New York Governor Kathy Hochul has announced the launch of a new local economy-wide cap-and-invest programme intended to fund emission reductions in the state.
- Carbon markets continue to expand with the planned launch of a NY emissions management programme – it will cap emissions and invest revenues of up to $1 billion.
- While most carbon markets are cap and trade, a cap and invest programme redirects capital from harmful activities to support for more environmentally friendly actions.
- Redirection of capital from traditional large emitters to new technologies and practices could drive the development of New York’s green economy.
Governor Hochul has instructed the Department of Environmental Conservation and the New York State Energy Research and Development Authority to advance an economywide Cap-and-Invest Program. The scheme is expected to establish a declining cap on greenhouse gas emissions, invest in programmes that drive emissions reductions in an equitable manner prioritising disadvantaged communities, and limit costs to economically vulnerable households, all while maintaining the competitiveness of New York industries.
Shift from cap and trade to cap and invest could be a model for future emissions programmes
In addition, Governor Hochul has said she will propose legislation to create a universal Climate Action Rebate that is expected to drive more than $1 billion in future cap-and-invest proceeds to New Yorkers every year.
Large-scale greenhouse gas emitters and distributors of heating and transportation fuels will be required to purchase allowances for the emissions associated with their activities. By applying to each metric ton of carbon emissions, the Cap-and-Invest Program will incentivise consumers, businesses, and other entities to transition to lower-carbon alternatives.
Proceeds from the emissions cap allowances will then support the State’s critical investments in climate mitigation, energy efficiency, clean transportation, and other projects, in addition to funding an annual Climate Action Rebate that will be distributed to all New Yorkers to help mitigate any potential consumer costs associated with the programme.
“As we work to drive down polluting emissions across the board, we must make sure that those who have already suffered from environmental injustice no longer bear an unfair share of the burden,” Governor Hochul said. “Our ambitious Cap-and-Invest Program sets a cap on greenhouse gas emissions and shares the revenues with New Yorkers from disadvantaged communities to help cover utility bills, transportation costs and decarbonization efforts. Through our innovative efforts, we will create a cleaner, greener future while helping New Yorkers with the costs of the transition.”
Another goal is to prioritise front-line, disadvantaged communities that have suffered from pollution and environmental injustice. The programme will not allow the use of offsets that could allow high-emitting sources to continue to pollute, and will instead be designed to ensure pollution burdens are reduced.
A minimum of 35%, with a goal of 40%, of the benefits of cap-and-invest resources will directly benefit disadvantaged communities, and the program will be designed to ensure pollution burdens are reduced in frontline communities. These investments will fund programmes to improve air quality, reduce reliance on polluting power plants, retrofit homes and schools, and decarbonise transportation systems, among other efforts to reduce pollution hotspots.
Building on lessons from the past
New York’s Cap-and-Invest Program will draw from the experience of similar and successful programs across the country and around the world that have yielded sizable emissions reductions while catalysing the clean energy economy. New York’s electricity system is already part of a regional cap-and-invest style program, the Regional Greenhouse Gas Initiative (RGGI). Since RGGI was established in 2005, the program has helped reduce greenhouse gases from power plants by more than half and raised nearly $6 billion to support cleaner energy solutions amongst its 12 participating states.
According to a statement, New York’s Cap-and-Invest Program will not only help achieve New York’s climate goals, but Governor Hochul hopes it will also further catalyse a nationwide movement towards carbon pricing.
To that end, Governor Hochul is specifically directing DEC and NYSERDA to design a program with the capacity to join other current or future programs, which can lower the price of the transition to a greener economy, overall.
One of the goals of the programme will be to deliver new investment into green industries and sectors that create sustainable jobs across a range of communities. These sectors range from home retrofits to electric vehicle charging installations and green manufacturing, cap-and-invest proceeds can stimulate the entire clean energy economy.
Five key priorities for the cap and invest programme
Beginning immediately, DEC and NYSERDA will design a programme that sets an annual cap on the amount of pollution that is permitted to be emitted in New York, as recommended in the recently finalised Climate Action Council Scoping Plan.
Every year, the emissions cap will be reduced, setting the State on a trajectory to meet its Climate Act requirements of a 40% reduction in emissions by 2030, and at least an 85% reduction from 1990 levels by 2050. At Governor Hochul’s direction, the program design will prioritise five core principles:
- Climate leadership
- Creating jobs and preserving competitiveness
- Jobs and Preserving Competitiveness
- Investing in Disadvantaged Communities
- Funding a Sustainable Future
Overall the new cap and invest programme will provide the funding needed to support the achievement of New York’s climate goals. Governor Hochul’s office said: “From helping business owners electrify operations to funding electric vehicle (EV) chargers and energy efficiency investments that will reduce energy bills, cap-and-invest proceeds will filter across our state – enhancing livability, cutting transition costs for consumers, and creating a better New York.”