Failure of Build Back Better Casts Uncertainty over New York’s Climate Plans

New York was counting on federal money to help pay for its transition to clean energy, which will cost the state an estimated $15 billion each year.

Lissa Harris and Colin Kinniburgh   ·   December 22, 2021
Imagine if FDR had said after Pearl Harbor that the price tag for action was too high, so states will have to fight the war on their own, said Senate Finance Committee Chair Liz Krueger. | Office of Gov. Phil Murphy

The abrupt unraveling of federal climate legislation on Sunday—when West Virginia Senator Joe Manchin went on Fox News and said he could not support President Biden’s Build Back Better bill as written—has made the already pressing problem of funding climate policy at the state level even more urgent. Unable to count on Build Back Better funding, states may have to meet their climate goals without a significant source of federal help.

As one of the few places in the US where significant climate action is politically feasible, New York is under intense pressure to find a way to fund a deep decarbonization of the state’s $2 trillion economy by 2050, a goal enshrined in the 2019 Climate Leadership and Community Protection Act (CLCPA).

State Senator Liz Krueger, chair of the senate’s finance committee, called the apparent failure of Build Back Better a “major blow” to New York’s climate efforts, though not a fatal one. “Imagine if FDR had said after Pearl Harbor that the price tag for action was too high, so states will have to fight the war on their own,” she told New York Focus and The River Newsroom. “It’s an unconscionable abdication of responsibility.”

New York’s 22-member Climate Action Council has been working to come up with a plan to decarbonize the state economy over the next few decades, an effort it expects to cost some $300 billion. On Monday, after a grueling four-and-a-half-hour meeting that followed two years of policy wrangling, the CAC unanimously approved a draft scoping plan.

Though it runs to more than 300 pages, the plan isn’t exactly an instruction manual for how to get New York to a net-zero economy by 2050. The New York Green Education and Legal Fund describes it as “more of a long white paper” on possible policy directions, and it leaves unanswered a number of key questions—perhaps none more central than where the money to implement its recommendations will come from.

“Though uncertain as of this writing, the proposed Build Back Better legislation could, if enacted, bring billions of additional dollars in federal spending to New York,” reads one line of the draft scoping plan, written before the Manchin dustup, citing existing federal funding and yet-to-be-developed new state revenue streams as other possible sources of funds.

The version of the federal package passed by the House last month contains $555 billion for climate action over 10 years and would direct billions to New York to tackle a broad array of climate and other problems. That would make a dent in the overall cost of meeting the state’s climate goals, which the CAC estimates will be roughly $300 billion (although with resulting benefits to the state and its residents in the realm of $400 billion). In the near term, state analysts working with the CAC say that ensuring a swift and orderly transition to clean energy will cost about $15 billion per year, no matter who ends up paying the tab: the federal government, New York State, private industry, ordinary citizens, or all of the above.

Right now, New York has no plan for filling that $15-billion-a-year hole.

No Help for Tough Emissions Problems

Solar power has dropped steeply in cost in recent years, and is now the cheapest form of electricity to build, cheaper than the gas-fueled generation that is currently the backbone of New York’s power grid. Wind power cost has fallen as well. That dynamic will help speed decarbonization in the power sector, which must be 70 percent renewables by 2030 to comply with the CLCPA. But other major decarbonization problems are harder, especially within households.

Heating buildings is one of the largest sources of greenhouse gas emissions in New York. Making heat for homes and businesses fossil-fuel-free will require intense efforts to improve weatherization and to replace boilers and furnaces with heat pump systems. That means helping consumers pay for heat pumps, which are cheap to run but expensive to install. Build Back Better includes hefty consumer rebates for heat pumps, and $850 million for the Weatherization Assistance Program.

A meeting of New York's Climate Action Council on March 3, 2020. | NYSERDA

Vehicle traffic is another huge driver of emissions in New York—with transportation accounting for nearly half of all emissions statewide as of 2018—and another place where the loss of Build Back Better will be keenly felt. The federal bill included up to $12,500 in tax credits for the purchase of an electric vehicle, up from the current $7,500 credit, and would have given a consumer-side boost to EV adoption that would meet up with $7.5 billion from the bipartisan infrastructure bill to roll out nationwide EV charging networks.

“The money for electric cars [in Build Back Better] was large enough to move the needle. And that’s important because the state can’t directly regulate tailpipe emissions,” says Pete Sikora, climate and inequality campaigns director at New York Communities for Change.

Cornell scientist Robert Howarth, a CAC member, summed up New York’s decarbonization problem in an October meeting. “The technologies are there,” he said. “The funding mechanisms are not so clear.” Howarth and other members have pressed for the CAC and its analysts to put clearer recommendations for funding in the draft scoping plan that will now go to the public for comment. But despite the urgency of the problem, the plan as it stands includes only a general discussion of different funding strategies the state could take.

What Are New York’s Options?

The CAC’s draft scoping plan lays out three potential paths for an economy-wide approach to reducing greenhouse gas emissions. Only two of them, carbon pricing and cap-and-invest, would actually raise revenue for state climate action. The third—adopting a clean energy supply standard for fuel, which would progressively tighten until the allowed amount of emissions is zero—would make tradable emissions credits valuable among energy market players, but would not deliver any state funding.

Both carbon pricing and cap-and-invest would require energy providers to pay for producing emissions. For carbon pricing (also known as a carbon tax or carbon fee), the price per ton is set by the state, which aims to get the price right to deliver the targeted emission reductions. For a cap-and-invest program, the amount of allowed annual emissions is set by the state, and the price is determined by supply and demand in the emissions allowances market the program would create. New York State currently has a cap-and-invest program for power producers—the multistate Regional Greenhouse Gas Initiative—but it doesn’t cover the entire economy, and isn’t tough enough to achieve the state’s ambitious climate goals.

The Department of Environmental Conservation does have the authority to make an economy-wide cap-and-invest program happen, although it would be a huge regulatory flex. But enacting a carbon price will probably require an act of the state legislature—and without a real analysis of how a carbon price would affect the economy and consumer energy prices, which the CAC has yet to produce, legislators are missing a crucial piece of information.

The carbon pricing bill that’s farthest along, the Climate and Community Investment Act (CCIA), would raise $15 billion a year and set aside a third of that to write checks to low- and middle-income New Yorkers to offset any rise in fossil fuel prices created by carbon pricing. But despite a concerted push by climate advocates over the past couple of years, the CCIA is still mired in committee in both houses of the legislature.

Another revenue-raising option not discussed in the scoping plan: Taxing the rich to fund the clean-energy transition, a tactic favored by proponents of the Green New Deal. Sikora thinks that might actually be a more achievable goal.

“A carbon tax is an economist’s wet dream, but in political reality, it’s like pushing a giant boulder up a cliff,” he said. “We think that taxing the rich for a Green New Deal is both substantively better and politically achievable.”

NY Renews—a large coalition of environment, community, and labor groups that has been a driving force behind the passage of New York’s 2019 climate law and the effort to pass the CCIA to fund it—said that while getting a carbon price passed is important, it’s a “slow process,” and the governor and the legislature need to act on climate in the upcoming budget.

“With the escalating climate emergency and economic/public health crises, we need the state to jump start the spending in the budget as we continue to build towards the long-term framework and funding source,” NY Renews coalition coordinator Stephan Edel wrote in a statement.

One Climate Crisis, Two Problems

Climate solutions tend to fall into one of two buckets: resilience, which deals with the impacts of a destabilizing climate, and decarbonization, which drives emissions down so the climate won’t destabilize as much in the first place. The problem isn’t so much that the federal government can’t act on climate overall. It’s that it struggles to act on decarbonization.

The federal bipartisan infrastructure bill passed in November contains about $50 billion in climate-related funding, and about $27 billion to New York State overall. That bill is already speeding up the building of renewables in New York: U.S. Senate Majority Leader Chuck Schumer recently announced that $30 million will go toward building a plant at the Port of Albany that will manufacture the poles used to build wind turbines.

But the climate problems tackled by the infrastructure bill mostly fall into the resilience bucket. The heavy lifting on decarbonization, much of it through new investment in zero-emissions alternatives to old dirty tech, was all in Build Back Better. On that front, at least for now, it seems New York is on its own.

Krueger said the infrastructure funding will help, if New York can use it wisely. “There was a significant amount of funding available to be used for climate solutions in the bipartisan infrastructure bill, and I’m hopeful that we will see Governor Hochul putting that to good use in her budget proposal,” she said.

Sparing Consumer Pain

It might be technically possible for New York State to decarbonize without raising revenue, by regulating fossil fuels more or less to death over the next few decades. But it wouldn’t be pretty. If the cost of producing dirty power and fuel goes up, fuel and energy producers are likely to pass that cost straight on to consumers. This is one reason why many experts say it’s important to ensure that money spent by polluters on carbon credits flows to the government. Without state programs to get that money back into the hands of ordinary New Yorkers and help them get their homes and cars off fossil fuels, an economy-wide cap on carbon could act like a flat tax, imposing the same pollution markup rate on a private helicopter flight to the Hamptons as it would on a struggling household’s heating bill.

That’s a future Liz Moran, New York State policy advocate for Earthjustice, doesn’t want to see.

“It will be important for the governor and the legislature to look closely at protecting consumers,” Moran said. “It isn’t the fault of the average consumer that we’re facing the climate crisis we’re in. It’s the fault of the polluters, and that’s the intent behind policies like the CCIA—to make polluters pay up for the mess that they put us in.”

For the Climate Action Council, the issue of consumer and ratepayer impacts has forged some common ground between industry and community groups—two factions often at odds. “Customer cost impacts are still missing,” said Donna DeCarolis, president of the National Fuel Gas Distribution Corporation and a CAC member, in a statement on her “yes” vote to release the draft scoping plan. “The plan really needs to include a detailed analysis of costs. It should be part of the discussion in the coming year.”

The release of the draft scoping plan on January 1 will kick off a process that will last well into 2022. The CAC will hold at least six public hearings and open a comment period of at least 120 days to gather public input on the plan from around the state. The plan lays out three possible pathways for meeting climate goals over the next few decades, with varying degrees of aggressiveness on electrifying and decarbonizing pieces of the state economy that now rely on fossil fuels.

“It is our intention to lay them out for the public for the next six months of dialogue for New Yorkers, so they can equally see pros and cons across these forks in the road,” said NYSERDA analyst Carl Mas at the CAC’s Monday meeting.

The lack of any real plan for revenue, among other large unsettled questions in the draft scoping plan, means there’s a lot of work ahead—both for the CAC and for state legislators. The clock is ticking.

“Toughest part is ahead, but this is an achievement,” DEC Commissioner and CAC co-chair Basil Seggos said in a tweet about the CAC’s vote to move forward with the draft scoping plan.

Mark Dunlea of the Green Education and Legal Fund took a dimmer view, writing in an analysis of the draft plan: “There is no one on the Council really willing to push the state to act like we are facing a Code Red on a climate emergency.”

Correction: This article has been updated to correct the percentage of state emissions that come from transportation.

Lissa Harris is a staff writer at The River and a volunteer firefighter. She was the founding editor of the Watershed Post, a site that covered local news in the rural Catskills from 2010 to 2017.
Colin Kinniburgh is a reporter at New York Focus, covering the state’s climate and environmental politics. Over a decade in media, he has worked in print, television, audio, and online news, and participated in fellowship programs at CUNY’s Graduate School of Journalism and… more
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