New York’s Climate Action Plan

Background

The New York Climate Leadership and Community Protection Act (“Climate Act”) was passed in 2019 and established ambitious greenhouse gas (“GHG”) emission reduction targets for the State of New York (“State”). Specifically, the Climate Act called for the issuance of a Scoping Plan to detail the actions required to achieve a 40 percent reduction in GHG emissions by 2030 and an 85 percent reduction by 2050, as compared to 1990 levels. To that end, the Climate Act created the New York State Climate Action Council (“Council”), composed of 22 members, including state agency commissioners, presidents of power authorities, non-agency experts, and other appointed members with energy and environmental experience and expertise. The Climate Act directed the Council to create a Scoping Plan to lead the State towards achieving its statutory goals. The Scoping Plan is informed by the Council’s seven Advisory Panels, the Climate Justice Working Group, and the Just Transition Working Group.

Key Elements of the Scoping Plan

The Scoping Plan provides “the foundation to significantly reduce [GHG] emissions, drive critical building and transportation electrification, secure climate justice, and advance the State’s commitment to economywide carbon neutrality by 2050 consistent with interim and long-term directives established in the Climate Act.”¹ Accordingly, the Scoping Plan details the actions required for New York to achieve:

• 70 percent renewable energy by 2030;
• 100 percent zero-emission electricity by 2040;
• 40 percent reduction in statewide GHG emissions from 1990 levels by 2030;
• 85 percent reduction from 1990 levels by 2050; and
• Net zero emissions statewide by 2050.

The Scoping Plan covers six sectors — transportation, buildings, electricity, industry, agriculture and forestry, and waste — and provides an overview of the “state” of each sector before detailing key sector strategies. The sector specific recommendations generally include:

• Transportation: Transition to zero-emission vehicles and equipment, increasing public transportation and access to low-carbon modes of transport, promoting smart growth and mobility-oriented development, and facilitating financing and market-based solutions.
• Buildings: Adopt zero-emission standards and energy benchmarking through electrification and elimination of natural gas hookups, transitioning from hydrofluorocarbons, expanding commitments to market developments, innovation and “lead-by-example” state projects, and expanding access to public and private financing to include scaling up of public financial incentives.
• Electricity: Enhance the grid, invest and evaluate emerging technologies, and transform power generation, scaling up clean energy resources.
• Industry: Provide incentives to attract and retain businesses to the State, including the provision of financial and technical assistance, the procurement of low-carbon products, the facilitation of research, development, and the demonstration and establishment of a GHG reporting and monitoring system.
• Agriculture and Forest: Promote sustainable forest management through various measures, including the prevention of degradation. Advance livestock management strategies and improve the health of soil and management of nutrients, mitigating agricultural GHG emissions and maximizing potential for carbon sequestration and storage.
• Waste: Recycle, reuse, and reduce organic and non-organic waste and establish markets for biogas utilization and recovered resources. Detect, monitor and reduce any fugitive emissions from solid waste management facilities and water resource recovery facilities.

Additionally, the Scoping Plan incorporates statewide and cross-sector policies; namely, economywide strategies, gas system transition, land use, local government, and adaptation and resilience. Measures recommended include the reduction of carbon emissions through strategic land conservation, the downsizing and decarbonization of gas systems in parallel with increased renewable energy generation, and continued engagement and collaboration with local governments.

Cap-and-Invest Program

The Scoping Plan also recommends an economywide cap-and-invest program to facilitate emission reduction efforts while supporting “clean technology market development.”² Under the recommended cap-and-invest program, the State would establish an enforceable annual cap on GHG emissions for all sectors, then reduce the cap annually. The State would make emissions allowances within the specified cap available to the market for those sources subject to the Scoping Plan; namely, the transportation, heating, industry, waste, and electricity sectors. The allowances would be made available for regulated entities through an auction mechanism with a variable price per ton for a compliance period of a year or more. At the end of each applicable compliance period, regulated entities would surrender allowances equal to the emissions they were responsible for within that period, and would be permitted to bank any allowances issued but unused for use in future compliance periods.³ The proceeds from the auction would then be used by the State for purposes consistent with the Climate Act, including targeted investments in Disadvantaged Communities and to support other Scoping Plan policies. Notably, the Scoping Plan fails to include details on oversight and enforcement of the cap-and-invest program.

Pillars

The strategies recommended by the Scoping Plan are guided by three central pillars: climate justice, just transition, and public health. With respect to climate justice, the Scoping Plan calls for providing financial incentives for the electrification of trucks and buses in those areas overburdened by pollution. The Climate Act itself requires that Disadvantaged Communities receive a minimum of 35 percent (with a goal of 40 percent) of the benefits of investments in clean energy. The second pillar looks to a just transition, and identifies recommendations for ten principles developed by a working group convened by the Council.⁴ The Scoping Plan seeks to advance these principles through collaboration, job transition assistance, and establishment of a fund to assist communities affected by the transition away from more carbon-intensive industries, amongst other measures. Regardless of what comes of these pillars, implementation of the plan is sure to cause lopsided workforce disruptions in certain sectors as the State attempts to reshape its economy to be less carbon-intensive. The final pillar — public health — further details the health concerns specific to each of the GHG-generating sectors identified in the Scoping Plan, particularly with respect to air quality impacts.

Investment Opportunities: Potential Winners and Losers

Implementation of the Scoping Plan will only further spur the development of renewable and energy storage resources in the State given the zero-emission benefits represented by such resources. Renewable natural gas (“RNG”) plays a role in the plan, but concerns with respect to combustive emissions and current size and projected growth of the State’s RNG industry prevent it from being a favored method under the plan for fuel switching in the transportation and power sectors. Similarly, the Scoping Plan sees hydrogen as a favored resource only in the context of fuel cells for transportation, rather than leveraging green hydrogen as an alternative source for home heating or power generation, because of concerns related to lifecycle GHG emissions associated with production and reliability with respect to using green hydrogen as a drop-in resource for the existing natural gas system in the State. Carbon capture and sequestration (“CCS”) technologies are acknowledged as a tool for reducing emissions from industrial sectors, and the plan calls for increased State research and development funding; however, the Scoping Plan contains very little in the way of calling for legal or regulatory changes that could incentivize deployment of CCS within the State.

The Scoping Plan acknowledges that achieving the GHG reduction targets will require a massive shift away from fossil fuels generally and “a strategic downsizing of the natural gas system”⁵ over the near and long-term. The Scoping Plan provides a framework for balancing this downsizing, initially focusing on minimizing leaks from the natural gas storage, transportation, and distribution system, with a defined timeline for phaseout of these resources in an attempt to minimize workforce and energy grid disruptions. This will include eliminating incentives for gas utility hookups to commercial and industrial buildings. The plan also calls for expanding existing energy efficiency and demand response programs across the State’s electric grid, rather than in just areas with a constrained supply of natural gas, to support the transition. Increased used of smart grid technologies, such as advanced metering, will be required.

Expected Challenges

Although the Scoping Plan is broad and ambitious, its opportunities come with complicated obstacles, and it is far from an “all of the above” approach. Critics of the Scoping Plan, including members of the Council who voted against it, are concerned that the recommendations are too costly and burdensome on State citizens who will be required to electrify their homes and vehicles in the upcoming years.⁶ The Scoping Plan recognizes the possibility that consumers could experience higher electric bills if forced to install heat pump systems in old buildings unequipped to reduce thermal energy demand.⁷

Further, it remains to be seen how the State will develop the new and upgraded power generation, transmission and distribution systems needed to support the grid demands created by the widespread electrification sought under the Climate Act. Given the emphasis on electrification as a means of reducing emissions from the building and transportation sectors, the State will need significant investment and rapid deployment of renewable power resources. For example, the New York Independent System Operator estimates that 95 gigawatts of additional generation capacity will be needed by 2040 to meet projected increases in energy demands and the emission reduction goals of the Climate Act. Delivery disruptions are also likely to arise within the State’s grid given aged infrastructure, particularly to Disadvantaged Communities. Although grid enhancements would improve efficiency and grid reliability in an area susceptible to electricity disruption by severe weather, widespread improvements will be costly and permitting timelines lengthy.

Additionally, implementation of the Council’s recommendations are dependent on the action of local governments and the New York Department of Environmental Conservation (the “DEC”). The New York State Administrative Procedure Act imposes a requirement upon agencies to issue a regulatory impact statement for any new rule proposed for adoption, detailing the projected costs of the rule.⁸ The statement of projected costs must include the costs to the people being regulated, the costs to the State for implementation, and the information and methodology relied upon in making such projections.⁹ In developing regulations based on the Scoping Plan’s recommendations, the DEC must consider and explain the costs of the proposed regulation to both consumers and the agency. To the extent that these costs are not addressed, and given the concerns already expressed by the members of the Council who voted against the Scoping Plan, the regulations will likely face legal challenges. These bureaucratic procedures and potential legal challenges could lead to delays, funding difficulties, and differences in approaches, which would make a disruptive transition more likely for both New York’s economy and its residents.

Next Steps

Now that the Scoping Plan has been submitted to the Governor and the State Legislature, the DEC will be required to draft and circulate enforceable regulations by January 1, 2024 to implement certain aspects of the Scoping Plan. The New York State Energy Plan will then be updated to incorporate the Scoping Plan’s recommendations. Implementation of other aspects will continue to be refined following the results of additional studies called for by the Scoping Plan. The journey is sure to be filled with both opportunities and challenges, spurring investment in certain resources while potentially chilling investment in others; namely, the maintaining of existing resources viewed as too carbon-intensive under the Scoping Plan.

¹ Press Release, N.Y. State Dep’t of Env’t Conservation, New York State Climate Action Council Finalizes Scoping Plan to Advance Nation-Leading Climate Law: Robust Public Input Provided Over the Past Three Years Informed Creation of Roadmap to Meet Climate Leadership and Community Protection Act Requirements (Dec. 19, 2022), https://www.dec.ny.gov/press/126772.html#:~:text=The%20Plan%20outlines%20actions%20needed,zero%20emissions%20statewide%20by%202050.

² N.Y. State Climate Action Council, Scoping Plan: Full Report December 2022, at 20.

³ However, the Scoping Plan advises that the State “should consider careful limits on this mechanism to ensure emissions do not exceed 2030 or 2050 limits and to provide for consistent progress toward those directives in intervening years.” Id. at 342.

⁴ These principles are: (1) stakeholder-engaged transition planning; (2) collaborative planning for a measured transition toward long-term goals; (3) preservation of culture and tradition; (4) realize vibrant, healthy communities through repair of structural inequalities; (5) equitable access to high quality, family-sustaining jobs; (6) redevelopment of industrial communities; (7) development of robust in-state low-carbon energy and manufacturing supply chain; (8) climate adaptation planning and investment for a resilient future; (9) protection and restoration of natural and working lands systems and resources; and (10) mutually-affirming targets for state industrialization and decarbonization. Id. at 72–73.

⁵ Id. at 20.

⁶ Marie J. French, New York Passes Sweeping Plan to Reduce Emissions and ‘Lead the Way on Solving Climate Change,’ Politico (Dec. 19, 2022), https://www.politico.com/news/2022/12/19/new-york-emissions-climate-change-00074600.

⁷ N.Y. State Climate Action Council, supra note 2, at 184.

⁸ N.Y. A.P.A. Law § 202-A.3(c).

⁹ Id.