By Peter Aronson
As New York pursues its climate goals, the state is pushing forward to develop an ambitious Cap-and-Invest Program.
Gov. Kathy Hochul introduced the program as part of her 2023 State of the State address and on December 20, the New York State Energy and Research Development Authority (NYSERDA) and the Department of Environmental Conservation (DEC) announced the next big step by releasing a pre-proposal outline and Climate Affordability Study.
Calling it an “economy wide” program, the state says implementation will ensure that New York meets its greenhouse gas emission reduction requirements of 40 percent below the 1990 levels by 2030 and 85 percent below that level by 2050, as mandated by the Climate Leadership and Community Protection Act.
“A Cap-and-Invest Program is an indispensable tool in the fight against climate change and a prerequisite to meeting the state’s emissions reduction targets,” said Julie Tighe, President of the New York League of Conservation Voters. “We were thrilled when Governor Hochul introduced this early in 2023 and we are encouraged to see the next steps beginning to unfold with the pre-proposal outline and Climate Affordability Study.”
The Cap-and-Invest Program is complex with several prongs and many options being considered as NYSERDA and DEC work through the many steps to bring the program to fruition.
The program will set an annual cap on the amount of greenhouse gas emissions that are allowed in the state, with emission limits for emitters in various sectors of the economy, with these caps being reduced each year as the state moves closer to its emission reduction goal.
During this pre-proposal process, state agencies are looking to identify the types of emitters who will be required to report their emissions and pay a fee if they exceed the cap.
“It’s anticipated that large-scale greenhouse gas emission sources and distributors of heating and transportation fuel will be required to” pay a fee based on rules that will be set following this preliminary stage, according to the state’s Cap-and-Invest website.
The “invest” portion of the program unfolds when the money raised from emitters is invested to further reduce carbon emissions. “Proceeds will support critical investments in climate mitigation, energy efficiency, clean transportation and other projects,” the state said, including prioritizing the delivery of benefits directly to individuals living in disadvantaged communities.
Tighe said, “It is crucial that this program focuses on equity, affordability and labor standards to help ensure nobody is left behind in our transition to a clean energy economy, especially low-income communities and communities of color that for too long have borne the brunt of fossil-fuel pollution and short-sighted environmental policies.”
The current announcement establishes a framework for the core regulatory components of the program: the Mandatory Greenhouse Gas Reporting Program Rule, the Cap-and-Invest Rule and the Auction Rule.
As part of this announcement, the state released The Climate Affordability Study, which focuses on viable options for distributing the funds raised in the Cap-and-Invest Program.
The study lays out numerous options and makes several recommendations. The guiding principles include the need to:
- Craft a program that delivers money back to all New Yorkers to ensure “energy affordability”;
- Protect existing jobs while also supporting the creation of new jobs in new and existing industries; and
- Ensure that at least 35 percent of the money invested by the state benefits disadvantaged communities.
The funds raised through the Cap-and-Invest Program that will be distributed to consumers will go through the Consumer Client Action Account (CCAA).
Among the recommendations for distributing the CCAA benefits are that:
- Maximum assistance should go to households in disadvantaged communities to help alleviate their energy costs;
- Funds delivered should not be subject to state or federal income tax, nor should the funds impact government assistance delivered to low-income households;
- The funds should be delivered in the form of a refundable tax credit, or through a means-tested program a family is already enrolled in. A supplemental application would be available for those families not filing tax returns or those not enrolled in a government benefit program, to ensure that all individuals and families are able to receive the CCAA funds; and
- Benefit allocations would include a regional adjustment based on the energy costs incurred in that geographic region.
Although the framework is coming into focus, the details for the Cap-and-Invest Program still need to be worked out.
In the First Stage of Pre-Proposal Outreach, DEC and NYSERDA hosted a series of webinars that can be viewed here.
In the next stage, NYSERDA and DEC will continue their public evaluation process before finally issuing a draft regulatory package. Virtual meetings will be held January 23, from 3 pm to 4:30 pm (The Role of Cap-and-Invest:); January 25, 1 pm to 4 pm (Pre-Proposal Outline overview); and January 26, 11 am – 2 pm (Preliminary Analysis Overview). To register, visit https://capandinvest.ny.gov/Meetings-and-Events. Recordings of these events will be posted online after they are completed.
DEC and NYSERDA, who will solicit input throughout the development of the program, are currently seeking feedback on the three regulations being developed: Cap-and-Invest Rule, Mandatory Reporting Rule, and the Auction Rule, and they have developed a template document to assist commenters in providing feedback. You can also sign up to receive information and notices about upcoming webinars and meetings.
In its effort to educate consumers and businesses and gather as much feedback as possible, the state has made available a series of learning sessions through the Georgetown Climate Center, Columbia’s Sabin Center for Climate Change Law and Resources for the Future.
“NYLCV looks forward to working with the governor and with DEC and NYSERDA as they hear from stakeholders and the broader community and begin to establish the contours of a policy that will put our clean energy transition on sound financial footing and further establish New York as a leader in the climate fight,” said Tighe.
The state’s goal is to have the Cap-and-Invest Program up and running by sometime in 2025.