A Green New York State of Mind

Posted on September 26, 2019 by Gail Port

In what has been heralded as a banner year in New York State for environmental legislation, the icing on the cake was the recent passage of the most groundbreaking climate action plan in the nation to date.  On July 22, 2019, Governor Andrew Cuomo signed the Climate Leadership and Community Protection Act (CLCPA) into law.  The CLCPA sets an admirable, albeit aggressive, statewide framework to reduce net greenhouse gas emissions to zero by 2050. Notably, while setting ambitious goals to reduce greenhouse gas emissions from all anthropogenic sources, the Act also recognized that improvements to the State’s resiliency—that is, adaptation, to address those impacts and risks of climate change that cannot be avoided ( e.g., infrastructure hardening to withstand climate induced disasters) was also necessary.

In enacting the CLCPA, the State legislature touted New York as a leader, and the CLCPA as a legislative model, in the climate change arena:  “Actions undertaken by New York to reduce greenhouse emissions will have an impact on global greenhouse gas emissions and the rate of climate change.  In addition, such action will encourage other jurisdictions to implement complementary greenhouse gas reduction strategies and provide an example of how such strategies can be implemented.”  The CLCPA’s legislative findings proclaim that “[b]y exercising a global leadership role on greenhouse gas mitigation and adaptation, New York will position its economy, technology centers, financial institutions and businesses to benefit from national and international efforts to address climate change.”  Clearly, the CLCPA is viewed as a potential economic development engine that can “advance the development of green technologies and sustainable practices within the private sector, which can have far-reaching impacts such as a reduction in the cost of renewable energy components, and the creation of jobs and tax revenues in New York.”      

Recognizing that climate change “especially heightens the vulnerability of disadvantaged communities”, the legislature made environmental justice a cornerstone of the CLCPA by providing that State actions to reduce greenhouse gas emissions “should prioritize the safety and health of disadvantaged communities, control potential regressive impacts of future climate change mitigation and adaptation policies on these communities and prioritize the allocation of public investments” in those areas.  The CLCPA calls for the formation of a twenty-two member state panel, the New York State Climate Action Council, to guide the State in meeting its progressive goals.  The Commissioner of the New York State Department of Conservation and the President of the New York State Energy Research and Development Authority (NYSERDA) are to be the Co-Chairs of the Council, and the remaining members will be the heads of certain state agencies and appointees from the Governor (two “non-agency” expert members), and the leaders of the State legislature (a total of 8 members).

In essence, the details for putting in place the plan and to propose regulations and other actions required to implement the new law will be left to the Council. Once the Council is formed, it will have three years to come up with a final scoping plan--a specific proposal to recommend mandates, regulations, incentives, and other measures to ensure New York meets the lofty carbon neutral goals outlined in the CLCPA. To fulfill its legislative mandates, the Council will receive input from to be-created subject-specific Advisory Panels, comprised of experts on transportation, energy intensive and trade-exposed industries, local government, energy efficiency and housing, power generation, and agriculture and forestry, a Climate Justice Working Group, with representatives from communities bearing disproportionate pollution and climate change burdens and a Just Transition Working Group (chaired by the State Labor Commissioner and the President of NYSERDA) giving business leaders a seat at the table to advise on workforce development and training issues and business impacts arising from New York’s “new energy economy.” Time will tell whether this structure will result in “too many cooks in the kitchen” or will function as a “well-oiled machine”.

Here are some of the highlights of the CLCPA benchmarks:

·      By 2030, 70% of New York’s electric generation has to come from renewable sources such as wind, solar or hydropower and must reach 100% by 2040. (According to the New York State Department of Environmental Conservation, 23% of New York’s electric power currently comes from renewable sources—chiefly hydroelectric).  The CLCPA incorporates Governor Cuomo’s renewable energy goals for offshore wind, distributed solar, storage and energy efficiency.

·       New York will have to cut its total green-house gas emissions—from 1990 levels—by 40% by 2030 and 85% by 2050. The remaining 15% will have to be offset by reforestation, restoring wetlands, carbon capture or certain other green projects which will make the state carbon neutral by 2050.

·       The State’s load serving entities will have to procure at least 6 gigawatts of photovoltaic solar energy by 2025 and 9 gigawatts of offshore wind energy by 2035, and to support 3 gigawatts of statewide energy storage capacity by 2030.

·     To the extent practicable, disadvantaged communities are to receive 40% of the overall benefits of State spending on clean energy and energy efficiency programs, projects and investments in the areas of housing, workforce development, pollution reduction, low income energy assistance, transportation and economic development, with a floor of receiving at least 35% of those benefits. (The CLCPA defines disadvantaged communities as “communities that bear burdens of negative public health effects, environmental pollution, impacts of climate change, and possess certain socioeconomic criteria, or comprise high-concentrations of low- and moderate- income households.”)

In recognition of the fact that climate change presents an existential crisis that must be addressed without delay, the CLCPA sets an implementation timeline that also is very aggressive.

The most significant challenge to achieving the CLCPA’s bold directives is figuring out how it will be accomplished in practice. By establishing the Council, the State, prudently, will be engaging a wide-pool of talent tasked to come up with novel and practical approaches. Nonetheless, there are significant questions that, at least as of now, are unanswered. Investments in renewables, energy storage and power generation will be necessary and costly, especially considering the projected retirements of the New York nuclear fleet.  Where will those funds come from?  Powerful incentives will be required to push the private sector towards electrifying the transportation, residential, and commercial sectors—what will those incentives look like? Is the establishment of a State-wide carbon marketplace necessary and, if so, how will it affect the pocket book of New Yorkers?  And how will New York ensure that greening its economy will be good for its business community and not scare them off? Does the statute inadvertently inject too much uncertainty into the State’s economy?

With the Trump administration on a mad dash to roll back a number of regulations designed to address and mitigate climate change, New York has embarked on a praiseworthy plan to achieve aggressive goals to address the existential crisis of climate change. Sure, there are innumerable obstacles that need to be overcome and, yes, the specific action plans have not yet been conceived, but setting these goals—and ultimately making them enforceable—is certainly a giant leap in the right direction.  Kermit the Frog once said, “it’s not easy being green” —but sometimes doing what is hard is what is necessary.

Carbon Taxes and Carbon Offsets -- A Path to Net Zero?

Posted on July 18, 2019 by Jeffrey C. Fort

Two recent press pieces caught my eye.  “UK Signs Net-Zero Emissions Requirement into Law,” and “GOP Pollster pitches Republicans on carbon pricing.” The first reflects recent studies with respect to a potential [or even likely] environmental calamity; the other suggests signs of political reconsideration on climate change.  As welcome as the latter is, and most economists praise the use of a carbon tax, it is likely not nearly enough.

According to the latest scientific forecast, meeting the Paris objective of no more than a 2 C increase in global temperatures from pre-industrial temperature levels will require worldwide net zero emissions of carbon-dioxide-equivalent (CO2e) gases by 2050.  In any event, the UK, France, Norway and Sweden have adopted a net-zero requirement to be achieved no later than 2050 and more than a dozen large US cities have done likewise.

How a net-zero requirement can be met, with all the extant emissions from industry, transportation and buildings, is perhaps the most important research and development task facing us.

Consider whether another approach should be considered. In a 2017 op-ed Wall Street Journal piece, James Baker and George Schultz recommended a “carbon tax” on emissions of carbon dioxide equivalent gases.   This recommendation is the centerpiece of a memorandum to “Interested Parties” by a Republican pollster and strategist suggesting that the Republican Party should heed polling results and embrace the Baker/ Schultz suggestion that the Republican Party ought to support a “Carbon Dividends” proposal. This proposal would feature “four pillars”: a tax (of $42/ metric tonne of CO2e, indexed to rise with inflation), an equivalent “dividend” to working class Americans, a border adjustment for carbon content of imported goods, and elimination of EPA’s regulatory authority concerning climate issues.  The tax revenues would be returned to private citizens with the lowest incomes, as a “Carbon Dividend” to mitigate the increased energy costs.

However, the Carbon Dividend proposal says nothing about reducing emissions other than by raising a “price on carbon.”  But will a tax achieve that goal? Some parties may choose to emit and pay the tax so there is no guarantee that emissions will be reduced and certainly not to achieve net-zero emissions. Any reduction in energy use by businesses would depend on the elasticity of the market for other inputs and competition for the output products. For businesses that have inelastic demand curves the costs just get passed through with no or little emission reduction.  In other words, a carbon tax will not yield significant environmental results, however admirable its intentions.

However, emission reduction credits, or “offsets,” is a tool which has been used for nearly 50 years under the Clean Air Act.  Verified offsets provide real reductions.   Verified offsets have been used to allow large new construction projects in dirty air areas, to reduce the costs of compliance measures in state implementation plans, and now as a means of reducing costs in most of the climate legislation around the world.  Offsets are not easy to create.  Using standard protocols, there must be a scientific method which has been adopted in a public process and adherence to that methodology then for a project to be undertaken.  Both are validated and verified by an independent third party. Only then is the “offset credit” created.  Offsets seem to attract entrepreneurs who have a “better idea” of what projects can be implemented at a much lower cost that an EPA-approved, command and control requirement.   The U.S. now has three independent offset verifiers which have produced millions of tonnes of extra reductions -- proving that the concept can work at scale.   These are real and verified reductions and the current prices are a small fraction of the $42 per tonne price in the Carbon Dividend proposal.  Verified offsets are a much better and cost-effective way to produce reduce real emission reductions.  

For a “tax” on carbon emissions, we would start with an existing and established measuring tool; those sectors covered by the Mandatory Reporting Rule (MRR).  The covered sectors have already been established as the most carbon-intensive industrial activities.  The MRR is established and tested and would not require a new system.

A proposed carbon tax systems could then allow a credit or a “deduction” for other state requirements for GHG controls.  State carbon reductions requirements (e.g. AB32 in California and RGGI in the Northeastern states or other state adopted requirements, see) could be recognized, which would reduce the taxable quantity.  Allowing offsets, including those purchased from sources “outside the [MRR] cap” would provide further reductions, and further reduce net taxable emissions.   But a complete elimination of taxable carbon emissions appears unlikely in the near term.

There are many sectors who now perform “voluntary” projects, at a cost far below $42/ metric tonne.  Among the sectors outside the MRR list, are:

  • agricultural and forestry programs (famers and foresters have produced substantial volumes of offset credits to date);
  • unregulated industrial processes, such as those emitting methane, nitrous oxides and hydrofluorocarbons, which are not subject to the MRR; and
  • abandoned coal and gas well vents.

Not only would using offsets provide an incentive for extra reductions on a voluntary basis, the existing voluntary programs are examples of innovation. Small businesses, new ideas, and new ventures have created most of the offsets now used in compliance and voluntary systems.

Carbon offsets are real reductions, and not just a fiscal policy redistribution.  In addition to providing a “dividend,” a carbon tax offset policy could stimulate new ideas and businesses as well as substantially reduce carbon emissions.  This would align sound climate policy with sound tax policy by using a tool developed long ago, updated based on recent experience.