New York is embarking on a critical year for the implementation of its landmark climate law, which could have a ripple effect on the U.S. energy sector and set a precedent for other states.
The outcome could determine if New York becomes the first state on the East Coast to ban gas in new buildings or place a cap on carbon emissions. It could also result in policies that change how renewables are constructed and natural gas is used in the state.
But consensus has often eluded lawmakers and policy groups in New York, even though Democrats control both the governor’s mansion and the Legislature. This year, clashes are likely to erupt again over key energy issues, creating uncertainty about if and how one of the bluest states in the country can deliver on its climate mandates.
The state’s Climate Leadership and Community Protection Act, passed in 2019, made New York one of the nation’s biggest laboratories for climate policy, requiring a swift and far-reaching decarbonization of the energy sector. Its environmental justice provisions were also a model for the Biden administration’s own equity pledges.
But Gov. Kathy Hochul (D) set the stage for disputes earlier this month when she unveiled major climate and energy proposals as part of a broader state budget proposal, drawing criticism from environmental activists, the gas industry and renewable developers.
The Alliance for Clean Energy New York (ACE NY), for instance, said Hochul’s budget plan is unhelpful for the state’s struggle to build out huge volumes of new wind and solar.
The Independent Power Producers of New York (IPPNY), which represents natural gas generators and some renewable companies, expressed a similar antagonism toward one of Hochul’s ideas — letting the state-owned utility take a role in renewable build-out.
Hochul’s office did not respond to request for comment by publication time. But while floating her proposals during the State of the State speech last month, the governor predicted that her plans would drive down emissions while protecting energy affordability and deliver redress for past environmental injustices.
“We are taking these steps now because climate change remains the greatest threat to our planet, and to our children and grandchildren,” she said.
Climate groups were supportive of Hochul’s push for an all-electric mandate for buildings and a statewide cap-and-invest program, among other ideas, but noted how little remains certain about those ideas’ final shape.
Democratic leaders of both legislative chambers, who have bucked Hochul on major climate policies before, now will get the chance to engage in negotiations over the state’s budget, meaning they could reject or transform her latest plans.
It remains unclear whether Hochul’s plans will be enacted, but there is a precedent for major proposals moving through the state budget process, including a 2020 law that streamlined siting of renewable projects.
“It’s become something of a tradition,” said Michael Gerrard, director of Columbia Law School’s Sabin Center for Climate Change Law. “Often, a lot of substantive laws are incorporated into the budget. It becomes a legislative kitchen sink.”
Under the climate law’s mandates, 70 percent of the state’s grid must be powered by renewables by 2030, with all electricity coming from carbon-free resources a decade later. By midcentury, the state’s entire economy must achieve net-zero greenhouse gas emissions.
Here are three key energy issues to watch as the state grapples with how to implement the targets:
Carbon cap?
Perhaps the highest-profile issue for New York concerns whether it will adopt a program to cap greenhouse gas emissions and reinvest funds raised from polluters.
The cap-and-invest concept was endorsed late last year by New York’s Climate Action Council, a 22-member advisory body that issued a far-ranging blueprint for executing the climate law’s mandates (Climatewire, Dec. 20, 2022).
California has long used a similar system to pay for landmark clean energy programs, and Oregon and Washington state have recently begun implementing their own versions of cap and invest, becoming, respectively, the second and third U.S. states to do so.
In the January State of the State speech, Hochul endorsed the idea of making New York the first cap-and-invest state on the East Coast, saying it would generate an annual $1 billion for consumer rebates and decarbonization efforts.
In theory, New York’s system would force big polluters to buy allowances for their emissions, while lowering the permissible amount over time. But many questions remain on the details.
“How high or low is the cap? What price is initially charged? What sectors of the economy are covered? Who’s exempt? Who decides where the money goes? All of those are really important questions,” said Gerrard.
The Independent Power Producers of New York, which counts many of the state’s largest power plant operators as members, says it backs a separate carbon pricing system long promoted by grid operators at the New York Independent System Operator (NYISO).
So far, IPPNY is withholding judgment on the cap-and-invest program. A spokesperson for the group told E&E News that it was “premature to know if this economywide program will achieve the goals of [the NYISO carbon price proposal].”
Environmental groups, some of which had been promoting a separate tax on polluters, also declined to express clear support or disapproval on the cap-and-invest idea, but signaled that they would engage in the details during the budget process.
NY Renews, a major statewide environmental justice coalition, issued a statement saying that tackling the climate crisis would require $10 billion in annual investments, a much higher sum than the $1 billion in revenues estimated by Hochul for her outlined carbon cap program.
Cap-and-invest dollars could benefit the state, “but our state leaders cannot be satisfied with half-measures,” wrote the coalition, adding that it looked forward to “digging into the details and advocating for the investments we need.”
New renewables model
One surprise that emerged in Hochul’s budget plans was her backing of a policy that would for the first time allow the state’s public utility, the New York Power Authority (NYPA), to build, own and operate renewable power projects.
The idea has long been pushed by progressive activists and climate groups, which maintain that the state’s government needs to take a stronger role in electricity generation in order to meet the 70 percent renewable goal without causing bills to rise for low-income New Yorkers.
The Public Power NY Coalition, which has spearheaded the reform, wants the power authority to provide what it has called an “insurance policy” for the state. The group says NYPA should study private developers’ progress in building out renewables, and if they are found to be lagging, the utility would step in to develop the amount necessary to meet the 70 percent renewable goal (Energywire, June 15, 2022).
Last year, the state Senate gave the idea traction, passing a bill promoted by the Public Power NY Coalition. It later died in the state Assembly.
Yet the coalition criticized Hochul’s version of the reform this week, saying it fails to include sufficient labor protections or establish a strong enough mandate for NYPA’s role.
“Governor Hochul’s budget proposal takes tentative steps in the right direction, but New Yorkers deserve to go all the way,” said the coalition in a statement on Wednesday, adding that it would work on the plan with the LKegislature and Hochul.
On the other side of the issue was the Alliance for Clean Energy New York, which represents clean energy developers.
Anne Reynolds, the group’s executive director, agreed that in New York, “renewable energy projects are not being deployed fast enough.”
But NYPA should be limited to improving the state’s transmission system so that wind and solar electrons can flow more easily across the grid, she said in a statement.
The reform backed by Hochul would not address what she described as the main barriers for renewables, like long interconnection times and “onerous” permitting. “This proposal does not solve — or even help to solve — any of these problems,” Reynolds said.
Gas ban 2.0
Last year, a bill that would have banned gas heat in most new construction of most new buildings failed to pass the Legislature, despite backing from Hochul and the state Senate’s Democratic leaders.
This year, Hochul has gotten behind the idea again, adding extra lift to green groups’ campaigning.
Her budget proposal called for prohibiting fossil fuel equipment in new single-family homes or new apartments of three stories or less, starting in 2026. Larger apartments and offices would have the same requirement kick in starting in 2028.
The road ahead for any ban is murky, given past opposition from Democratic leadership in the state’s Assembly, as well as from the natural gas industry and builders.
Donna DeCarolis, president of National Fuel Gas Distribution Corp. and a member of the state’s Climate Action Council, said in an email to E&E News that a gas ban would exacerbate “serious reliability and resiliency concerns.”
DeCarolis added that the state should “encourage inclusion of a broad array of options, including use of the natural gas delivery system, to meet the emissions reduction targets of the Climate Act.”
But environmental groups vowed to press the Legislature to embrace a gas ban.
“Hochul’s landmark budget proposal paves the way to stop digging a deeper hole,” Alex Beauchamp, a regional director for Food & Water Watch, said in a statement. “Banning fossil fuels in new buildings is the right move — it’s also the politically popular one.”
