Budget watchdog pans New York's proposed carbon tax plan
Citizens Budget Commission says it would cost businesses and consumers billions. Environmentalists disagree.
By Rick Karlin, Staff Writer
Oct 29, 2024
A well-known budget watchdog group is taking aim at plans for New York to enact a carbon tax designed to reduce air emissions, saying it is unrealistic as written.
ALBANY — A leading budget watchdog group is leveling criticism at the carbon tax state policymakers are designing to fight global warming. The Citizens Budget Commission, in a recent report, contends that New York’s incipient Cap and Invest program is unrealistic and could cost businesses and consumers billions of dollars a year.
Supporters of the plan, though, say it’s a tool needed to pay for the ambitious goals of removing carbon emissions from the economy to fight climate change.
The state Department of Environmental Conservation and the New York State Energy Research and Development Authority are scheduled to issue draft regulations by the end of the year for the state’s plan to limit carbon emissions and other pollutants. The actual program could start in 2025.
Both agencies came out with a preproposal plan last December. The budget commission looked at that plan and found it badly lacking.
“This is a big deal to people’s pocketbooks and their jobs and it’s important to get it right,” said Andrew Rein, the president of the commission which last week issued its lengthy critique of how the state’s plan is shaping up.
The organization’s early analysis predicts that the program would cost $12 billion annually by 2030 with businesses and households bearing the costs. Others have estimated the plan could cost families hundreds of dollars per month in higher energy costs that are passed along.
The cost of Cap and Invest may be paid by big carbon emitters but its impact would ripple throughout the economy, Rein said.
State officials stress they are still developing the plan and are working to make it affordable.
“New York state’s commitment to achieving a clean and sustainable energy future that is timely, responsible and affordable for all New Yorkers remains steadfast,” DEC said in a prepared statement. There are still comment periods and DEC is still seeking input on what the final program will look like.
Support for Cap and Invest remains strong in the environmental community. “A bold cap-and-invest program has the potential to elevate New York’s role as a climate leader — serving as a critical tool in cutting pollution,” according to a public letter last year from a consortium of groups including National Resources Defense Council, Environmental Defense Fund, NY League of Conservation Voters and others.
Under Cap and Invest, large greenhouse gas emitters would be subject to a pre-determined cap on how much they can emit each year. They would have to buy allowances or credits that let them emit a certain amount of tonnage, an idea that’s been dubbed a carbon tax.
The money from the credits would be divided into thirds. Approximately two-thirds would go toward climate mitigation — the development and installation of energy-efficient products and programs to further reduce emissions. About a third would be a rebate for low-income households which could be disproportionately hit by higher costs that are passed along. A small amount would also go to help small businesses that get hit by higher costs.
There would be controls such as a ceiling on how much emitters could bid for carbon emission credits, with the idea of containing pass-along costs.
Over time, the cap on emissions each year would be lowered to phase out as much greenhouse gas, or carbon emissions, as possible.
There are many unanswered questions, including who or what enterprises would be included under the plan.
Moreover, the plan envisions another category of emitters known as emissions-intensive and trade-exposed companies or entities, industries that use a lot of energy and would potentially lose businesses to foreign competitors if they had to pay a full carbon tax.
New York doesn’t have a list of companies that could fall under those distinctions, although the federal government and other states that already have Cap and Invest plans, such as Washington, have developed such lists of those industries.
In Washington, for example, emission-intensive and trade-exposed companies include manufacturers of paper, food, beverages, steel, aluminum, glass, cement, building materials, airplanes, semiconductors, fertilizer and transportation fuels.
Unclear is whether power plants in New York would be subject to New York’s plan. They already are part of the Regional Greenhouse Gas Initiative, a program under which power plants in northeast states purchase carbon allowances.
If included in Cap and Invest, power-plant operators would likely call foul, maintaining they are being double taxed.
“We don’t want to pay twice for allowances,” remarked Gavin Donohue, president and CEO of the Independent Power Producers of NY, a trade group of power plant operators.
The Citizens Budget Commission, repeating criticisms that others have made, said it’s unlikely that New York will meet its goal of having a 70% percent renewable grid by 2030 with net-zero emissions by 2040. The pace of developing alternatives such as solar and wind has been too slow, and the costs, especially for offshore wind, have risen too sharply to meet that goal, they say.
The 2030 goal should be revised, said Rein. And to help offset the cost of Cap and Invest, Rein’s group believes it should be part of a wider consortium with other states such as California, Oregon and Washington that are already running such programs. That would create a larger market for the credits to presumably bring down the cost.
But there could be problems with that as well. It could allow deep-pocketed polluters to essentially buy their way out of reducing emissions.
Environmentalists argue that even more needs to be done to rein in carbon emissions.
“What is being discussed won’t be enough,” said Elizabeth Moran, a policy advocate for Earth Justice.
For one thing, Moran’s group wants a linear rather than nonlinear cap on the timeline for reducing emissions. The Cap and Invest proposal currently calls for sharper drops in emissions in the later years of the program. By back-loading the sharpest drops, industries would have time to adjust and innovate ways to cut their greenhouse gases.
Earth Justice wants emissions from buildings such as apartment blocks or malls to be expressly included in the plan, as well as livestock operations such as large-scale farms.
There are lots of other details to be worked out over the next year with both sides agreeing they will be busy finalizing the Cap and Invest plan.
“You’ve got to get it right,” remarked Rein.
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