New York looks toward a carbon-free economic future

 N.Y.'s carbon-free economy: A closer look at the emissions cap

Cap will require businesses to purchase carbon credits, but there are unanswered questions

 

By Rick Karlin

 

Dec 25, 2023

 

ALBANY — Draft regulations for how New York will enact a sweeping emissions cap on business and industry, known as Cap and Invest, were originally supposed to be released by the end of the year.

 

That turned out to be more complicated and difficult than expected, so the state Department of Environmental Conservation last week issued a “Pre-Proposal,” which outlined their progress on the cap. And they are still seeking input.

 

Envisioned as a way to help enforce and pay for the state’s shift to a carbon-free economy, the plan requires some of the state’s largest emitters of carbon or greenhouse gases to purchase emission allowances that would be auctioned off on a quarterly basis.

 

The overall cap on emissions would be lowered each year with the goal of having a 70 percent carbon-free power grid by 2030 and 100 percent by 2040. There is also a goal of a carbon-neutral economy by 2050, as laid out in the 2019 Climate Leadership and Community Protect Act designed to fight climate change.

 

Embedded in this emissions cap is a multitude of questions about who would or wouldn’t have to buy emission credits. 

Large factories that emit more than 10,000 tons of carbon per year, for instance, would be required to buy credits, although users of aviation fuel would not.

 

“Upstream” suppliers of natural gas or motor fuel, such as distributors, would have to buy credits, although the details with that are still being developed.

 

The plan also calls for accommodations for industries that rely on large amounts of power, such as aluminum smelters, or those subject to heavy international competition. 

 

One of the biggest unanswered questions centers on whether power plants that burn fossil fuels such as natural gas or oil would have to participate.

 

So far, the DEC is undecided on that point and that has already drawn pro and con arguments from various quarters of New York’s energy industry and environmental community.

 

“From a climate change point of view, it makes sense to include them,” said Anne Reynolds, executive director of the Alliance for Clean Energy, NY.

“They are one of the biggest sources of carbon,” she added. Reynolds’ group represents developers of solar, wind and other green energy sources, which compete with traditional gas-fired power plants.

 

Overall, buildings, many of which require gas or oil to heat, and transportation, are the largest carbon emitters, followed by various industries and power plants.

Power plant owners see it differently.

 

 They already pay a carbon tax, or purchase emission credits from the Regional Greenhouse Gas Initiative, a consortium of 11 mostly Northeastern states that have for almost two decades operated their own emissions auction for power plants.

 

“It’s an issue of fairness and how much can consumers bear,” said Gavin Donohue, president and CEO of the Independent Power Producers of NY, which represents power plants including many that are gas-fired.

 

Forcing them into a state carbon allowance program while they are in a regional one could be viewed as double taxation, which would likely prompt a legal challenge.

 

His remarks about consumers speaks to the fact that the cost of buying carbon credits inevitably gets passed along to the consumer.

 

The money from the carbon tax, or purchase of emission allowances, goes back to developing green energy and to consumer rebates, probably through an income tax credit.

 

That too, raises a number of questions, however. An “Affordability Study,” that the New York State Energy Research and Development Agency issued last week along with the Pre-Proposal, acknowledged some of those questions.

 

Still unknown, for instance, is how energy rebates may impact peoples’ federal taxes, and at what incomes could or should the rebates be reduced or phased out.

 

Additionally, there are regional variables that impact the cost of energy: Those who live in northern New York typically have higher heating bills and they tend to pay more for transportation, i.e. gasoline, since there isn’t much mass transit. 

 

And it’s not yet clear how a credit would go to people who don’t file income taxes but nonetheless have electricity and heating bills.

 

With all these unanswered questions, environmentalists in New York weren’t too upset that this year’s deadline for draft regulations will be missed.

 

“This is a good opportunity for people to see the direction they are going in,” said Jessica Ottney Mahar, state policy and strategy director at The Nature Conservancy.

 

“We’re disappointed that the state wasn’t able to meet the deadline but at the same time it’s really important that they get this right,” added Conor Bambrick, director of policy at Environmental Advocates NY.

By Rick Karlin

Rick Karlin covers the environment and energy development for the Times Union. Has previously covered education and state government and wrote about natural resources and state government in Colorado and Maine. You can reach him at  rkarlin@timesunion.com or  518-454-5758.

 

A closer look at New York's pending emissions cap, or carbon tax (timesunion.com)