The Ways New York State is Boosting its Climate Action Plan

Mar 07, 2023

A black and white photo of the New York State Capitol in Albany, NY.

The Ways New York State is Boosting its Climate Action Plan

In Our Role As Business Energy Advisors, We Outline Three New Initiatives Passed by the Climate Action Council

 New York’s climate legislation is rapidly advancing through current and developing regulations and laws. The Climate Leadership and Community Protection Act (CLCPA) serves as a guiding document for emerging policy, requiring that the state procure 70% of electricity from renewables by 2030, acquire 100% zero-emission electricity by 2040, and reduce emissions to 85% of 1990 levels by 2050. Per the CLCPA’s goals, the state has created a Scoping Plan outlining steps and legislation to increase clean energy and energy efficiency, including a Cap-and-Invest program.

While the CLCPA was passed in 2019, New York’s Climate Action Council approved this Scoping Plan to meet the targets of the CLPA on December 19th, 2022. This plan outlines the state’s strategy to meet its climate targets with directives based on the economic sector. The document was written in consultation with hundreds of professionals, as well as feedback from forums and 35,000 public comments. The plan uses legislative requirements and economic incentives to cost-effectively meet the state’s climate goals. As a leading business energy advisor in New York City, NY, we wanted to provide details on aspects of this plan that may be relevant to your business.

SEE MORE: How NYC is Implementing the Tier 4 Recs Program

Cap-and-Invest Program

Following recommendations in the Scoping Plan, Governor Kathy Hochul announced New York is developing an economy-wide Cap-and-Invest program to drive emission reductions and direct revenue towards decarbonization efforts. The state’s Department of Environmental Conservation (DEC) and the New York State Energy Research and Development Authority (NYSERDA) are charged with establishing the program with an annual limit on greenhouse gas emissions. The DEC has until January 1st, 2024, to draft regulations, so the program details are still emerging, after which the legislature would have to approve them. That being said, we do have an overview of the program as it stands. 

The program will require large greenhouse gas emitters and energy distributors to acquire emission allowances from an available ‘pool’ of emission credits based on their pollution emission levels. Emission allowances will likely be allocated by auction. This would differ from conventional Cap-and-Trade schemes in which allowances are distributed initially, and additional allowances are bought and sold. When the program is fully implemented, organizations will also face a tax on the emissions associated with their purchase of non-renewable energy and their use of emission-producing industrial activities. The tax aims to incentivize consumers to switch to lower carbon alternatives to reduce the global warming potential of their actions and improve air quality.

It is important to note that compliance obligations are placed on fuel producers and distributors for the heating and transportation sector, while industry and electricity emissions will be regulated at the point of emission. This saves organizations and businesses from additional compliance requirements, yet the cost will most likely be transferred to them. For most organizations, the compliance requirements will fall upstream and act indirectly on the consumer.

The expected carbon price for these emission allowances is unknown and will depend on the allocation of credits. However, if the price is based on the DEC’s previous social cost of carbon estimate of $151 per ton of carbon dioxide, this would equate to approximately $0.82 per therm for natural gas. Whether or not the DEC cost of carbon is applied to the Cap-and-Invest program, we do not expect the price to originate at this value. Overall, we can expect to see allowances reflective of emissions at the commencement of the program to carry low prices. Over time the pool of available credits will likely decrease in line with New York State’s emission policy of a 40% reduction of greenhouse gas emissions by 2030 and an 85% reduction by 2050, based on 1990 levels. This will result in price increases over time. Environ is closely monitoring the implementation of the Cap-and-Invest program.

Alongside restricting emissions, New York will incentivize energy efficiency, electrification, and carbon reductions by investing the proceeds of the Cap-and-Invest scheme into decarbonization efforts. This program will generate and direct over $1 billion to New Yorkers yearly through “consumer-led decarbonization efforts.” The funding generated from the Cap-and-Invest program will go towards energy efficiency measures, electrification of buildings, and transportation decarbonization. 

Although NYSERDA and the DEC have yet to outline how this fund will be dispersed, there are indications the funds are designed to mitigate the costs of transitioning to a low-carbon economy among consumers and industry. Along this vein, a minimum of 35% of the program’s proceeds are designated to communities disadvantaged by pollution associated with fossil fuels. These funds will be used to improve air quality, decarbonize transportation systems, and implement energy efficiency projects. Overall, the program aims to incentivize emission reductions while funding clean energy and energy efficiency programs across the state.

Energy Efficiency

Governor Hochul also announced proposed legislation to electrify over one million homes and have one more million homes electrification-ready by 2030, in line with the state’s goal of having 250,000 electrification-ready homes retrofitted or constructed annually by 2030. Central to this plan is an emerging piece of legislation, The Advanced Building Codes, Appliance and Equipment Efficiency Standards Act of 2022. 

This policy will restrict the sale of certain low-efficiency appliances in the state and allow for the state-level design of energy codes for new construction. States are typically prohibited from setting appliance and efficiency standards as they are regulated at the federal level. However, this legislation authorizes NYSERDA and the New York Department of State to develop and modify energy standards. This builds upon twelve other states that have already implemented standards surpassing federal requirements.

Building Heating

The Utility Thermal Energy Network and Jobs Act,  passed in 2022,  lays the legal groundwork for utilities to create thermal energy networks. Thermal energy networks are infrastructure projects that allow multiple buildings to connect to a network of thermal energy sources. These thermal sources include geothermal energy, groundwater, wastewater, or waste heat from large commercial buildings. 

Thermal energy networks have been proven to be effective on a small scale, such as a campus level, due to their high efficiency and low operating costs. However, with high installation costs, it is still being determined how feasible and economical these systems will be at the utility level. The New York State Public Service Commission has required seven utility companies to propose at least one thermal energy network pilot project in their respective operating regions. Although thermal energy networks are an evolving technology, they could be an affordable and reliable heating and cooling source if properly implemented.
As a leading business energy advisor, Environ is monitoring developments with these legislations, so watch this space for updates. If you want to learn more about these policies or have any questions, please don’t hesitate to reach out. Set up a consultation with our team by calling or filling out our contact form.