The Costs of Energy Transition Are Massive Despite the Word Games and Numerical Tricks Being Used to Claim Otherwise!

Guest Post by Roger Caiazza of Pragmatic Environmentalist of New York.

Recently I described the status of the New York Cap-and-Invest Program(NYCI). It was widely accepted that Governor Hochul’s State of the State address would say that NYCI implementation would be a priority and that a schedule for the first auctions would be announced.

However, the only mention of NYCI noted that in the coming months the Department of Environmental Conservation (DEC) and the New York State Energy Research and Development Authority (NYSERDA) will take steps forward on developing the cap-and-invest program by proposing new reporting regulations to gather information on emissions sources. Nothing was said about implementing an auction. This post describes reactions to this unexpected development.

Overview

The Climate Act established a New York “Net Zero” target (85% reduction in GHG emissions and 15% offset of emissions) by 2050. It includes an interim 2030 reduction target of a 40% GHG reduction by 2030. The Climate Action Council (CAC) responsible for preparing the Scoping Plan to “achieve the State’s bold clean energy and climate agenda” recommended a market-based economywide cap-and-invest program.

The program is supposed to work by setting an annual cap on the amount of greenhouse gas pollution that is permitted to be emitted in New York: “The declining cap ensures annual emissions are reduced, setting the state on a trajectory to meet our greenhouse gas emission reduction requirements of 40% by 2030, and at least 85% from 1990 levels by 2050, as mandated by the Climate Act.”

The prevailing perception of NYCI is exemplified by Colin Kinniburgh’s description in his recent article in New York Focus. He describes the theory of a cap-and-invest program as a program that will kill two birds with one stone.

“It simultaneously puts a limit on the tons of pollution companies can emit — ‘cap’ — while making them pay for each ton, funding projects to help move the state away from polluting energy sources — ‘invest.'”

I described questions about NYCI that I believe need to be resolved here.

Kinniburgh also described the last-minute decision to pull any mention of timing about NYCI from the State of the State briefing book. In the remainder of this post, I will describe the response to the delay by politicians and environmental advocates.

Political Reaction

Kate Lisa described the reaction of New York lawmakers on Spectrum News. After describing the program, she explained that late last year Hochul’s office “floated a draft plan with varying funding levels to stakeholders, who anticipated a proposal in the upcoming executive budget.” Lisa believes:

The delay of the program means the system will not be in place to generate revenue for the state’s green energy mandates until at least 2027 and increases the chances lawmakers will have to rollback its ambitious emission reduction mandates set under its climate law.

Her interview with Sen. Kevin Parker, a Democrat from Brooklyn included the following quotes:

“They haven’t talked to anybody. They haven’t had hearings, they don’t know what the community thinks, (and) they haven’t talked to the Legislature with their ideas about it.” Lisa stated that “

The senator said Hochul, and her team failed to tell policymakers about their new hesitancy to impose cap and trade after codifying language in the 2023-24 budget to create a fund to impose the program this year.” She quoted Parker: “They said: ‘We’ve got it, we’ll come out with rules,’ and now, they said they’re not ready”.

Lisa noted that:

Hochul on Wednesday defended her decision to delay the program’s rollout and said the state needs more pollution data to get the program right. She insisted that her support for New York’s climate mandates have not faltered.

“This simply says we can study here, we’ll get the right information, we’ll get it right,” Hochul told reporters. “But I’m not letting these projects go unfunded. I think that’s an important distinction to make here.”

As I noted in my first article about NYCI in the State of the State address, funding is the key issue. Lisa quoted Senate Environmental Conservation Committee chair Pete Harckham who said:

What was disappointing was that there was no mention of climate change, the environment, or specifically cap and invest pertaining to climate change. Let’s hope the approach to climate policy is not changing. It’s greatly disappointing, but more importantly, it’s a missed opportunity to address climate change and a missed opportunity to address affordability in utility rates.

Lisa noted that “Other top Democrats stand ready to fight back this budget cycle — arguing the policy is critical to bridge the state’s affordability gap that Hochul focused on in her speech.” She noted that Hochul has proposed that the NYCI fee on polluters would “fund rebates for consumers to drive down utility costs.”

Senate Finance Committee chair Liz Krueger expressed her extreme disappointment in a statement that claimed Hochul is “choosing not to save ratepayers billions of dollars every year through NY HEAT or provide low- and middle-income New Yorkers the immediate affordability benefits of cap and invest.”

I am no economist, but politicians are innumerate. The initiatives to reduce emissions are going to cost money. The only way that NYCI will address affordability in utility rates is if the money comes from somewhere else. The more complicated the scheme to fund the initiatives the more likely that the transactional costs will increase overall costs.

NYCI is supposed to fund emission reduction programs, so the proposed rebates decrease the funding available for reductions. Another problem with rebates is that a fundamental precept for market-based programs is that increasing costs incentivizes people to change behaviors that can reduce emissions. Rebates ruin that incentive. Another nonsensical idea pushed by Democratic leadership is the idea that fees on polluters will not get passed on to consumers.

Kate Lisa also recognized that critics worry that the cap-and-invest system would increase gas prices and costs of natural gas and other utilities. “The speed in which they’re moving forward is really unworkable, not feasible and very, very costly,” said Assemblyman Phil Palmesano, the ranking Republican on the Energy Committee. “It’s a radical energy climate agenda that’s really going to be borne by ratepayers and businesses.”

Environmental Advocate Reactions

It is no surprise that environmental advocates are concerned. The Environmental Defense Fund (EDF) voiced disappointment with the delay in implementing the cap-and-invest program. Kate Courtin, Senior Manager of State Climate Policy & Strategy at EDF, criticized the decision, stating, “By continuing to kick cap-and-invest down the road, Governor Hochul is delaying the benefits that New Yorkers want — cleaner air, lower energy bills and more resilient communities.”

The Nature Conservancy in New York released a statement from Jessica Ottney Mahar, policy and strategy director, that included the following:

Unfortunately, in a concerning setback for climate action, Governor Hochul is delaying the implementation of a Cap and Invest Program that would reduce the air pollution that causes global warming. Rather than advancing draft regulations this month, as had been widely discussed, the Governor’s address states that partial program details will be released sometime this year, and then proposes a one-time infrastructure investment of $1 billion.

This is insufficient. Policy change is needed to reduce carbon pollution and generate ongoing revenue that can be used to invest in cleaner energy, buildings, transportation and cost reduction programs for New Yorkers. A Cap and Invest program is necessary for the State to meet the goals of the Climate Leadership and Community Protection Act.

At a time when our state and our nation face unprecedented impacts from climate change—from flooding to wildfires to droughts—as well as new uncertainty regarding climate policy at the federal level, there is no time to waste. We must address the climate emergency now, and New York must lead the way. The Nature Conservancy urges Governor Hochul to implement a strong Cap and Invest Program this year.

Kinniburgh quoted Patrick McClellan, policy director of the New York League of Conservation Voters, who was dismayed to learn of the change: “There’s really no reason why that rule couldn’t be done this year,” he told New York Focus by text. “If the Governor is unwilling to set a deadline even for that then I think it’s a total capitulation on her part.”

In her Spectrum News segment Kate Lisa referenced lawmakers and environmental advocates who argue the continuing costs of climate change are higher than waiting to address it.” I cannot let that statement go unchallenged. The idea that the costs of Climate Act inaction are greater than the costs of action is a political sound bite that is is misleading and inaccurate as I documented in my verbal comments and written commentson the Draft Scoping Plan. I summarized the machinations used to mislead New Yorkers as a shell game in a summary post.

One of the talking points of environmental advocates is the concern that delaying NYCI could impact the strict timeline of the state’s other climate mandates. Lisa quoted New York League of Conservation Voters President Julie Tighe:

The longer we wait, the harder it will be to meet those targets and generally speaking, the more expensive it will get. Most infrastructure projects don’t get cheaper over time, they get more expensive, so trying to move things along sooner rather than later also provides a longer time frame over which to help get those reductions.

I agree with Tighe that the longer we wait the more expensive infrastructure will get. However, that is not the position taken in the Scoping Plan. For example, the Integration Analysis device costs for zero-emissions charging technology and the vehicles themselves is presumed to decrease significantly over time. Home EV chargers and battery electric vehicles both are claimed to go down 18% between 2020 and 2030. Of course, this optimistic scenario is not panning out.

Conclusion

Democratic legislators and environmental advocates subscribe to the NYCI premise that it would be an effective policy that would provide funding and ensure compliance because of their naïve belief that existing market-based programs worked. Past results are no guarantee of future success, especially when past results are not triumphs.

My evaluation of the Regional Greenhouse Gas Initiative (RGGI) program results show that cap-and-invest programs can raise money but have not shown success in reducing emissions. That analysis also showed that New York investments in programs are not cost-effective relative to the state’s value of carbon. Unfortunately, that is not the reason that Hochul is delaying implementation. It is all about the money.

It is not just NYCI. The optimistic projections of environmental advocates and the Progressive Democrats who whole-heartedly support the Climate Act are at odds with reality. When all the transition costs are tallied, massive increases will be found whatever word games and numerical tricks are employed to claim otherwise. I believe it would be prudent to re-assess the Scoping Plan cost estimates to determine if New York can afford to implement the Climate Act in general and NYCI in particular.

#Caiazza #Climate #RGGI #GlobalWarming #ClimateAct #Wind #Solar #NewYork #NYSERDA #NYCI

Roger Caiazza blogs on New York energy and environmental issues at Pragmatic Environmentalist of New York.  This post represents his opinion alone and not the opinion of his previous employers or any other company with which he has been associated. Roger has followed the Climate Leadership & Community Protection Act (Climate Act) since it was first proposed, submitted comments on the Climate Act implementation plan, and has written over 490 articles about New York’s net-zero transition.