greenland and Antarctic ice sheets are shrinking. The Earth’s climate is changing, with adverse consequences already well documented across the globe, in our nation and in the State. Extreme heat events are increasing and intense storms are occurring with greater frequency. Many of the observed climate changes are beyond what can be explained by natural variability of the climate.

This description of the relationship between CO2 emissions and observed warming does not acknowledge that there is any scientific uncertainty about the greenhouse effect and climate change.  The reality is that there is debate and New York State ignores the potential ramifications.  Dr. Richard S. Lindzen, has summarized the scientific debate as follows:

I will simply try to clarify what the debate over climate change is really about. It most certainly is not about whether climate is changing: it always is. It is not about whether CO2 is increasing: it clearly is. It is not about whether the increase in CO2, by itself, will lead to some warming: it should. The debate is simply over the matter of how much warming the increase in CO2 can lead to, and the connection of such warming to the innumerable claimed catastrophes. The evidence is that the increase in CO2 will lead to very little warming, and that the connection of this minimal warming (or even significant warming) to the purported catastrophes is also minimal. The arguments on which the catastrophic claims are made are extremely weak –and commonly acknowledged as such.

In response to scientific projections of likely severe climate impacts of global average temperatures rise, the U.S. signed the1992 United Nations Convention on Climate Change. In 2016 the United States once again joined 197 countries in ratifying the Paris Climate Agreement, an enhancement to help the implementation of that Convention.

The claim that the United States ratified the Paris Climate Agreement is incorrect.  The United States never properly joined the accord.  It is a treaty that requires the advice and consent of the Senate. Instead, President Barack Obama chose to “adopt” it with an executive order.  The Senate never voted on the treaty.

Impacts from Emissions Already Observed in New York’s Climate

New York’s climate has already begun to change, gradually taking on the characteristics of the climate formerly found in locations south of New York. The need for the reduction of CO2 emissions, including through the reduced emissions cap, budget adjustment, and establishment of the ECR, is clearly supported by numerous direct impacts that have been observed in New York State and presented in the 2011 New York State ClimAID assessment and the 2014 update to ClimAID.

The title of this section exposes a significant error in the understanding of the ClimAID assessments.  In particular, those assessments described observed climate trends but did not attempt to attribute how much of the observed trends were linked to GHG emissions, how much were caused by other anthropogenic effects such as land-use changes and the urban heat-island effect, and how much was caused by natural variability.  For example, the observed monthly data source for average temperature and precipitation was the United State Historical Climatology Network and page 21 of the 2011 ClimAID document states that “this data product is not specifically adjusted for urbanization”.  One of the sites used to describe climate trends was at New York City’s Central Park.  Clearly the urban heat-island has a significant effect on temperature at that location.  Therefore, the RIS presumption that the only cause of all the observed trends was GHG emissions over-estimates their role in observed climate change trends.

These include:

  • Temperatures in New York State have risen during the twentieth century, with the greatest warming coming in recent decades – temperatures have risen on average 0.25°F per decade over the past century. This warming includes an increase in the number of extreme hot days (days at or above 90ºF) and a decrease in the number of cold days (days at or below 32ºF).

Because the effect of the urban heat-island is not considered these trends do not represent the trend due solely to the greenhouse effect.

  • Sea level rise. Sea level in the coastal waters of New York State and up the Hudson River has been steadily rising over the twentieth century, chiefly as a result of thermal expansion of ocean waters, melting of land ice and local changes in the height of land relative to the height of the continental land mass. Tide-gauge observations in New York indicate that rates of relative sea level rise were significantly greater than the global mean, ranging from 0.9 to 1.5 inches per decade.

The fact that New York tidal gauge rates of relative sea level rise are greater than the global mean shows that local changes in the height of land relative to the height of the continental land mass are a significant factor of sea-level rise that no amount of change to the greenhouse effect will affect.

 Although the RIS purports to provide current information, consider an alternative assessment of current climate state based on data and not model speculation.  Ole Humlum a former Professor of Physical Geography at the University Centre in Svalbard, Norway, and Emeritus Professor of Physical Geography, University of Oslo, reported “The State of the Climate 2019,” that presents ten key facts in the Executive summary:

“1. According to the [surface] instrumental temperature record (since about 1850), 2019 was a very warm year, but cooler than 2016.

      1. In 2019, the average global air temperature was affected by a moderate El Niño episode, interrupting a gradual global air temperature decrease following the strong 2015–16 El Niño.
      2. Since 1979, lower troposphere temperatures have increased over both land and oceans, but more so over land areas. The possible explanations include insolation, cloud cover and land use. {Caiazza note: if the greenhouse effect were the only cause of the temperature increase then there should be no difference over land vs over water.}
      3. The temperature variations recorded in the lowermost troposphere are generally reflected at higher altitudes too. In the stratosphere, however, a temperature ‘pause’ commenced in around 1995, 5–7 years before a similar temperature ‘pause’ began in the lower troposphere near the planet’s surface. The stratospheric temperature ‘pause’ has now persisted for about 25 years.
      4. The 2015–16 oceanographic El Niño was among the strongest since the beginning of the record in 1950. Considering the entire record, however, recent variations between El Niño and La Niña are not unusual.
      5. Since 2004, when detailed recording of ocean temperatures began, the global oceans above 1900 m depth have, on average, warmed somewhat. The strongest warming (between the surface and 200 m depth) mainly affects the oceans near the Equator, where the incoming solar radiation is at its maximum. In contrast, for the North Atlantic, net cooling at the surface has been pronounced since 2004.
      6. Data from tide gauges all over the world suggest an average global sea-level rise of 1–1.5 mm/year, while the satellite record suggests a rise of about 3.2 mm/year, or more. The noticeable difference in rate (a ratio of at least 1:2) between the two data sets still has no broadly accepted explanation.
      7. Since 1979, Arctic and Antarctic sea-ice extents have had opposite trends, decreasing and increasing, respectively. Superimposed on these overall trends, however, variations of shorter duration are also important in understanding year-to-year variations. In the Arctic, a 5.3-year periodic variation is important, while for the Antarctic a variation of about 4.5-years’ duration is seen. Both these variations reached their minima simultaneously in 2016, which explains the simultaneous minimum in global sea-ice extent. This particularly affected Antarctic sea-ice extent in 2016.
      8. Northern Hemisphere snow cover extent undergoes important local and regional variations from year to year. Since 1972, however, snow extent has been largely stable.
      9. Tropical storms and hurricanes have displayed large annual variations in accumulated cyclone energy (ACE) since 1970, but there has been no overall trend towards either lower or higher activity. The same applies for the number of continental hurricane landfalls in the USA, in a record going back to 1851.”

Future Impacts from Emissions Predicted for New York’s Climate

Predictions of future impacts associated with emissions in New York further support the need for a substantial reduction in the CO2 emissions cap as well as the budget adjustment and ECR, as outlined in the proposed revisions to the Program. The 2011 New York State ClimAid assessment and 2014 update also examined how sea level rise, changes in precipitation patterns, and more frequent severe weather conditions will affect New York’s economy, environment, community life and human health. ClimAID used regionalized climate projections to develop adaptation recommendations and is a climate change preparedness resource for planners, policymakers, and the public. 

The future impacts assessment in the RIS relies on the 2011 New York State ClimAid assessment and 2014 update that examined how sea level rise, changes in precipitation patterns, and more frequent severe weather conditions will affect New York’s economy, environment, community life and human health.  There are three problems with those assessments: reliance on global climate model simulations, the use of Representative Concentration Pathway 8.5, and the use of a regional climate model.

 Climate sensitivity

Predictions of substantial global warming assume that the climate is very sensitive to an increase in GHG concentrations.  The RIS does not recognize that this is an active debate because of climate feedback in various models and that estimates in peer reviewed studies range from 0.8°C warming to almost 6.0°C warming by 2100.  Clearly such a wide range

of uncertainty means climate model temperature projections remain dubious, at best. In my opinion climate sensitivity estimates based on measured data are more likely to be correct than GCM projected estimates and those estimates are invariably on the lower end of the range.  The problem with the GCM estimates is cloud formationFor example, “Given current uncertainties in representing convective precipitation microphysics and the current inability to find a clear observational constraint that favors one version of the authors’ model over the others, the implications of this ability to engineer climate sensitivity need to be considered when estimating the uncertainty in climate projections.”  To be clear, that means that modelers can conjure up whatever warming amount you want simply by tweaking how clouds form in response to the greenhouse effect.

 Emissions RCP 8.5

In order to make a projection for the future it is necessary to not only project the effect of changing GHG concentrations but also project how emissions will change.  The ClimAID assessment presents a range of possible projections but the worst-case impacts rely on a future emissions scenario that was not intended to be plausible. In short, the likelihood of the projected impacts that “make the case” for the proposed revisions are based on an unrealistic emissions scenario.  While it does make for the scary story needed to justify the proposed action, the fact is that it is inappropriate for use as justification for it.

 Regional Climate Model

One problem with a GCM is that in order to calculate the global climate a coarse horizontal grid is needed simply because of computational requirements.  In order to account for New York-specific impacts using a finer grid resolution ClimAID developed a regional climate model.  I believe they used a statistical technique to estimate regional climate impacts.  If that assumption is correct then their results are flawed.  In particular, the GCM gird resolution is so coarse that effects of the Great Lakes are not included.  However, “These techniques assume that the relationship between large scale climate variables (e.g. grid box rainfall and pressure) and the actual rainfall measured at one particular rain gauge will always be the same.”  Given that precipitation downwind of the Great Lakes is strongly influenced by lake-effect snow and rain, the large-scale precipitation estimates that do not include the Great Lakes means that this is clearly not the case.

Future Impacts from Emissions for New York State’s Resource Sectors

I did respond to all the problematic statements in this section.  As shown above there are serious concerns with the primary projections of temperature change.  The secondary projections of impacts to resource sectors is even more speculative especially because the alleged impacts require specific uncertain climatic outcomes.  I highlighted several issues that demonstrate a lack of nuanced understanding of potential climate change impacts.

In the section on Coastal Zones, the RIS states “Superstorm Sandy gained additional strength from unusually warm upper ocean temperatures in the North Atlantic”.  The RIS correctly does not attribute Superstorm Sandy to climate change.  I do not disagree with the claim that the storm could have gained additional strength from unusually warm temperatures.  I do want to point out that these claims point to the most likely long-term impact of anthropogenic climate change, i.e., impacts will be tweaks to the environment and not primary drivers of environmental change. 

In the same section the RIS claims that New York’s shoreline will be adversely affected by climate change: “The major contributor to sea level rise is thermal expansion and melting of glaciers and ice sheets.”  This section concerns Future Impacts from Emissions and therefore it is incompatible with the Impacts from Emissions Already Observed in New York’s Climate discussion of sea level.  As correctly noted in that section “Sea level in the coastal waters of New York State and up the Hudson River has been steadily rising over the twentieth century, chiefly as a result of thermal expansion of ocean waters, melting of land ice and local changes in the height of land relative to the height of the continental land mass. Tide-gauge observations in New York indicate that rates of relative sea level rise were significantly greater than the global mean, ranging from 0.9 to 1.5 inches per decade”.  Because New York tidal gauge rates of relative sea level rise are greater than the global mean shows that local changes in the height of land relative to the height of the continental land mass are a significant factor of sea-level rise that no amount of change to emissions will affect.

In the section on agriculture the RIS notes that “increased summer heat stress will negatively affect cool-season crops and livestock unless farmers take adaptive measures such as shifting to more heat-tolerant crop varieties and improving cooling capacity of livestock facilities”.  Misleadingly, the section then goes on to say “A loss of milk production efficiency from heat effects could result in the loss of hundreds of millions of dollars annually for New York’s dairy industry” based on the following:

“Dairy farmers will also be impacted since milk production is maximized under cooler conditions ranging from 41°F to 68°F. New York is the third largest producer of milk in the United States, behind California and Wisconsin, with 14.9 billion pounds of milk produced in 2017. During the unusually hot summer in 2005, many New York dairy herds reported declines in milk production of five to 15 pounds of milk per cow per day (an eight to 20 percent decrease).”

The average July temperature in Syracuse is 71, Madison WI is 75, and Sacramento, CA is 77, so two states that produce more milk than New York have higher average temperatures.  Additionally, the RIS mistakenly quotes a milk decrease from a weather event to support an alleged climate impact.

In the section on Air Quality and Public Health Benefits the RIS states:

“In addition to contributing to a 50% reduction in CO2 from affected power plants in New York, it is estimated that the RGGI program provided $1.7 billion in avoided public health costs in New York by reducing associated air pollutants. Across the RGGI region, it is estimated that the RGGI program helped avoid 16,000 respiratory illnesses, up to 390 heart attacks, and 300 to 830 deaths.  At a more local level, according to a 2002 study, the expected health benefits of urban air pollution reductions from climate change mitigation strategies in the New York City area (assuming that they produce an approximately 10 percent reduction in PM10 and ozone concentrations), would be to avoid approximately 9,400 premature deaths (including infant deaths), 680,000 asthma attacks, and 12 million restricted activity days.”

I showed in my companion post that the primary reason for the emission reductions was fuel switching from coal and residual oil to natural gas.  That means that the RGGI contribution to those reductions was on the order of 5% and not 50%.  That also means that the avoided health impacts were mostly due to fuel switching and not RGGI. 

A couple of points about health impacts in general and the referenced 2002 study and the potential impacts of a 10% reduction in PM10 and ozone concentrations in particular.  Between 2000 and 2019 Northeast air quality trends show more improvement than a 10% reduction: PM10  is down 39%, PM2.5 is down 47%, ozone is down 24%, and SO2 is down 86%.  Until such time that DEC can reference a study that shows the actual health benefits associated with the observed air quality improvements, I am not confident that their air quality health claim is accurate.  Also note that future air quality impacts will be much smaller because the higher polluting coal and residual oil sources have already been reduced.  CO2 reductions from natural gas firing will not produce as many reductions in PM and Ozone levels and no change in SO2.

Components of the Proposed Program Revisions

One of the problems with New York’s energy policy is demonstrated by this statement: “The reduction in the CO2 emissions cap to approximately align with current levels represents a critical step to combat the significant challenges presented by climate change and to advance sound energy policies that foster energy efficiency, a reduction in reliance on fossil fuels, and energy independence”.   In particular, New York State has not done a holistic analysis of the energy and environmental alternatives proposed to replace fossil fuels.  For example, this proposal is supposed to foster energy independence but in 2019 the United States was energy independent.  New York’s energy plan proposes to rely on renewable energy which will require battery energy storage.  Both technologies rely on rare elements which are not produced in sufficient quantities domestically to cover the requirements of the New York energy transition so we will become less energy independent.  Furthermore, the production of these rare elements is environmentally destructive so the State is merely leaking environmental impacts elsewhere.

Benefits from the Proposed Program Revisions

This section notes: “The most recent version of the New York State Regional Greenhouse Gas Initiative-Funded Programs Status Report for the quarter ending December 31, 2018 estimates cumulative annual customer bill savings of $293 million.”

Unfortunately, in my companion post I showed that as a GHG emission reduction mechanism, New York’s RGGI investments fail to make investments that are less than the purported cost of the negative externalities for a ton of CO2 emitted today (the Social Cost of Carbon (SCC)).  In fact, the cost per ton removed is an order of magnitude larger than the Obama-era SCC value.  Therefore, New York’s investments are woefully cost ineffective which suggests that our resources should be invested in adaptation because we will not be able to afford the costs of mitigation.

There is a paragraph in this section that describes the Climate Act:

Most notably, as described above, the recently-enacted Climate Act establishes Statewide GHG emission reduction requirements and renewable and clean energy generation targets. In particular, ECL Section 75-0107, which was added by the Climate Act, requires a 40 percent reduction in Statewide GHG emissions from 1990 levels by 2030, and an 85 percent reduction from 1990 levels by 2050. Moreover, Public Service Law Section 66-p, which was also added by the Climate Act, establishes a target to generate 70 percent of the State’s electricity from renewable energy sources by 2030, and to generate 100 percent of the State’s electricity from carbon-free sources by 2040. The proposed revisions to the Program, including the additional reduction in the RGGI CO2 emissions cap and the establishment of the ECR, further the objectives of the Climate Act. Finally, the Climate Act also includes multiple provisions that recognize that historically disadvantaged communities often suffer disproportionate and inequitable impacts from climate change. The proposed revisions to the Program to expand its applicability to include certain smaller sources, many of which are located in such communities, are consistent with these provisions of the Climate Act.

This section concludes with claimed benefits of implementing the proposed revisions:

Climate change is a global problem and effective action at the national and international level is necessary in order to stabilize atmospheric GHG concentrations at acceptable levels. Notwithstanding this, particularly given the current federal Administration’s recent actions to slow or rescind various regulatory and other efforts to reduce GHGs nationally, action now at the State and regional level to reduce GHG emissions and to implement the revisions to the Program will benefit and reduce the risk of injury to New York and its citizens and residents from climate change. The risks of injury from a warming climate increase with the rate and magnitude of the warming, and in turn, the rate and magnitude of warming is primarily dependent upon the level of CO2 emissions. In addition, by implementing the proposed revisions to the Program now, New York and the Participating States can:

        • Reduce the long-term costs of addressing climate change. By acting now, states can avoid the need for more disruptive measures later.
            • As noted previously there is no quantitative estimate of the potential reduction of climate change costs that will accrue due to the proposed action.
        • Position the region ahead of competitors. Taking continued action to reduce the region’s carbon-intensity will create a competitive advantage relative to other parts of the country when additional action is taken at the national and international level.
            • The German attempt to implement a similar but much less ambitious GHG emissions program led to massive price increases: “A German online site Stromreportwrites that since the year 2000 the average electricity price for private households has risen from 13.94 to 30.43 euro cents per kilowatt hour (2019)”.  If the cost of electricity is so much higher than elsewhere it will be a competitive dis-advantage.
        • Capture environmental co-benefits. Reducing power sector carbon emissions provides numerous environmental co-benefits, including reduced emissions of other pollutants associated with fossil-based electricity generation. Additionally, co-benefits will continue to be realized by allocating almost 100 percent of the CO2allowances to the EE&CET account to be auctioned by NYSERDA and have the resulting proceeds utilized for the account’s purposes of furthering the GHG emission reduction objectives of the Program.
            • Future environmental co-benefits will be much smaller than in the past simply because future reductions will be displacing natural gas rather than coal and oil. As shown above, NYSERDA’s investments are not cost-effective relative to the Social Cost of Carbon.
        • Drive new technology. By attaching tangible financial value to avoided carbon emissions, the proposed Program revisions provide additional market incentive for developing and deploying new technologies that can increase fuel efficiency, utilize non-carbon resources (including renewable technologies such as wind and solar power), and reduce or eliminate carbon emissions from combustion sources. In addition, to the extent that the auctioning of allowances will spur additional investments in clean energy technologies, the auctions drive the deployment of new technologies in the State.
          • I believe the cost of avoiding carbon emissions is far greater than the cost of RGGI on operations so this will have little effect on new technology.
        • Promote improved supply-side and demand-side efficiency. The proposed Program revisions create a direct incentive to reduce the fossil fuel inputs required to produce electricity through more efficient generating technologies. This is consistent with the Climate Act’s target to obtain 100 percent of the State’s electricity from carbon-free sources by 2040.
            • The NYSERDA investments in demand-side efficiency have provided tangible benefits. If DEC wants to claim supply-side efficiency gains then they should provide examples.
        • Improve the region’s energy security and reduce its exposure to higher energy prices. By creating a market incentive for low-carbon and non-carbon electricity technologies and by promoting increased supply-side and demand-side efficiency, the proposed Program revisions reduce the Northeast’s long-term exposure to high fossil fuel energy prices. Efficiency improvements and advances in new energy technology fostered by the proposed Program revisions can help buffer the region from the considerable economic risks associated with continued dependence on these fuels.
            • If New York truly wants to reduce exposure to higher energy prices then they should embrace natural gas development which has proven to be the leading cause in decreased prices. In spite of New York’s irrational war on natural gas fracking, that technology has been primarily responsible for the observed emission reductions and associated health benefits in the past decade.
        • Stimulate economic development. The proposed Program revisions provide a positive stimulus for economic growth in the region by creating incentives for new technologies that could be developed in-region, promoting a more efficient and cleaner electricity generating sector, prompting other activities through its offsets program and improving efficiency. NYSERDA’s investment of proceeds from the auctioning of allowances provides further economic benefits.
            • The broken window fallacy negates this claim. In the broken window fallacy – money spent on RGGI allowances, for example, is “money that cannot be spent on food, clothing, health care, or other industries. The stimulus felt in one sector of the economy comes at a direct – but hidden – cost to other sectors”.

Conclusion

I recently listened to the June 24 meeting of the New York Climate Action Council Policy in which New York’s climate leaders repeatedly expounded on the importance of science driving New York policy.  However, as the implementation of this regulation shows, it is more about rhetoric than science.  Science-driven policy should consider all possibilities, make a case for the preferred alternative, and not neglect inconvenient aspects of the proposal.  In this instance the RIS claims over-whelming evidence and dismisses legitimate issues.  I showed in the companion post that no case was made for the proposed revision to the regulation to include smaller sources.  The most egregious problem is that New York has never quantified the potential effect of any of their GHG emission reduction regulations.  The suggestion that changing New York’s contributions to global warming due to GHG emissions, even if you accept the consensus science, will have any measurable effect on the list of alleged problems is clearly not likely.  At this time of unprecedented budgetary crisis, the RIS does not make a case to support these revisions and it is entirely appropriate to ask why this regulation is necessary.

[2] Esper, J., R.J.S. Wilson,  D.C. Frank, A. Moberg, H. Wanner, & J. Luterbacher.  2005.  “Climate: past ranges and future changes”.  Quaternary Science Reviews 24: 2164-2166.

[1] This was the total for 2015 NYS emissions in NYSERDA Greenhouse Gas Inventory 1990-2015. Subsequent editions have lowered the most recent total so this is a conservative value for impacts.

 

Part 242 Comments – Background and Rationale for Revisions

For the past month or so I have been preparing comments on the New York State Department of Environmental Conservation (DEC)  proposed revisions to their Part 242 CO2 Budget Trading Program rule.  This post summarizes my Part 242 Comments addressing the background for the rule revisions and rationale used for significant rule changes.  There is a second post that addresses the Regulatory Impact Statement for the proposed rule changes.

I submitted comments because I want my family to be able to afford to continue to live in New York State.  The proposed rule is consistent with the Climate Leadership and Community Protection Act (“Climate Act”) that will necessarily affect the price of energy in New York and based on results elsewhere I believe those costs will ultimately be unacceptable.  I have written a series of posts on the feasibility, implications and consequences of the law.  I am a retired electric utility meteorologist with nearly 40 years of experience analyzing the effects of emissions on the environment.  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.

Introduction

The proposed revisions to Part 242 primarily implement Regional Greenhouse Gas Initiative (RGGI) program changes set forth in the updated RGGI Model Rule.  There are several substantive changes.

The proposed Program revisions will cap regional CO2 emissions at approximately 75 million tons annually beginning in 2021 and decrease the cap by 2.275 million tons annually. There are changes to the Cost Containment Reserve (CCR) that modify the CCR trigger price and the maximum amount of CCR allowances available at auction each year. This feature puts a limit on the upper bound of costs and the proposed program revisions create an Emissions Containment Reserve (ECR), that will put a lower bound on costs.  Simply put if the price gets too high allowances are added and if the price gets too low allowances are subtracted.

The rule also includes a provision for a Third Adjustment for Banked Allowances that will adjust the budget for 100 percent of the pre-2021 vintage allowances held by market participants as of the end of 2020, that are in excess of the total quantity of 2018, 2019, and 2020 emissions. This provision is included to prevent a large allowance bank.  If the allowance bank is larger than the fourth control period emissions then they will adjust the size of the cap.

Comment Overview

For the most part the DEC proposed revisions simply implement the RGGI Model Rule and as such there is little chance for meaningful change based on comments received.  Nonetheless, because there are issues with a couple of the proposed revisions and the Regulatory Impact Statement that provides justification of the changes, I spent quite a bit of time developing comments.  The revised rule proposes to expand applicability under Part 242 to capture certain units that serve an electricity generator with a nameplate capacity equal to or greater than 15 MW and I show that the rationale used to justify this change is incorrect. RGGI recently released a guidance document that includes a schedule for the calculation of the third adjustment for banked allowances that I believe inappropriately ensures an adjustment of the allowance bank.  Finally, one of the purported benefits of this regulation is that New York’s climate leadership will entice other jurisdictions to emulate New York by setting an example.  However, the justification for these revisions provides New York citizens insufficient evidence to support the proposed changes and sets a poor example for others to follow.

 There were three components to the comments I submitted and I will discuss one in this post.  I addressed three underlying suppositions driving the proposed revisions: that RGGI has been a success and deserves to be revised, that expanding the applicability of the program to generating units greater than 15 MW but less than 25 MW is warranted, and that a binding cap is an appropriate goal.  There was a section with specific comments on the text of the regulation but I will not discuss those comments in a blog post.  A second post discusses the claims in the Regulatory Impact Statement (RIS) that were used to justify the proposed actions.

RGGI Success

The underlying premise of the proposed actions is that the Regional Greenhouse Gas Initiative has been an unqualified success and deserves to be expanded and revised.  Sprinkled throughout the RIS are statements such as: “contributing to a 50% reduction in CO2 from affected power plants in New York, it is estimated that the RGGI program provided $1.7 billion in avoided public health costs in New York by reducing associated air pollutants”.   My comments on this topic were based primarily on the many posts that I have done on RGGI.  Rather than re-hash all the background information available in my previous posts I will simply summarize the key points.

The “RGGI is a success” statements are based on a naïve comparison of emissions before and after RGGI program implementation.  I compared CO2 emissions in the nine-state RGGI region for a baseline period (2006-2008) before the start of RGGI to annual emissions since.  The total emissions have decreased from an annual average baseline of over 127 million tons prior to the program to just under 75 million tons in 2018.  This represents a 40% decrease for the RGGI region as a whole as compared to a 50% reduction in New York State CO2 emissions.  However, it is important to evaluate why the emissions decreased.  When you compare emissions by the primary fuel type burned it is obvious that emissions reductions from coal and oil generating are the primary reason why the emissions decreased.  Note that both coal and oil emissions have dropped over 80% since the baseline.  Natural gas increased but not nearly as much.

Ultimately, the only reductions from RGGI that can be directly traced to the program are the reductions that result from direct investments of the RGGI auction proceeds. Information necessary to evaluate the performance of the RGGI investments is provided in the RGGI annual Investments of Proceeds update.  In order to determine reduction efficiency, I had to sum the values in the previous reports because the most recent report only reported lifetime benefits.  In order to account for future emission reductions against historical levels the annual reduction parameter must be used.  The Accumulated Annual Regional Greenhouse Gas Initiative Benefits table lists the sum of the annual avoided CO2 emissions generated by the RGGI investments from three previous reports.  The total of the annual reductions is 2,818,775 tons while the difference between the baseline of 2006 to 2008 compared to 2017 emissions is 59,508,436 tons.  The RGGI investments are only directly responsible for less than 5% of the total observed reductions!

Expanded Applicability

The proposed revisions expand applicability under Part 242 to capture certain units that serve an electricity generator with a nameplate capacity equal to or greater than 15 megawatts (MW).  The only rationale provided is that “New York stakeholders raised concerns during the extensive outreach efforts that the cost of complying with RGGI might result in increased operation at units not subject to the regulatory provisions of Part 242, particularly at smaller units below the existing 25 megawatt (MW) applicability threshold”.

Sadly, New York State energy and environmental policy is more about optics than scientific facts.  In order to describe this proposal based on facts I believe that, at a minimum, there would be a list of affected units, an estimate of their emissions, and an evaluation of the stakeholder concern that they might run more in the future.  There is no listing of affected units and obviously no estimate of emissions.  My best guess is that there will be 69 affected units.  I estimated that emissions averaged 126,843 tons over a five-year period and that in the highest year the CO2 emissions were 163,042 tons.  That represents about a half a percent of the total NYS emissions. The rationale is not based on a quantified estimate just a “feeling” that it might happen.  In fact, elsewhere the document itself in the RIS Model Rule Policy Case Program Design Assumption description suggests that these units will run less.  The modeling results compare two cases and in the Reference Case New York is a net importer of 2,709 GWh in 2031 but New York imports more in the Model Rule Policy Case due to lower in-state generation from gas units backing off”, my emphasis added in bold.  Furthermore, the DEC promulgated rules late last year that will result in the retirement of most of these units anyway.

Binding Cap

The RIS mentions a binding cap with respect to two aspects of the proposed rule.  During the last program review the RGGI states decided to set the regional emissions cap in 2021 to 75,147,784 tons and then reduce it by 2.275 million tons per year thereafter, resulting in a total 30 percent reduction in the regional cap from 2020 to 2030.  In addition, the RGGI states included a budget adjustment for banked allowances if the allowance bank exceeded the total quantity of 2018, 2019, and 2020 emissions at the end of the fourth control period. The RIS claims this will “help create a binding cap”.

My interpretation of a cap and trade “binding cap” is that it requires emission reductions from affected sources as a result of the control program itself and not because of other factors.  During the program review process, environmental stakeholders insisted that a “binding cap” was necessary despite significant reductions.  In this instance I think there are considerations that make that a poor choice.  This topic is important enough to warrant its own post but I will briefly address my concerns here.

There is an important difference between cap and trade programs for SO2 and nitrogen oxides (NOx) emissions and cap and invest programs for GHG emissions.  In particular, there are add-on control options for SO2 and NOx whereas there isn’t any cost-effective option for CO2.  As a result, affected sources could directly control their SO2 and NOx compliance and, more importantly, the cap limit can be set based on technologically available control performance.  In RGGI and other GHG emissions programs, there are limited direct options for the affected sources and, going forward especially, compliance is  going to have to rely on indirect reductions, i.e., someone will have to build a zero-emitting plant that displaces enough output from a fossil plant so that enough allowances are available to cover the affected source requirements.  As a result, the ultimate control strategy for an emissions marketing CO2 control program is to run less and hope power is available from somebody else.

Future emission limits are based on past RGGI success but I have shown that most of the success was the result of fuel switching to a lower priced fuel.  A recent report from the Department of Energy’s Lawrence Berkeley National Laboratory, “The Impact of Wind, Solar, and Other Factors on Wholesale Power Prices: An Historical Analysis—2008 through 2017,” confirms  that emission prices have been a minor factor in wholesale electric price changes in the NYISO.  The factors that affect wholesale electric prices determine the change in costs of production which in turn govern how much a particular unit operates.  During the ten-year period of the study “falling natural gas prices were the dominant driver of overall market-wide average price drops, reducing average annual wholesale prices by $7–$53 per megawatt-hour (MWh) over the last decade”.   Note that in Figure ES-1 Impact of Wind, Solar, and Other Factors on Wholesale Power Prices from that document that the $53 per MWh reduction was for the NYISO.

There is a limit to fuel switching, New York has closed all its coal-fired power plants and I believe the fuel-oil fired power plants cannot reduce emissions any more without shutting down.  While there are still opportunities elsewhere in RGGI the fact is that there is a limit to this option.  Combine this with the fact that past RGGI investments have not been particularly effective (only responsible for 5% of the observed reductions) that means that a binding cap will be inevitable.  While there are mechanisms that are supposed to address the risk that affected sources will be unable to obtain allowances to run and have to shut down, the concern that this is uncharted territory and has risks to reliability remains.

Third Adjustment to the Allowance Bank

The RGGI model rule includes a Third Adjustment for Banked Allowances that will adjust the budget for 100 percent of the pre-2021 vintage allowances held by market participants as of the end of 2020, that are in excess of the total quantity of 2018, 2019, and 2020 emissions. That translates to: if the allowance bank is larger than the fourth control period emissions then they will adjust the size of the cap.  This provision is included to prevent a large allowance bank going forward and is directly related to the binding cap arguments.

The clear intent of the adjustment was that there should be a limit on the size of the allowance bank going forward in 2021 based on the status after the emissions through the end of 2020 were surrendered.   On April 20, 2020 RGGI quietly posted  a guidance document, RGGI Compliance: CO2 Budget Source Fact Sheet (“Fact Sheet”), that sets a schedule  in the “dates to remember” section that states the final true-up of allowance surrender for fourth control period emissions will occur on April 2, 2021.  Using that schedule, the comparison of fourth control period emissions and the allowance bank occurs before reconciliation thus ensuring the third allowance bank adjustment.

The rationale for the timeline necessary to compare the fourth control period emissions to the allowance bank on April 2, 2021 ignores reality.  According to the Fact Sheet, the states need 31 days to ensure compliance for each CO2 budget source.  The compliance test compares the certified number of allowances submitted by each affected source against the certified number of tons emitted for each CO2 budget source.  Given that the Potomac Economics Report on the Secondary Market for RGGI CO2 Allowances for Q1 2020 released on March 13, 2020 included the allowances that were deducted for 2019 interim compliance based on the March 1, 2020 compliance certification submittals there is every reason to expect that there is a report that lists the emissions and allowances so that this comparison is a trivial effort.  This mismatch in dates will artificially reduce the allowances available for auction in 2021 (and beyond) and is not consistent with the discussions surrounding banked allowance adjustments during the public review of the Model Rule.

Conclusion

I recently listened to the June 24 meeting of the New York Climate Action Council Policy in which New York’s climate leaders repeatedly expounded on the importance of science driving New York policy.  However, as the implementation of this regulation shows, it is more about rhetoric than science.  In this regulation, smaller combustion sources are to be regulated.  The hypothesis is that they will be regulated because they will run more but there is no evidence provided why that might be the case.  In fact, they don’t even describe which units will be affected and how much they emit.  If science was the driving factor the hypothesis for each rule change would be tested to prove the case for the proposed action.