Make NY’s Carbon Pricing a Cap-Penalize-Rebate-and-Invest Program
Courtesy of NASA
New York needs to commit to 100% clean, renewable energy by 2030. Enact a Green New Deal. Halt new Fossil Fuels.
by Mark Dunlea, Green Education and Legal Fund
One of the many shortcomings of the Hochul administration’s climate scoping document is its failure to detail how much funding is needed, and by when, to implement that state’s transition to a clean energy future.
However, at the last minute, the administration inserted a call for carbon pricing, though without providing specific details, such as the amount of funding needed. Hochul has rebranded the much-maligned cap-and-trade program – opposed by everyone from environmental justice groups to Pope Francis – into cap-and-invest. (You can read more about carbon pricing in my new climate book, Putting Out the Planetary Fire. See the carbon pricing chapter.)
I would recommend that the state legislature step in to: lower the cap on emissions (e.g., set a goal of at least a 70% reduction by 2030); set a price floor of $60 a ton per carbon (raising to $120 a ton in 4 years); rebate at least 50% of the revenues to New York taxpayers; and invest in speeding up the clean energy transition, including mass transit and large subsidies to decarbonize buildings.
We should also remember that unlike Congress, the Democrats have overwhelming control at the Albany State Capitol, with the GOP irrelevant. There is no need for the Democrats in New York to sacrifice needed action on climate to placate the Republicans – or the fossil fuel industry.
One of the reasons why many climate groups oppose cap-and-trade is that it often enables polluters to continue their pollution in more disadvantaged communities in exchange for improvements elsewhere, a problem cited by the state’s climate justice working group and some members of the Climate Action Council. The Pope opposes such efforts: “The strategy of buying and selling ‘carbon credits’ can lead to a new form of speculation which would not help reduce the emission of polluting gases … in no way does it allow for the radical change which present circumstances require.”
Independent studies have also found that cap-and-trade has been ineffective in reducing emissions, starting with the governments setting the cap on emissions at too high a level. This was the conclusion reached by the Congressional Research Service when it examined the Regional Greenhouse Gas Initiative (RGGI), the existing cap-and-trade program for electricity production that NY participates in with other northeastern and Mid-Atlantic states. (They did find that investing the revenues from the carbon auction in renewable energy was beneficial; ironically, many of the environmental groups promoting RGGI had initially opposed charging polluters for the auction.)
In NY, unlike other participating states, RGGI was implemented administratively by the Governor, not the state legislature. This approach was partially done because the State Senate at that time was controlled by Republicans, who often blocked environmental reforms. It appears that Governor Hochul intends to follow a similar approach with her carbon pricing, though the invest part would seem to require some level of legislative review.
I urge the State legislature to insist that they be a full partner in developing carbon pricing, especially in view of the defacto closed door approach the Cuomo / Hochul administration took in developing the climate scoping document. The Hochul administration is far too friendly with large campaign donors. Plus, the state legislature is far more accessible to the public, and a number of its members are more progressive on climate issues than Hochul. The State Legislature could also enact a carbon pricing system this session, while the administrative approach could take years.
Cap Emissions at a much more stringent target than the CLCPA
One of the reasons why a number of climate groups had urged Hochul to reject “cap-and-invest” is that they view it as superfluous, since the state’s new climate law already sets a “cap” on emissions (e.g., a 40% reduction in emissions by 2030). One of the reasons that more climate groups endorsed the Off Fossil Fuels / 100% Renewables by 2030 Act that I helped draft, rather than the CCPA (which was merged into the CLCPA), was its far more aggressive emission reduction goals.
Since the CLCPA was passed 3.5 years ago, not only have other states announced stronger climate goals but most importantly, President Biden on Earth Day in 2021 announced a nationwide goal of a 50 to 52% emission reductions by 2030.
The State Legislature needs to move beyond the goals of the CLCPA. Many people do not realize that the emission reduction goals (45% by 2030) recommended by the Intergovernmental Panel on Climate Change (IPPC) are, by the IPCC’s own admission, inadequate to avoid climate chaos (e.g., keeping global warming below 1.5 degree C).
The IPCC instead puts its hopes in a Hail Mary pass, namely that somehow carbon capture technology will work even after the investments of tens of billions of dollars and decades of research have been unable to show that is viable. Swedish youth climate activist Greta Thunberg, in her speech at the UN several years ago, said that the younger generation is not willing to risk its future on the unlikely development of a miracle technology (and even then, the IPCC estimates that the chance of keeping global warming below the 1.5-degree target is only 50%).
I helped author the Green Party’s initial call for the Green New Deal back in 2010, which included a ten-year timetable to get to zero emissions. The Democrats have steadfastly refused to take such bold climate action, even as global warming and extreme weather has continued to accelerate. To meet Biden’s 50% plus reduction in emissions goal by 2030, states like NY which are controlled by Democrats will need to go beyond the national average to offset the more limited efforts in Republican states. Since the CLCPA sets a goal of getting 70% of the state’s electricity by 2030, it would be reasonable to use 70% as the overall cap for carbon pricing.
The Penalty - Set the price floor for carbon at $60 a time, rising to $120 in four years
The International Monetary Fund estimates that the worlds’ government provide nearly $6 trillion in subsidies annually to fossil fuel companies. The vast majority of this subsidy is due to governments’ failure to hold polluters financially accountable for the damage their emissions cause. For instance, it is estimated that the cost of air pollution in New York state alone exceeds $30 billion a year, starting with increased health costs. Worldwide, the World Health Organization estimates that seven million individuals are killed annually by air pollution.
Partially due to the cap on emissions by RGGI being set too high, even after the participating states recently revised it, the cost per ton for the carbon permits is only $12 (up from the prior levels of $6 or less). The New York State Department of Environmental Conservation (DEC) estimates that the average “social cost of carbon” is $120 per ton. This is the figure that should be set as a floor for the auction. It could start at $60 a ton, and then raise the price by $15 a year for four years. After that, the price be tied to the official calculation by DEC.
The Hochul administration unfortunately intends to rely upon the flawed approach of allowing the “marketplace” to set the price for carbon. Since it is the “market” that largely created the climate crisis, it is insulting for politicians to try to sell the public that the market should be relied upon to solve it.
Rather than cap-and-trade, economists have long stated that a robust carbon tax is the most effective way to speed up the transition to a clean energy future. If the price of fossil fuels reflected their actual costs, this would make renewable energy even a cheaper alternative. I have been testifying at state budget hearings in favor of a carbon tax for decades. In 2015, I helped draft a state carbon tax bill for New York.
In recent years, climate groups have sought to reframe a carbon tax as a “polluter penalty” to make it more politically attractive, as politicians often cringe at the word “tax,” even when it targets the wealthy and powerful. There have been a number of polluter penalties proposals advanced in NY in recent years, including the comprehensive CCIA proposal by NY Renews to raise $10 billion a year, and the Climate Superfund Act by NYPIRG and others to raise $3 billion annually from the state’s largest polluters. The NY Independent Systems Operator has also proposed a carbon pricing system following Cuomo’s decision to provide a $6 billion subsidy to keep three small upstate nuclear facilities open when they were no longer financially viable.
Rebate to Consumers
Since low- and moderate-income consumers spend a higher percentage of their income on basic necessities such as energy, any energy tax is considered regressive. So, steps need to be included in the design of any energy tax/penalty/pricing to make it more progressive.
A traditional approach is to rebate some if not all of the “energy tax” to consumers. There are many variations to this, with pros and cons to the different approaches. (See my carbon pricing chapter.)
When I helped draft the state carbon tax bill in 2015, we surveyed more than 100 climate activists and groups to come up with what percentage should be rebated. The median response was 60%, which we included in the bill, targeting it to low- and moderate-income New Yorkers. However, we have always been clear that the rebate provisions in the bill were a placeholder. There are many legitimate perspectives on how to structure the rebate (including the size), and it would be impossible for us to come up with an approach that everyone embraced. We said that the rebate issue would be resolved during the final negotiations over a carbon tax.
Polls do show slightly stronger support, particularly among Republicans, when the revenues are invested in renewable energy rather than a rebate.
The easiest and cheapest way to provide the rebate is through the annual tax filings. However, this is not an ideal situation for the lowest income New Yorkers, who often have limited interaction with the state income tax system. Plus, households struggling on a monthly basis to pay their bills aren’t helped much by receiving a tax refund once a year. One of the improvements that NY Renews proposed in their polluter penalty bill was alternative ways to provide a rebate, such as through free mass transit cards.
One of the few positive developments of the COVID crisis was that the government figured out a way to provide several stimulus checks directly to individuals. This would enable governments to adopt a similar approach for a carbon pricing rebate.
Invest
In addition to the rebates, the revenues need to be invested in the transition to renewable energy.
Whenever a new pot of public funds is made available, the special interests and their campaign donations and lobbyists swarm around it to extract as much of possible for themselves. This needs to be resisted. It is critical that these funds are not invested in “false climate solutions” whose main impact is to enrich the developers peddling them.
The CLCPA has a goal of investing 35 to 40% of new climate funds in disadvantaged communities, which historically have been the principal victims of climate change. Since the Hochul administration has determined that at least half of the state’s residents meet this definition, the CLCPA should be amended to raise the goal to the 60 to 70% range.
We certainly need to increase the investment in renewable energy, including decentralized systems. I have advocated for public power for more than four decades. Our energy system should be treated as a common good, democratically controlled with strong levels of various forms of public ownership (including worker and community cooperatives).
Governor Cuomo four years ago proposed having the New York Power Authority (NYPA) to build renewables. This unfortunately was defeated by the private developers who want to maintain their profits. This goal has re-emerged in the Build Public Renewables Act, which passed the Senate last year but was blocked by the Assembly Speaker from being voted upon despite appearing to have enough votes to pass.
In addition to an expanded NYPA role, funds should be provided to expand and develop municipal renewable energy systems. New York already has more than 50 municipal power systems, which provide their customers with cheaper electricity than the investor-owned utilities. Carbon pricing revenues should be provided to any municipality that wants to build local renewable energy systems, which would ensure that local residents and elected officials determine the siting of such facilities rather than private developers. Municipalities should be urged to develop local renewable energy systems.
By far the two largest sources of greenhouse gas emissions in the state are building and transportation. Billions of the revenue should be provided to allow residents to decarbonize their buildings, such as the purchase of air and ground heat pumps and roof top solar.
While we need to make it more affordable for residents to transition to electric cars, even more critical is to invest in a greatly expanded mass transit system, including buses. To say that New York – and the U.S. – has a third world mass transit system would be an insult to many third world countries. We need to make mass transit affordable and convenient to everyone, including in rural and suburban communities, incorporating outside-the-box solutions.
Just this week for instance Capital District Transportation Authority kicked off its new car sharing service in Albany County, rolling out its fleet of all-electric cars that users can rent by the hour or the day. Community members will have the ability to book a zero-emission Chevrolet Bolt for $5 an hour or $40 a day, plus a one-time $20 application fee. The first 150 miles are included in the booking costs and any trip over that limit will cost $0.35 per mile.
The other industrial countries invest in a world class transit system, with high-speed trains traveling everywhere. America instead wastes its tax dollars by throwing ever more money at war contractors. We need a peace dividend.
We Are Running out of time to avoid climate collapse
The Secretary-General of the United Nations keeps on issuing warnings that we are rapidly headed towards climate collapse, that we have less than 7 years to take the radical actions needed to keep global warming below 1.5 degrees C. He has made it clear there is no time left for incremental changes. When he says the actions by governments since the Paris climate accords are inadequate, he includes things like the CLCPA. New York has made little progress since the CLCPA was enacted 3.5 years ago. We need to demand more of our state lawmakers.
Mark Dunlea is chair of the Green Education and Legal Fund (www.gelfny.org). He is the author of Putting Out the Planetary Fire