To lower the emissions cap established under Part 242 starting in 2014, declining by 2.5 percent per year through 2020.
Public hearing(s) will be held at:
2:00 p.m., Aug. 26, 2013 at Department of Environmental Conservation, 625 Broadway, Public Assembly Rm. 129A, Albany, NY; 2:00 p.m., Aug. 27, 2013 at Department of Environmental Conservation, Region 8 Office, Conference Rm., 6274 E. Avon-Lima Rd. (Rtes. 5 and 20), Avon, NY; and 2:00 p.m., Aug. 29, 2013 at Department of Environmental Conservation, Region 2 Office, One Hunters Point Plaza, 47-40 21st St., Rm. 834, Long Island City, NY.
Interpreter Service:
Interpreter services will be made available to hearing impaired persons, at no charge, upon written request submitted within reasonable time prior to the scheduled public hearing. The written request must be addressed to the agency representative designated in the paragraph below.
Accessibility:
All public hearings have been scheduled at places reasonably accessible to persons with a mobility impairment.
Substance of proposed rule (Full text is posted at the following State website:www.dec.ny.gov):
The New York State CO Budget Trading Program, 6 NYCRR Part 242 (CO Budget Trading Program or Part 242), is designed to stabilize and then reduce anthropogenic emissions of carbon dioxide (CO), a greenhouse gas (GHG), from CO budget sources in an economically efficient manner. The proposed revisions to Part 242, including most notably the proposed reduction in the annual CO emission budgets, are designed to further these objectives.
While the proposed revisions to Part 242 maintain annual base budgets for CO, the most significant proposed revision to Part 242 is the approximately 45 percent reduction in the amount of such annual base budgets. In particular, the proposed revisions to Section 242-5.1 establish that, for allocation year 2014, the Statewide CO Budget Trading Program base budget will be reduced from 64,310,805 tons to 35,228,822 tons1. The annual base budgets under Part 242 then decrease thereafter, as follows: to 34,348,101 tons in 2015, to 33,489,399 tons in 2016, to 32,837,536 tons in 2017, to 32,016,597 tons in 2018, to 31,216,182 tons in 2019, and to 30,435,778 tons for 2020. Each year thereafter, the annual CO Budget Trading Program base budget will remain at 30,435,778 tons.
In addition to the proposed reduction in the annual CO Budget Trading Program base budgets, the proposed revisions to Part 242 also include a new Section 242-5.2 for annual CO Budget Trading Program adjusted budgets. The CO Budget Trading Program adjusted budget is defined as the annual amount of CO allowances allocated each year. In order to account for the existing private bank of CO emissions allowances already acquired, and in order to help create a binding cap, the proposed revisions to Part 242 provides for two distinct budget adjustments. The First Control Period Interim Adjustment for Banked Allowances will reduce the budget for 100 percent of the first control period private bank of allowances (vintages 2009, 2010, and 2011) held by market participants after the first control period. The first adjustment will reduce New York’s budget (the annual cap) by this amount, multiplied by New York’s portion of the RGGI regional cap (approximately 38.93 percent), in each allocation year over the seven year period 2014-2020. The Second Control Period Interim Adjustment for Banked Allowances will reduce the budget for 100 percent of the surplus 2012 and 2013 vintage allowances held by market participants as of the end of 2013. The second adjustment will reduce New York’s budget (the annual cap) by this amount, multiplied by New York’s portion of the RGGI regional cap (approximately 38.93 percent) in each allocation year over the six year period 2015-2020. These are referred to as the CO Budget Trading Program adjusted budget(s).
The proposed revisions to Part 242 also include the creation of the Cost Containment Reserve (CCR), which will help provide additional flexibility and cost containment for the Program. The CCR allocation and the rules for the sale of CO CCR allowances are set forth in subdivision 242-5.3(b) of the proposed revisions to Part 242. CO CCR allowances are separate from and additional to CO allowances allocated from the CO Budget Trading Program base and adjusted budgets. The CCR allowances will be triggered and released at auctions at $4/ton in 2014, $6/ton in 2015, $8/ton in 2016, and $10/ton in 2017. Each year after 2017 the CCR trigger price will increase by 2.5 percent.
If the CCR trigger price is reached, up to 10 million additional CCR allowances will be available for purchase at auction regionally under the RGGI program, except in 2014, when the reserve will be limited to five million allowances in the RGGI region. New York’s portion of the regional CCR is approximately 38.93 percent, such that the State’s portion of the CCR in Part 242 is limited in 2014 to 1,946,639 CO CCR allowances in 2014 and 3,893,277 CO CCR allowances in 2015 and each calendar year thereafter.
The proposed revisions to Part 242 create a new interim compliance obligation, set forth in proposed paragraph 242-1.5(c)(2). An interim control period is defined as a one-year period, consisting of each of the first and second calendar years of each three year control period. In addition to demonstrating full compliance at the end of each three-year control period, at the end of each interim control period, regulated entities must now demonstrate that they are holding CO allowances equal to at least 50 percent of their CO emissions during the previous year.
Under the proposed revisions to Part 242, the second control period, which commenced on January 1, 2012, still concludes on December 31, 2014. Likewise, under the proposed revisions to Part 242, the CO allowance transfer deadline for the second control period will remain March 1, 2015. Subsequent control periods begin on January 1st and conclude on the December 31st three years later. In each of the first two calendar years of each three year control period the owners and operators of each source subject to the revised Program shall hold a number of CO allowances available for compliance deductions, as of the CO allowance transfer deadline (midnight of March 1st or, if March 1st is not a business day, midnight of the first business day thereafter), in the source’s compliance account that is not less than 50 percent of the total tons of CO emissions for that interim control period. For example, the first interim control period will be the year 2015 and the second interim control period will be the year 2016 under the proposed revisions to Part 242, with associated CO allowance transfer deadlines of March 1, 2016 and March 2017 respectively. At the end of the control period in 2017, all sources must demonstrate full compliance and account for 100 percent of their control period emissions with an allowance transfer deadline of March 1, 2018. Under the proposed revisions to Part 242, a compliance certification report is still required at the end of each control period; however, a report is not required at the end of each interim control period. Moreover, pursuant to the proposed revisions, the so-called treble damages provision in paragraph 242-6.5(d)(1), which applies to excess emissions, will not apply to excess interim emissions.
The proposed revisions to Part 242 do not change the applicability provisions of the regulation, and maintain the limited exemption for units with electrical output to the electric grid restricted by permit conditions pursuant to subdivision 242-1.4(b). The proposed revisions do, however, eliminate the provision in paragraph 242-1.4(b)(4) to reduce the CO Budget Trading Program base budget and remove the tons equal to the exempt unit’s average annual emissions from the previous three calendar years. These allowances will now be available to the market.
The Department will continue to allocate most of the CO Budget Trading Program adjusted budget to the energy efficiency and clean energy technology account. Although New York State Energy Research and Development Authority’s (NYSERDA) CO Allowance Auction Program (21 NYCRR Part 507) will not be revised as part of this rulemaking, NYSERDA will continue to administer the energy efficiency and clean technology account so that allowances will be sold in an open and transparent allowance auction. The proceeds of the auctions will be used to promote the purposes of the energy efficiency and clean technology account and for administrative costs associated with the CO Budget Trading Program.
The Reserve Price is the minimum acceptable price for each CO allowance in a specific auction. Under the proposed revisions to Part 242, the reserve price at an auction is either the Minimum Reserve Price (MRP) or the CCR trigger price, depending on the level of demand for allowances at the auction. The proposed revisions to Part 242 provide that the MRP will be set at $2.00 in 2014 and increase by 2.5 percent each year thereafter. The provisions for a current market reserve price are eliminated under the proposed revisions.
Under the proposed revisions to Part 242, the Department has maintained the inclusion of two set-asides in subdivisions 242-5.3(c) and (d). In particular, the department shall continue to allocate 700,000 and 1,500,000 tons each year, respectively, from the CO Budget Trading Program adjusted budgets to these two set-asides.
While the amount of allowances set-aside remains the same, the revisions to Pat 242 include a proposal to modify the existing “voluntary renewable energy market set-aside” in subdivision 242-5.3(c) to include eligible biomass. This revision expands eligibility for retiring CO allowances from the set-aside to include CO budget sources that co-fire eligible biomass as a compliance mechanism. Therefore, when a CO budget source deducts CO emissions from its compliance obligation as a result of co-firing eligible biomass, the Department proposes to also allow for the retirement of the corresponding number of CO allowances from the set-aside. The proposed revisions to the Program maintain the existing provisions for voluntary renewable energy purchases. The Department will continue to retire allowances under the voluntary renewable energy market and eligible biomass set-aside for voluntary renewable energy purchases.
Similarly, while the amount of allowances set-aside remains the same, under the proposed revisions to Part 242, the long-term contract set-aside in subdivision 242-5.3(d) will continue to be available to CO budget sources that can make the necessary demonstration to the Department’s satisfaction. The changes proposed in this subdivision are merely intended to clarify the operation and administration of the set-aside, consistent with the Department’s interpretation of subdivision 242-5.3(d) pursuant to Declaratory Ruling 19-18, which the Department issued on November 5, 2009.
The proposed revisions to Part 242 delete the existing stage one and stage two triggers and associated provisions. These price triggers raised the allowable percentage of offsets to be used for compliance, allowed for the use of international CO emission credit retirements, and created the potential extension of the control period to four years. The offset price triggers and the potential extension of the control period to four years are replaced by the CCR mechanism, to provide measurable cost control in an efficient, transparent and predictable manner. For CO offset allowances, the proposed revisions retain the number of CO offset allowances that are available to be deducted for compliance with a CO budget source’s CO budget emissions limitation for a control period at 3.3 percent of the CO budget source’s CO emissions for that control period.
The proposed revisions to Part 242 eliminate the provision to award early reduction allowances, in existing subdivision 242-5.2(b), as those provisions are no longer applicable. Finally, the proposed revisions to Part 200 include updated cites for the portions of Federal statute and regulations, as well as other documents, that are incorporated by reference into the proposed revisions to Part 242.
1 This amount reflects New York State’s portion of the regional cap of 91,000,000 tons for 2014, proposed by the states participating in the Regional Greenhouse Gas Initiative (RGGI).
Text of proposed rule and any required statements and analyses may be obtained from:
Michael Sheehan, P.E., NYSDEC, Division of Air Resources, 625 Broadway, Albany, NY 12233-3251, (518) 402-8396, email: 242co2btp@gw.dec.state.ny.us
Data, views or arguments may be submitted to:
Same as above.
Public comment will be received until:
September 9, 2013.
Additional matter required by statute:
Pursuant to Article 8 of the State Environmental Quality Review Act, a Short Environmental Assessment Form, Positive Declaration, Draft Supplemental Generic Environmental Impact Statement and a Coastal Assessment Form have been prepared and are on file.
Summary of Regulatory Impact Statement
The Regional Greenhouse Gas Initiative (RGGI) is a cooperative, historic effort among New York and eight Participating States1 and is the first mandatory, market-based carbon dioxide (CO) emissions reduction program in the United States. Recently, New York along with the Participating States, completed a comprehensive program review and announced a proposal to lower the regional emissions cap established under RGGI to 91 million tons in 2014, declining 2.5 percent a year through 2020.2 To implement the updated RGGI program in New York State, the Department of Environmental Conservation (Department) proposes to revise 6 NYCRR Part 242, CO Budget Trading Program (the Program) and 6 NYCRR Part 200, General Provisions.
The statutory authority to revise the Program to reduce the CO emissions cap, provide for the budget adjustments, add a cost containment reserve, and create an interim compliance obligation derives primarily from the Department’s authority to use all available practical and reasonable methods to prevent and control air pollution, as set out in the Environmental Conservation Law (ECL) at Sections 1-0101, 1-0303, 3-0301, 19-0103, 19-0105, 19-0107, 19-0301, 19-0303, 19-0305, 71-2103, 71-2105. Although the Allowance Auction Program (21 NYCRR Part 507) will not be revised as part of this rulemaking, the statutory sections that grant NYSERDA authority to implement the Allowance Auction Program, which were outlined in the Regulatory Impact Statement accompanying such rulemaking, are briefly outlined in the full Regulatory Impact Statement as background and context for the proposed Program revisions.
The warming climate represents an enormous environmental challenge for the State, because unabated, climate change will continue to have serious adverse impacts on the State’s natural resources, public health and infrastructure. New York power plants represent approximately one-fifth of all GHG emissions in the State.3 In 2012, New York power plants subject to the Program emitted approximately 35 million tons of CO into the atmosphere.
The Department complied with Sections 202-a, 202-b and 202-bb of the State Administrative Procedures Act through an extensive Regional program review process that included public participation by all Participating States. New York coordinated an additional stakeholder process to gather input from the public within its borders. New York and the Participating States had committed to a comprehensive program review during the initial development of RGGI and agreed to evaluate: program success; program impacts; additional emissions reductions; imports and emissions leakage; and offsets. The Participating States initiated program review in the fall of 2010 with the announcement of the first stakeholder meeting, and concluded the process in February, 2013. New York conducted an in-state separate stakeholder process designed to provide updates on the status of the regional process and to afford additional opportunity for New York’s stakeholders to provide comment.
Mitigating the impacts of a changing climate represents one of the most pressing environmental challenges for the State, the nation and the world. Extensive scientific data demonstrates the need for immediate worldwide action to reduce emissions from burning fossil fuels and supports the conclusion that great benefits will accrue if fossil fuel-fired emissions are reduced through programs like RGGI.
A naturally occurring greenhouse effect has regulated the earth’s climate system for millions of years. CO and other naturally occurring GHGs trap heat in our atmosphere, maintaining the average temperature of the planet approximately 60°F higher than it normally would be. An enhanced greenhouse effect and associated climate change results as large quantities of anthropogenic GHGs, especially CO from the burning of fossil fuels, are added to the atmosphere. Since the mid-1700’s, atmospheric concentrations of GHGs have increased substantially due to human activities such as fossil fuel use and land-use change. Today, atmospheric CO concentrations have reached 400 parts per million - nearly 40 percent higher than preindustrial levels.4
The need for the reduction of CO emissions is clearly supported by numerous direct impacts that have been observed in New York State. Temperatures in New York State have risen during the twentieth century, with the greatest warming coming in recent decades - temperatures have risen by approximately 0.6°F per decade since 1970, with winter warming more than 1.1°F per decade.5 This warming includes an increase in the number of extreme hot days (days at or above 90ºF) and a decrease in the number of cold days (days at or below 32ºF). New York experienced record high nighttime temperatures in the summer of 2010.6 Sea level in the coastal waters of New York State and up the Hudson River has been steadily rising over the 20th century. Tide-gauge observations in New York indicate that rates of relative sea level rise were significantly greater than the global mean, ranging from 2.41 to 2.77 millimeters per year (0.9 to 1.1 inches per decade).7
Predictions of future impacts associated with emissions in New York further support the need for a substantial reduction in the CO emissions cap. ‘Responding to Climate Change in New York State: The ClimAID Integrated Assessment for Effective Climate Change Adaptation’ (ClimAID) project examines how sea level rise, changes in precipitation patterns, and more frequent severe weather conditions will affect New York’s economy, environment, community life and human health. The ClimAID project predicts the following: Air temperatures are expected to rise across New York, by 1.5°F to 3°F by the 2020s, 3°F to 5.5°F by the 2050s, and 4°F to 9°F by the 2080s. Annual average precipitation in New York is projected to increase by up to five percent by the 2020s, up to 10 percent by the 2050s and up to 15 percent by the 2080s, with the greatest increases in the northern part of the State. A recent study based upon 60 years of tide-gauge records indicates that the rate of increase for sea level rise along approximately 1000 km of the east coast of the United States, including New York, remains at approximately three to four times higher than the global average.8 Extreme climate events, such as heat waves and heavy rainstorms, significantly impact New York’s communities and natural resources.
The need for the significantly reduced CO emissions cap and budget adjustments are further supported by the ClimAID Study9 which enumerates a number of predictions specifically for New York’s valued resources such as: 1) Rising air temperatures intensify the water cycle by driving increased evaporation and precipitation. The resulting altered patterns of precipitation include more rain falling in heavy events, often with longer dry periods in between; 2) high water levels, strong winds, and heavy precipitation resulting from strong coastal storms already cause billions of dollars in damage and disrupt transportation and power distribution systems. Barrier islands are being dramatically altered by strong coastal storms, such as Hurricane Sandy, as ocean waters over wash dunes, create new inlets, and erode beaches; 3) within the next several decades, New York State is likely to see widespread shifts in species composition in the State's forests and other natural landscapes; 4) lakes, streams, inland wetlands and associated aquatic species will be highly vulnerable to changes in the timing, supply, and intensity of rainfall and snowmelt, groundwater recharge and duration of ice cover; 5) increased summer heat stress will negatively affect cool-season crops and livestock unless farmers take adaptive measures such as shifting to more heat-tolerant crop varieties and improving cooling capacity of livestock facilities; 6) demand for health services and the need for public health surveillance and monitoring will increase; 7) over the next few decades, heat waves and heavy precipitation events are likely to increase transportation problems such as flooded streets and delays in mass transit; 8) communication service delivery is vulnerable to hurricanes, lightning, ice, snow, wind storms, and other extreme weather events, some of which are projected to change in frequency and/or intensity; 9) impacts of climate change on energy demand are likely to be more significant than impacts on supply. Climate change will adversely affect system operations, increase the difficulty of ensuring adequate supply during peak demand periods, and exacerbate problematic conditions, such as the urban heat island effect.
The reduction in the CO emissions cap to current levels represents a critical step to combat the significant challenges presented by climate change and to advance sound energy policies that foster energy efficiency and energy independence. The proposed Program revisions will cap regional emissions at 91 million tons annually beginning in 2014 and will reduce that level by 2.5 percent each year through 2020. Further, to account for the existing private bank of CO emissions allowances already acquired at auction, and to help create a binding cap, the proposed Program revisions provide two distinct budget (cap) adjustments. To provide additional flexibility and cost containment the proposed Program revisions also create the Cost Containment Reserve (CCR). Finally, the proposed Program revisions create an interim compliance obligation. The Department proposes to maintain the amount of CO allowances allocated to the two existing set-aside accounts under the Program and proposes a modification to the existing voluntary renewable energy market set-aside to include eligible biomass, and minor clarifications to the long term contract (LTC) set-aside.
The Department, NYSERDA and the New York State Department of Public Service (DPS) analyzed costs and impacts associated with compliance with the proposed revisions to the Program. CO allowance prices (the cost of complying with RGGI) are projected to increase from approximately $6.02/ton (2010 dollars) in 2014 to about $6.73/ton in 2016 and to about $8.41/ton in 2020. Under the Program Case, New York’s wholesale electricity prices (including both energy and capacity costs) are projected to be $1.64/MWh higher in 2016 and $2.12/MWh higher in 2020, than the Reference Case. RGGI is projected to increase wholesale electricity prices in New York State by about 3.0 percent in 2016 and 3.9 percent in 2020. For a typical New York residential customer (using 750 kWh per month), the projected increase in wholesale electricity prices in 2016 translates into a monthly retail bill increase of about 1.0 percent or $0.86. In 2020, the projected increase in wholesale electricity prices translates into a monthly residential retail bill increase of about 0.8 percent or $0.71. For commercial customers, the projected retail price impact of RGGI is about 1.1 percent in 2016 and 0.7 percent in 2020 ($7.87 and $5.00 per month, respectively). For industrial customers, the projected retail price impact of RGGI is about 1.7 percent in 2016 and 1.2 percent in 2020. A macro-economic impact study of the Program was also conducted. The study concluded that the economic impacts of RGGI on the economies of the participating states, including New York, were generally positive, albeit relatively small.
There will be costs associated with the administration of the Program. The Department will continue to incur staff costs associated with the implementation of the revised Program. NYSERDA will also continue to incur costs to administer and evaluate the use of auction proceeds from the Program. It should be noted, that the Department’s costs and NYSERDA’s administrative and evaluation rates are expected to remain unchanged as a result of the Program revisions. A significant portion of Program costs are allocated to the operation and administration of COATS and conducting allowance auctions. It is anticipated that these costs will not change in the future.
Under the existing Program and the proposed revisions to the Program, the owners and operators of each source and each unit at the source shall retain the following documents for a period of ten years from the date the document is created: account certificate of representation form; Emissions monitoring information; copies of all reports and compliance certifications; copies of all documents used to complete a permit application; copies of all documents used to complete a consistency application; and copies of all documents required as part of an auction application.
For each control period in which one or more units at a source are subject to the CO budget emission limitation, the CO authorized account representative of the source shall submit to the Department, a compliance certification report for each source covering all such units. This must be submitted by the March 1st following the relevant control period for all units subject to the Program.
The Department examined the “No Action” alternative which would leave the current Program in place and the Program cap and flexibility provisions within it would remain unchanged. Since the “No Action” alternative would leave the Program unchanged and would not address the issue of over allocation, it was not selected. The Department also considered different regional emissions cap levels as additional alternatives, rather than the 91 million ton regional emission cap that is proposed to be implemented under the revised Program. Lastly, flexibility provided for under the Program provided through the expansion of allowable offset usage, the addition of international offsets and an extension of the compliance period were evaluated. During program review, the Participating States recognized complexity associated with these provisions and their inability to provide immediate cost containment for the Program. Accordingly, the proposed revisions to the Program include a new CCR.
The proposed revisions to the Program are protective of public health and the environment in the absence of similar federal emission standards. The potential adverse impact to global air quality and New York State’s environment from CO emissions necessitates that New York State take action now to minimize CO emissions that contribute to climate change. Due in part to the lack of a federal program, the Department has determined that fossil fuel-fired electricity generators must reduce emissions of CO now.
The proposed revisions to the Program do not change the applicability provisions of the current Program. Therefore, sources already subject to the current Program will remain subject to the proposed revisions to the Program. While the second control period under the current Program will remain unchanged and will include years 2012-2014 with a CO allowance transfer deadline of March 1, 2015, the proposed Program revisions will require affected sources and units to comply with the emission limitations of the Program beginning on January 1, 2014.
The proposed revisions to the Program create a modified compliance schedule called an interim compliance period which is defined as each of the first two years of each three-year control period. The first interim control period under the revised Program will take place in year 2015; the second interim control period will take place in year 2016. In each of the first two calendar years of each three year control period (e.g., 2015 and 2016), the owners and operators of each source subject to the revised Program shall hold a number of CO allowances available for compliance deductions, as of the CO allowance transfer deadline (midnight of March 1st or, if March 1st is not a business day, midnight of the first business day thereafter), in the source’s compliance account that is not less than 50 percent of the total tons of CO emissions for that interim control period. A unit is subject to the interim control period requirements of the Program starting on the later of January 1, 2015 or date the unit commences operation.
1 In addition to New York, the RGGI Participating States include: Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, Rhode Island, and Vermont.
2 The Participating States released the Updated Model Rule on February 7, 2013.
3 “Patterns and Trends New York State Energy Profiles: 1996-2010,” Final Report, April 2012. http://www.nyserda.ny.gov/BusinessAreas/Energy-Data-and-Prices-Planning-and-Policy/Energy-Prices-Data-and-Reports/EA-Reports-and-Studies/Patterns-and-Trends.aspx?sc_database=web
4 National Research Council of the National Academies. Climate Change: Evidence, Impacts, and Choices. 2012. Available at http://nas-sites.org/americasclimatechoices/more-resources-on-climate-change/climate-change-lines-of-evidence-booklet/.
5 Rosenzweig, C., W. Solecki, A. DeGaetano, M. O’Grady, S. Hassol, P. Grabhorn (Eds.). ‘Responding to Climate Change in New York State: The ClimAID Integrated Assessment for Effective Climate Change Adaptation’. New York State Energy Research and Development Authority (NYSERDA). http://www.nyserda.ny.gov/climaid
6 Natural Resources Defense Council (NRDC). ‘The Worst Summer Ever? Record Temperatures Heat Up the United States’. September 2010. NRDC. http://www.nrdc.org/globalwarming/hottestsummer/
7 Titus, J.G. ‘Coastal Sensitivity to Sea-Level Rise: A Focus on the Mid-Atlantic Region. Synthesis and Assessment Product 4.1’. U.S. Climate Change Science Program. 2009. http://www.epa.gov/climatechange/effects/coastal/sap4-1.html
8 Sallenger, A.H., Doran, K.S., Howd, P.A. Hotspot of accelerated sea-level rise on the Atlantic coast of North America. Nature Climate Change. Published online June 24, 2012. doi: 10.1038/NCLIMATE1597.
9 Rosenzweig, ‘op.cit’
Regulatory Flexibility Analysis
The Regional Greenhouse Gas Initiative (RGGI) is a cooperative, historic effort among New York and eight Participating States1 and is the first mandatory, market-based carbon dioxide (CO) emissions reduction program in the United States. Since its inception in 2008, RGGI has utilized a market-based mechanism to cap and cost-effectively reduce emissions that cause climate change. Recently, New York along with the Participating States, completed a comprehensive program review and announced a proposal to lower the regional emissions cap established under RGGI to 91 million tons in 2014, declining 2.5 percent a year through 2020.2 Accordingly, New York and the Participating States committed to propose revisions, pursuant to state-specific regulatory processes, to their respective CO Budget Trading Programs to further reduce CO emissions from power plants in the region. To implement the updated RGGI program in New York State, the Department of Environmental Conservation (Department) proposes to revise 6 NYCRR Part 242, CO Budget Trading Program (the Program) and 6 NYCRR Part 200, General Provisions.
The only local government affected by the proposed revisions to the Program is the Jamestown Board of Public Utilities (JBPU), a municipally owned utility which owns and operates the S. A. Carlson Generating Station (SACGS). The emissions monitoring at SACGS currently meets the monitoring provisions of the proposed Program revisions, 40 CFR Part 75; no additional monitoring costs will be incurred. Additionally, the costs associated with JBPU’s compliance with the proposed Program revisions will be similar to those incurred by other privately held sources. JBPU’s exposure to compliance costs in addition to those already incurred for compliance with the Program will depend upon JBPU’s need to solicit consultants or contractors for its compliance. No small businesses will be directly affected by the adoption of the proposed revisions.
The proposed Program revisions, which will cap regional CO emissions at 91 million tons annually beginning in 2014, represent a nearly 45 percent reduction from the existing cap currently in place under the Program. After 2020, the cap will remain at 78 million tons annually. Further, to account for the existing private bank of CO emissions allowances already acquired at auction, and to help create a binding cap, the proposed Program revisions provide two distinct budget adjustments, namely the First and Second Control Period Interim Adjustments.
The proposed Program revisions also create the Cost Containment Reserve (CCR) from which CCR allowances will be triggered and released at auctions at $4/ton in 2014, $6/ton in 2015, $8/ton in 2016, and $10/ton in 2017. Each year after 2017, the CCR trigger price will increase by 2.5 percent. If the trigger price is reached, up to 10 million additional CCR allowances will be available for purchase at auction, except in 2014, when the reserve will be limited to five million allowances. The existing price triggers for expanding use of offsets and the one year compliance period extension will be eliminated in favor of the CCR.
Finally, the proposed Program revisions create an interim compliance obligation in part to align it with the annual compliance obligations under federal programs such as the Clean Air Interstate Rule and the Title IV Acid Rain Program. In addition to demonstrating full compliance at the end of each three-year compliance period, regulated entities must now demonstrate that they are holding allowances equal to at least 50 percent of their emissions at end of each of the first two years in each three year compliance period. The proposed Program revisions also include minor revisions such as setting the reserve price at $2.00 in 2014, to rise at 2.5 percent per year in subsequent years, updating all references, and the deleting early reduction allowance provisions.
1. Effects on Small Businesses and Local Governments. No small businesses will be directly affected by the adoption of the proposed Program revisions. As noted above, however, the only local government affected by the proposed revisions to the Program is the JBPU, a municipally owned utility which owns and operates the SACGS. The costs associated with the proposed revisions to the Program will be similar to those incurred by other privately held sources and will depend upon JBPU’s need to solicit consultants or contractors for its compliance.
2. Compliance Requirements. The JBPU, as owner and operator of the SACGS, will need to comply with the proposed revisions to the Program, as described below.
The proposed Program revisions do not change the applicability provisions of the current Program. Therefore, sources already subject to the Program will remain subject to the proposed Program revisions. While the second control period under the current Program will remain unchanged and will include years 2012-2014 with a CO allowance transfer deadline of March 1, 2015, the proposed Program revisions will require affected sources to comply with the emission limitations beginning on January 1, 2014.
The proposed Program revisions create an interim compliance period which is defined as each of the first two years of each three-year control period. In each of the first two calendar years of each three year control period (e.g., 2015 and 2016), the owners and operators of each source subject to the revised Program shall hold a number of CO allowances available for compliance deductions in the source’s compliance account that is not less than 50 percent of the total tons of CO emissions for that interim control period. A unit is subject to the interim control period requirements of the Program starting on the later of January 1, 2015 or date the unit commences operation.
Accordingly, at the end of each control period, (e.g., 2017), the owners and operators of each source subject to the revised Program shall hold a number of CO allowances available for compliance deductions, as of the CO allowance transfer deadline in the source’s compliance account that is not less than the total tons of CO emissions for the control period less the CO allowances deducted for the previous two interim control periods. Additionally, for each control period in which a CO budget source is subject to the proposed Program revisions, the CO authorized account representative of the source must continue to submit to the Department by the March 1st following the relevant control period, a compliance certification report for each source covering all such units.3
3. Professional Services. The JBPU is the only local government affected by the proposed revisions to the Program and like other privately held sources may need to solicit professional consultants and contractors for its compliance with the proposed revisions to the Program. The Department also confirmed that no capital improvements to plant operations will be needed for JBPU’s compliance with the proposed Program revisions.
4. Compliance Costs. Emissions monitoring at JBPU’s SACGS currently meets the monitoring provisions of the current Program and no additional monitoring costs will be incurred under the proposed revisions to the Program. Notwithstanding this, like any other owner or operator of any source subject to the revised Program, the JBPU will need to purchase CO allowances equal to the number of tons of CO emitted. The Department limited the analysis of control costs to the purchase of allowances needed to comply with the proposed revisions to the Program and predicts that CO allowances will cost between $6.00 in 2014 and $9.00 in 2020 (in 2010 $) per ton for CO under the Program Case.
In order to estimate total costs for SACGS under the proposed revisions to the Program, the Department reviewed 2009 through 2012 emissions from Jamestown’s affected unit. During that time period, SACGS’s emissions ranged from a low of 4,261 tons to a high of 117,311 tons. Based on these emissions values, allowances needed to cover emissions are estimated to cost between a low of $25,600 and a potential high of $1 million, annually. These costs will eventually be passed on to the JBPU consumers.
The JBPU has a range of compliance options and can utilize the flexibility mechanisms inherent in the proposed revisions to the Program. Since the revised program has a three year control period with the compliance obligation at the end of the control period, the emission peaks associated with electricity generation will be averaged out and more long term planning options will be available to SACGS. Although the proposed Program revisions include an Interim Control Period that require JBPU to cover 50 percent of their emissions in each of the first two years of a three year control period, it is not anticipated that this interim requirement will significantly reduce the flexibility available to JBPU. The JBPU will also incur costs associated with the administration of the revised Program.
5. Economic and Technological Feasibility. The JBPU has the option to do any combination of the following to comply with the proposed revisions to the Program: increase the efficiency of the natural gas-fired turbine, co-fire biofuel, purchase allowances, or purchase offsets. The addition of the CCR under the proposed Program revisions, in fact, adds more immediate relief to all affected sources, including the JBPU, by adding allowances to the market when the CCR triggers are hit. Any or all of these options are technologically and economically feasible to apply to SACGS.
6. Minimizing Adverse Impact. The promulgation of the proposed revisions to the Program and the amendments to 6 NYCRR Part 200 do not directly affect small businesses. Only one local government is affected by the proposed revisions to the Program, the JBPU. The proposed revisions to the Program constitute an emissions allowance based cap-and-trade program. Cap and trade systems are the most cost effective means for implementing emission reductions from large stationary sources. By continuing to implement the Program and proposed Program revisions, the Department will minimize any associated adverse economic impacts on the JBPU.
7. Small Business and Local Government Participation. The JBPU was included on every stakeholder invitation sent to the Department’s list serve and the Department conducted public forums after the stakeholder notifications were mailed. The Department’s records from those stakeholder meetings do not reflect that the JBPU attended those meetings nor is the Department otherwise aware of whether or not the JBPU attended them.
8. Cure Period. The proposed revisions to the Program will be effective on January 1, 2014. No additional cure period or other additional opportunity for ameliorative action is included in the Program revisions. First, sources that will be subject to the proposed Program revisions are already subject to the existing Program, and have been since the regulation was initially promulgated in 2008 (or since they commenced operation). Second, because of the cap-and-trade nature of the revisions to the Program which includes periodic compliance deadlines, sources have flexibility to emit any amount of CO during a control period, provided such emissions are covered by an adequate amount of CO allowances by the relevant CO allowance transfer deadline. For example, the second control period under the existing Program dates from years 2012-2014, with a CO allowance transfer deadline of March 1, 2015. This is unchanged under the proposed revisions to the Program, and will continue to provide sources with flexibility and time to comply with the proposed revisions to the Program. Finally, while the proposed revisions include a new annual interim compliance requirement, the first interim compliance period will be year 2015 with a CO allowance transfer deadline of March 1, 2016. This provides additional time for sources to plan for compliance with the proposed new interim compliance obligation. For these reasons, no additional cure period or other additional opportunity for ameliorative action is necessary for the proposed Program revisions.
1 In addition to New York, the RGGI Participating States include: Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, Rhode Island, and Vermont.
2 The Participating States released the Updated Model Rule on February 7, 2013.
3 Sources will not be required to submit a compliance certification report for any interim control periods.
Rural Area Flexibility Analysis
The Regional Greenhouse Gas Initiative (RGGI) is a cooperative, historic effort among New York and eight Participating States1 and is the first mandatory, market-based carbon dioxide (CO) emissions reduction program in the United States. Since its inception in 2008, RGGI has utilized a market-based mechanism to cap and cost-effectively reduce emissions that cause climate change. Recently, New York along with the Participating States, completed a comprehensive program review and announced a proposal to lower the regional emissions cap established under RGGI to 91 million tons in 2014, declining 2.5 percent a year through 2020.2 Accordingly, New York and the Participating States committed to propose revisions, pursuant to state-specific regulatory processes, to their respective CO Budget Trading Programs to further reduce CO emissions from power plants in the region. To implement the updated RGGI program in New York State, the Department of Environmental Conservation (Department) proposes to revise 6 NYCRR Part 242, CO Budget Trading Program (the Program) and 6 NYCRR Part 200, General Provisions.
The promulgation of the proposed revisions to Part 242 and the amendments to Part 200 will apply equally to affected sources statewide; rural areas will not be disproportionately impacted. The Department will implement the proposed Program revisions through a cap-and-trade program because allowance based cap-and-trade systems are the most cost effective means for implementing emission reductions from large stationary sources. The regulatory flexibility inherent in a cap-and-trade program that allows for interstate trading of emission allowances best enables the Department to balance the competing interests of the protection of the public health and welfare with continued industrial development of the State. By revising the Program, the Department is further able to balance these competing interests and minimize any potential adverse impacts of the revised Program on a statewide basis.
The Propose Program Revisions
The proposed Program revisions, which will cap regional CO emissions at 91 million tons annually beginning in 2014, represent a nearly 45 percent reduction from the existing cap currently in place under the Program. After 2020, the cap will remain at 78 million tons annually. Further, to account for the existing private bank of CO emissions allowances already acquired at auction, and to help create a binding cap, the proposed Program revisions provide two distinct budget adjustments, namely the First and Second Control Period Interim Adjustment for Banked Allowances.
The proposed Program revisions also create the Cost Containment Reserve (CCR), which will help provide additional flexibility and cost containment for the revised Program. The CCR allowances will be triggered and released at auctions at $4/ton in 2014, $6/ton in 2015, $8/ton in 2016, and $10/ton in 2017. Each year after 2017, the CCR trigger price will increase by 2.5 percent. If the trigger price is reached, up to 10 million additional CCR allowances will be available for purchase at auction, except in 2014, when the reserve will be limited to 5 million allowances. The existing price triggers for expanding use of offsets and the one year compliance period extension will be eliminated in favor of the CCR.
Finally, the proposed Program revisions create an interim compliance obligation in part to align it with the annual compliance obligations under federal programs such as the Clean Air Interstate Rule and the Title IV Acid Rain Program. The proposed Program revisions also include minor revisions such as setting the reserve price at $2.00 in 2014, to rise at 2.5 percent per year in subsequent years, updating all references, and the deleting early reduction allowance provisions. The majority of the proceeds from the sale of New York’s allowances will continue to be dedicated to strategic energy or consumer benefits, such as energy efficiency and clean energy technologies.
The nature of the proposed Program revisions, generally described above and discussed more thoroughly in the accompanying Regulatory Impact Statement (RIS), is such that they clearly will minimize any potential adverse impacts of the revised Program on a statewide basis.
TYPES AND ESTIMATED NUMBER OF RURAL AREAS AFFECTED
The promulgation of the proposed Program revisions and the amendments to Part 200, will apply equally to affected public and private sources statewide; rural areas will not be disproportionately impacted.
REPORTING, RECORDKEEPING AND OTHER COMPLIANCE REQUIREMENTS
The proposed Program revisions will not change the applicability provisions of the current Program. Therefore, sources already subject to the current Program will remain subject to the proposed Program revisions. While the second control period under the current Program will remain unchanged and includes years 2012-2014 with a CO allowance transfer deadline of March 1, 2015, the proposed Program revisions will require affected sources and units to comply with the emission limitations of the Program beginning on January 1, 2014.
As noted above, the proposed Program revisions will create an interim compliance period which is defined as each of the first two years of each three-year control period. The first interim control period under the revised Program will take place in year 2015; the second interim control period will take place in year 2016. For each interim control period, (e.g., 2015 and 2016), the owners and operators of each source subject to the revised Program shall hold a number of CO allowances available for compliance deductions in the source’s compliance account that is not less than 50 percent of the total tons of CO emissions for that interim control period, as of the CO allowance transfer deadline. A unit will be subject to the interim control period requirements of the revised Program starting on the later of January 1, 2015 or date the unit commences operation. Likewise, at the end of each control period, (e.g., 2017), the owners and operators of each source subject to the revised Program shall hold a number of CO allowances available for compliance deductions in the source’s compliance account that is not less than the total tons of CO emissions for the entire control period less the CO allowances deducted for the previous two interim control periods, as of the CO allowance transfer deadline.
Additionally, for each control period in which a CO budget source is subject to the proposed revisions to Program, the CO authorized account representative of the source must continue to submit to the Department by the March 1st following the relevant control period, a compliance certification report for each source covering all such units.3 As noted above, since the second control period for the Program remains unchanged, the first CO allowance transfer deadline under the proposed revisions to the Program will occur on March 1, 2015.
COSTS
The Department, New York State Energy Research Development Authority (NYSERDA) and New York State Department of Public Service (DPS) analyzed costs, including statewide impacts to jobs, total Gross State Product and total Personal Income, associated with compliance with the proposed revisions to Part 242. As discussed below, this analysis concludes that the proposed Program revisions will not disproportionately affect sources in rural areas of the State and best enables the Department to balance the competing interests of the protection of the public health and welfare with continued industrial development on a statewide basis. By revising the Program, the Department is able to balance these competing interests and minimize any potential adverse impacts of the revised Program.
To evaluate the potential cost impacts of the reduced CO emissions cap and budget adjustments, Integrated Planning Model (IPM®4) was used to compare a future case with the proposed Program (Program Case) to a Reference Case (Business As Usual scenario) to project how the regional electricity system would function if the Program remained unchanged and proposed revisions were not implemented. The modeling assumptions and input data were developed through a stakeholder process, including representatives from the electricity generation sector, business and industry, environmental advocates and consumer interest groups. Subsequently, modeling results were presented to stakeholders for review and comment throughout the development of the proposed Program revisions. For a greater explanation of NYSERDA’s analysis and a summary of the (IPM®) modeling conducted by ICF International (ICF), see Regulatory Impact Statement pages 45-62.
Utilizing the New York’s Investments of RGGI Allowance Proceeds and output data from IPM®, the REMI macroeconomic study estimates that the impact of the reduced CO emissions cap, budget adjustments and the remainder of the proposed Program revisions5 on jobs, the economy and customer bills6,7, in New York will be very small and generally positive. The REMI study estimates a cumulative, positive change in employment in New York associated with the proposed Program revisions will be about 80,500 additional job-years over the period 2012 to 2040. A job-year is equivalent to one person employed for one year. Further, the REMI study estimates that the cumulative changes in New York’s Gross State Product and Personal Income associated with the proposed Program revisions will increase approximately $5.8 billion and $4.7 billion, respectively.8 Although these cumulative changes are minimal, they represent positive impacts for total State employment, total Gross State Product and total Personal Income.
MINIMIZING ADVERSE IMPACT
The Department will implement the proposed Program revisions through a cap-and-trade program because allowance based cap and trade systems are the most cost effective means for implementing emission reductions from large stationary sources. The regulatory flexibility inherent in a cap-and-trade program that allows for interstate trading of emission allowances will not disproportionately affect sources in rural areas of the State and best enables the Department to balance the competing interests of the protection of the public health and welfare with continued industrial development of the State. By revising the Program, the Department is further able to balance these competing interests and minimize any potential adverse employment impacts of the revised Program.
RURAL AREA PARTICIPATION
The Department complied with Sections 202-a, 202-b and 202-bb of the State Administrative Procedures Act through an extensive Regional program review process that included public participation by all Participating States. New York coordinated an additional stakeholder process to gather input from the public within its borders. New York and the Participating States had committed to a comprehensive program review during the initial development of RGGI and agreed to evaluate: program success; program impacts; additional emissions reductions; imports and emissions leakage; and offsets. The Participating States initiated program review in the fall of 2010 with the announcement of the first stakeholder meeting and concluded the process in February, 2013. The Participating States and RGGI Incorporated (RGGI, Inc.)9 conducted more than a dozen stakeholder meetings and webinars during this period whereby they obtained public input on a number of program elements. Prior to each stakeholder meeting, agency staff and RGGI, Inc. distributed pertinent written material to the over 250 participants on the list serve and posted meeting documents on the RGGI, Inc. website. The stakeholder meetings were open to the public and all interested parties were encouraged to provide comment. All stakeholder comments were ultimately considered in the development of the Draft Updated Model Rule, which contained detailed regulatory text, and was released to the stakeholders for comment on November 20, 2012. On February 7, 2013, the Participating States released the final version of the Updated Model Rule, which contained additional updates based on stakeholder feedback received on the Draft Updated Model Rule.
New York conducted an in-state stakeholder process designed to provide updates on the status of the regional process and to afford additional opportunity for New York's stakeholders to provide comment. The Department held seven meetings and staff availability sessions in New York and when possible, the Department sent list-serve notices to over 250 New York stakeholders announcing regional meetings and webinars. This included, for example, presentations by Department representatives, regarding RGGI program review and the proposed revisions to the Program, at the Business Council’s10 Spring Environmental Conference on April 18, 2013 and Annual Meeting in Bolton Landing on September 19, 2012.
1 In addition to New York, the RGGI Participating States include: Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, Rhode Island, and Vermont.
2 The Participating States released the Updated Model Rule on February 7, 2013.
3 Sources will not be required to submit a compliance certification report for any interim control periods.
4 IPM® is a nationally recognized modeling tool used by the U.S. Environmental Protection Agency (EPA), state energy and environmental agencies, and private sector firms such as utilities and generation companies.
5 The estimated impact of the RGGI Program is the increment calculated as the difference between the Reference Case and the “91 Cap Bank MR IPM Scenario.”
6 REMI Economic Impacts Analysis,” by the Northeast States for Coordinated Air Use Management (NESCAUM), dated May 29, 2013. http://www.dec.ny.gov/docs/administration_pdf/remi91cap2013.pdf.
7 “IPM Potential Scenario Customer Bill Analysis,” by the Analysis Group, dated May 24, 2013. http://www.dec.ny.gov/docs/administration_pdf/custbillanaly2013.pdf
8 This is provided in 2010 dollars, calculated as the present value of estimated annual changes over the period 2012 to 2040, discounted at three percent per year to account for the time-value of money.
9 RGGI, Inc. is a 501(c)(3) non-profit corporation created to provide technical and administrative services to the Participating States.
10 The Business Council of New York State, Inc., is the leading business organization in New York State, representing the interests of large and small firms throughout the state. Its membership is made up of thousands of member companies, as well as local chambers of commerce and professional and trade associations.
Job Impact Statement
1. Nature of Impact: The Regional Greenhouse Gas Initiative (RGGI) is a cooperative, historic effort among New York and eight Participating States1 and is the first mandatory, market-based carbon dioxide (CO) emissions reduction program in the United States. Since its inception in 2008, RGGI has utilized a market-based mechanism to cap and cost-effectively reduce emissions that cause climate change. Recently, New York along with the Participating States, completed a comprehensive program review and announced a proposal to lower the regional emissions cap established under RGGI to 91 million tons in 2014, declining 2.5 percent a year through 2020.2 Accordingly, New York and the Participating States committed to propose revisions, pursuant to state-specific regulatory processes, to their respective CO Budget Trading Programs to further reduce CO emissions from power plants in the region. To implement the updated RGGI program in New York State, the Department of Environmental Conservation (Department) proposes to revise 6 NYCRR Part 242, CO Budget Trading Program (Part 242 or the Program) and 6 NYCRR Part 200, General Provisions.
The Department, New York State Energy Research Development Authority (NYSERDA) and the New York State Department of Public Service (DPS) analyzed costs, including impacts to jobs, total Gross State Product and total Personal Income, associated with compliance with the proposed revisions to Part 242. As discussed below, this analysis concludes that the proposed revisions to the Program will not have an adverse impact on jobs and employment opportunities in New York. At the direction of New York and Participating States, Northeast States Coordinated Air Use Management (NESCAUM) conducted a macroeconomic impact study called “Regional Economic Models, Inc. Policy InsightTM (REMI),” which estimates the impact of the reduced CO emissions cap, budget adjustments and the remainder of the proposed Program revisions3 on jobs in the RGGI region. Utilizing data inputs from extensive Integrated Planning Model (IPM®) modeling conducted by ICF International (ICF), REMI estimates that the cumulative, positive change in employment in New York associated with the proposed Program revisions will be approximately 80,500 additional job-years over the period 2012 to 2040 (a job-year is equivalent to one person employed for one year). Further, the study estimates that the cumulative changes in New York’s Gross State Product and Personal Income associated with the proposed Part 242 revisions will increase approximately $5.8 billion and $4.7 billion, respectively4. These cumulative changes, while small, represent positive impacts for total State employment, total Gross State Product and total Personal Income.
The proposed Program revisions, which will cap regional CO emissions at 91 million tons annually beginning in 2014, represent a nearly 45 percent reduction from the existing cap currently in place under the Program. After 2020, the cap will remain at 78 million tons annually. Further, to account for the existing private bank of CO emissions allowances already acquired at auction, and to help create a binding cap, the proposed Program revisions provide two distinct budget adjustments. The First Control Period Interim Adjustment for Banked Allowances will reduce the budget for 100 percent of the first control period private bank of allowances (vintages 2009, 2010, and 2011) held by market participants after the first control period. The Second Control Period Interim Adjustment for Banked Allowances will reduce the budget for 100 percent of the surplus 2012 and 2013 vintage allowances held by market participants as of the end of 2013.
The proposed revisions to Part 242 also create the Cost Containment Reserve (CCR), which will help provide additional flexibility and cost containment for the Program. The CCR allowances will be triggered and released at auctions at $4/ton in 2014, $6/ton in 2015, $8/ton in 2016, and $10/ton in 2017. Each year after 2017, the CCR trigger price will increase by 2.5 percent. If the trigger price is reached, up to 10 million additional CCR allowances will be available for purchase at auction, except in 2014, when the reserve will be limited to five million allowances. The existing price triggers for expanding use of offsets and the one year compliance period extension will be eliminated in favor of the CCR.
Finally, the proposed Program revisions create an interim compliance obligation in part to align it with the annual compliance obligations under federal programs such as the Clean Air Interstate Rule and the Title IV Acid Rain Program. This program revision also helps to address the potential for a budget source to avoid its compliance obligation as a result of the business closing or falling into bankruptcy prior to the third year compliance obligation. In addition to demonstrating full compliance at the end of each three-year compliance period, regulated entities must now demonstrate that they are holding allowances equal to at least 50 percent of their emissions at the end of each of the first two years in each three year compliance period. The proposed Program revisions also include minor revisions such as setting the reserve price at $2.00 in 2014, to rise at 2.5 percent per year in subsequent years, updating all references, and the deleting early reduction allowance provisions. The majority of the proceeds from the sale of New York’s allowances will be continue to be dedicated to strategic energy or consumer benefits, such as energy efficiency and clean energy technologies.
The nature of the proposed Program revisions, generally described above and discussed more thoroughly in the accompanying Regulatory Impact Statement, is such that they clearly will not have an adverse impact on jobs and employment opportunities.
2. Categories and Numbers Affected: As indicated above, the Department, NYSERDA and DPS analyzed costs, including impacts to jobs, total Gross State Product and total Personal Income, associated with compliance with the proposed revisions to Part 242. Modeling analysis and review was coordinated by RGGI Inc. and New York staff, and included input from energy and environmental representatives from the Participating States and each regional Independent Systems Operator.
To evaluate potential cost impacts of the reduced CO emissions cap and budget adjustments, IPM®5 was used to compare a future case with the proposed Program revisions (Program Case) to a Reference Case (Business As Usual scenario) to project how the regional electricity system would function if the Program remained unchanged and proposed revisions were not implemented. The modeling assumptions and input data were developed with input from a stakeholder process, including representatives from the electricity generation sector, business and industry, environmental advocates and consumer interest groups. Subsequently, modeling results were presented to stakeholders for review and comment throughout the development of the proposed Program revisions. For a greater explanation of NYSERDA’s analysis and a summary of the Integrated Planning Model (IPM®) modeling conducted by ICF International (ICF), see Regulatory Impact Statement pages 45-62.
Utilizing New York’s Investments of RGGI Allowance Proceeds and output data from IPM®, the REMI macroeconomic study estimates that the impact of the reduced CO emissions cap, budget adjustments and the remainder of the proposed Program revisions6 on jobs, the economy and electricity customer bills7,8, in New York will be very small and generally positive. The REMI study estimates a cumulative, positive change in employment in New York associated with the proposed Program revisions of about 80,500 additional job-years over the period 2012 to 2040. A job-year is equivalent to one person employed for one year. Further, the REMI study estimates that the cumulative changes in New York’s Gross State Product and Personal Income associated with the proposed Program revisions will increase approximately $5.8 billion and $4.7 billion, respectively9. Although these cumulative changes are minimal, they represent positive impacts for total State employment, total Gross State Product and total Personal Income.
3. Regions of Adverse Impact: A Statewide analysis of the impacts of these revisions on electricity prices in New York State was performed. The analysis predicts that under the Program Case, New York’s wholesale electricity prices (including both energy and capacity costs) are projected to be $1.64/MWh higher in 2016 and $2.12/MWh higher in 2020, than the Reference Case. The proposed revisions to the Program are projected to increase wholesale electricity prices in New York State by about 3.0 percent in 2016 and 3.9 percent in 2020.
4. Minimizing Adverse Impact: The Department will implement the proposed Program revisions through a cap-and-trade program because allowance based cap-and-trade systems are the most cost effective means for implementing emission reductions from large stationary sources. The regulatory flexibility inherent in a cap-and-trade program that allows for interstate trading of emission allowances best enables the Department to balance the competing interests of the protection of the public health and welfare with continued industrial development of the State. By revising the Program, the Department is further able to balance these competing interests and minimize any potential adverse employment impacts of the revised Program.
5. Self-Employment Opportunities: Not applicable.
1 In addition to New York, the RGGI Participating States include: Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, Rhode Island, and Vermont.
2 The Participating States released the Updated Model Rule on February 7, 2013.
3 The estimated impact of the RGGI Program is the increment calculated as the difference between the Reference Case and the “91 Cap Bank MR IPM Scenario.”
4 This is provided in 2010 dollars, calculated as the present value of estimated annual changes over the period 2012 to 2040, discounted at three percent per year to account for the time-value of money.
5 IPM® is a nationally recognized modeling tool used by the U.S. Environmental Protection Agency (EPA), state energy and environmental agencies, and private sector firms such as utilities and generation companies.
6 The estimated impact of the RGGI Program is the increment calculated as the difference between the Reference Case and the “91 Cap Bank MR IPM Scenario.”
7 REMI Economic Impacts Analysis,” by the Northeast States for Coordinated Air Use Management (NESCAUM), dated May 29, 2013. http://www.dec.ny.gov/docs/administration_pdf/remi91cap2013.pdf.
8 “IPM Potential Scenario Customer Bill Analysis,” by the Analysis Group, dated May 24, 2013. http://www.dec.ny.gov/docs/administration_pdf/custbillanaly2013.pdf
