N.Y. adopts cap and trade as a pillar of climate action

Source: By Benjamin Storrow, E&E News • Posted: Tuesday, December 20, 2022

People navigate flooded streets on Sept. 1, 2021, as the remnants of Hurricane Ida pass through New York City.

People navigate flooded streets on Sept. 1, 2021, as the remnants of Hurricane Ida pass through New York City. The storm dumped 3.15 inches of rain in the span of an hour at Central Park. David Dee Delgado/Getty Images

Sales of gasoline powered cars would be banned in 2035, natural gas hookups in new homes would be prohibited starting in 2025 and a statewide cap and trade program would be implemented by the end of the decade under the recommendations approved by a New York climate committee Monday.

The plan finalized by the Climate Action Council was a step forward in meeting the ambitious emissions targets established by a landmark state law in 2019. The Climate Leadership and Community Protection Act created the council to map out how the state would cut emissions 40 percent of 1990 levels by 2030 and achieve carbon neutrality by 2050.

The group, made up of 22 people drawn from state government, industry, organized labor and environmental groups, spent two years drafting a strategy and taking public comment. The final plan approved by the council Monday in a 19-3 vote envisions a wholesale overhaul of New York’s energy systems.

It foresees one to two million homes using heat pumps for space and water heating by 2030, compared to roughly 4 million that use natural gas today. It predicts that 3 million zero-emission vehicles will be on New York roadways by the end of the decade, up from roughly 100,000 electric cars today. It contemplates generating 70 percent of the state’s power with renewables by 2030, driven by a massive build-out of wind, solar and battery storage facilities. And to ensure emission targets are met, it proposes the creation of a statewide cap and trade program.

“I would say to you today that the final scoping plan is big, it’s bold, and it’s visionary,” Basil Seggos, the commissioner of the New York Department of Environmental Conservation, told the gathering. “It’s the most comprehensive document for any state as it charts a path forward on addressing the climate crisis.”

The vote symbolized the evolution and growing ambition of state climate policy in the United States. New York, like most states, has long focused its emission cutting efforts on power plants. The Empire State is a founding member of the Regional Greenhouse Gas Initiative, an 11-state cap and trade program for power plants in the northeast. New York has long had requirements for wind and solar generation.

The retirement of coal, gas and oil plants has shifted the climate focus in the Northeast to other sectors. In 2019, the most recent year for which state data is available, 32 percent of New York emissions came from buildings, making them the top source of greenhouse gas pollution. Other sectors contributing large amounts of emissions include transportation with 28 percent of CO2 emissions, power plants with 13 percent and industry with 9 percent.

Buildings dominated much of the climate council’s deliberations, with environmentalists arguing that New York should phase out the gas and oil-fired furnaces commonly used to heat buildings today, while industry representatives said such a shift would overburden the state’s power grid.

The council ultimately recommended that New York ban the use of fossil fuels for space and water heating in new homes by 2025. Homeowners who want to replace a heating system beginning in 2030 would be required to find a nonemitting system, while commercial building owners would face a similar requirement in 2035.

The council’s recommendations are not binding. In the case of buildings, it will now fall to state agencies like the New York State Energy Research and Development Authority and the New York Department of State to promulgate new building codes and standards that reflect the Climate Action Council recommendations. DEC will have until January 2024 to draft regulations that meet state emission targets.

Turbulent provisions

Monday’s vote offered a preview of the coming fights over those regulations. Two of the council’s industry representatives voted against the final plan, saying increased electrification threatens reliability of the state power grid.

Donna DeCarolis, president of National Fuel Gas Distribution Corp., a gas utility, said she worried the strategy would drive up electricity demand at the same time it increased reliance on intermittent generation from wind and solar.

“In my view, the plan’s undue reliance on electrification to achieve the state’s emissions reduction goals may push the state and consumer squarely into the sort of reliability shortfalls that we’ve seen in other states that the New York ISO has repeatedly warned about,” DeCarolis said at the council meeting.

Her comments were echoed by Gavin Donohue, who leads the Independent Power Producers of New York, a trade group representing power plant owners. The scoping plan envisions building 10 gigawatts of distributed solar by 2030, 6 GW of energy storage by the end of the decade and 9 GW of offshore wind by 2035. The existing power capacity of New York’s grid is about 40 GW.

“The build out that we’re talking about here is unbelievable and this state has never seen a build out like this,” Donohue told the group.

Yet those views were in the minority. Most speakers said it was imperative for the state to move quickly to avoid the worst impacts of a warming planet, and argued the transition would create jobs and avoid higher costs from climate charged weather events.

Voting in favor of the plan were energy executives like Thomas Falcone, the CEO of the Long Island Power Authority, and state regulators like Rory Christian, who chairs the Public Service Commission. Christian noted that the plan will be updated every couple of years, enabling the state to adjust its approach as new challenges arise.

“The scoping plan before us today sets a clear direction, while also allowing for sufficient flexibility and approach,” he said, adding later, “through the actions outlined in the plan, we’ll be able to achieve things that our parents and our grandparents never considered a possibility.”

Perhaps one of the biggest surprises in the plan was the call for a cap and trade program. Such approaches were once a hallmark of state climate action, but they have fallen out of favor among climate activists. Many argue such market based programs impose an undue burden on poor neighborhoods and communities of color by enabling the continued operation of polluting facilities.

Cap and trade was not initially called for in the draft plan released earlier this year. The final plan calls for a “cap-and-invest” program by setting an emissions cap by 2030 that would become more stringent every year through 2050. New York already participates in RGGI, but the new program would be expanded to other sectors of the economy such as transportation, industry and gas utilities.

The cap and trade program would direct at least 35 percent of its revenues to underserved communities. It also proposes setting emissions caps in disadvantaged communities.

Anne Reynolds, the executive director of the Alliance for Clean Energy New York, said the inclusion of cap and trade answers two key questions facing New York’s climate efforts: how will the state guarantee emission reductions and how it will find the money to pay for them.

“I believe the inclusion of a cap and invest policy lends this plan credibility,” she said.

But some environmental justice advocates expressed skepticism.

“Ideas for market based cap-and-invest and biofuel schemes should be rejected if they can’t overcome design flaws and stakeholder concerns,” Raya Salter, an environmental justice advocate and principal of Imagine Power LLC, told the group.