Hochul’s Budget Charts a Middle Path on Climate

This article was published in collaboration with The River Newsroom.

On Tuesday, Governor Kathy Hochul released her proposed budget for New York’s 2023 fiscal year. Flush with higher-than-expected tax revenues and billions in federal pandemic relief funds, the $216.3 billion budget includes significant investments in healthcare, education, and infrastructure, among other areas.

On climate, the budget’s most ambitious proposal was a ban on gas in new construction. The ban would begin in 2027, three years after New York City’s parallel measure goes into effect, but would still make New York the first state in the country to enact a gas ban.

But on other decarbonization issues—including, crucially, the growing question of how New York will pay for the programs necessary to achieve its emissions goals—Hochul’s proposals were modest. 

She touted a $1 billion increase to a previously planned $3 billion environmental bond act, together with a $100 million increase to the state’s environmental protection fund, as an investment that “confronts the climate crisis with the urgency that is required.” Hochul also described a plan for spending $500 million in state funds on efforts to boost manufacturing and the supply chain for offshore wind energy.

But less than a third of the one-time bond act, if it were passed by the legislature and approved by voters in November, would go toward reducing emissions. That would leave New York still without a plan to fund its statutory climate goals—which would cost around $300 billion in public and private spending by 2050 to achieve, according to estimates by the state’s Climate Action Council.

“To say that this budget adequately addresses the current moment in climate change and adequately prepares us for the future is just incorrect,” said Stephan Edel, coalition coordinator for the renewable energy advocacy coalition NY Renews. But despite his criticism, Edel said that several aspects of the budget “represent a big shift away from the complete austerity budgets of the Cuomo administration.”

The budget also did not include several other prominent measures pushed by progressives, including proposals for building public renewable energy projects, a moratorium on energy-intensive cryptocurrency mining, and scaling back New York’s $1.6 billion in annual fossil fuel subsidies.

The executive budget represents the governor’s opening position in negotiations with the legislature, which is expected to push to modify or expand many of her proposals. 

It’s uncertain to what degree the legislature intends to push for expanded funding for climate initiatives. That will become clearer in the weeks ahead, as the legislature begins the series of public hearings that precede each house publishing a list of its budget priorities in early to mid-March. (Spokespeople for both houses of the legislature did not immediately provide comment.)

“I do think that there is this expectation on the legislature to really up their game when it comes to climate,” said Liz Moran, policy advocate at the environmental group Earthjustice, noting the absence of any significant climate legislation in the 2021 legislative session.

Gas Ban

Hochul’s budget would ban fossil fuel heating systems in new buildings “no later than” 2027. Most climate groups applauded the proposal, but said 2027 is too late: the Climate Action Council’s draft scoping plan for meeting the state’s climate goals calls for the phaseout of fossil fuels in new construction to begin in 2024.

New York City is already moving faster than the state on this front, with a ban on fossil fuels in new construction that goes into effect at the end of 2023 for buildings under seven stories and by 2027 for taller ones. Gas Free NY, a coalition of organizations that successfully fought for New York City’s fossil fuel ban, issued a statement in response to Hochul’s budget that calls on legislative leaders to “insist on a faster timeline.”

The All-Electric Building Act, a bill cosponsored by Emily Gallagher in the Assembly and Brian Kavanagh in the Senate, would put an end to fossil fuels in most new construction by 2024.

In a statement to New York Focus/The River, Gallagher said that Hochul’s proposal “represents a major breakthrough,” but that she would like to see the state “move much more aggressively” towards a full gas ban. 

Pete Sikora, a climate advocate at New York Communities for Change, said he supports the Gallagher/Kavanagh bill but could envision a compromise between Hochul’s proposed timeline and the legislature’s. “It’s not hard to see the outline of a deal taking shape,” he said.

“New York State is poised to become the first state in the country to ban gas in new construction. And that is a big important shaping step to fight the climate crisis,” he added.

Already Existing Buildings

The gas ban would only affect new buildings. The budget took far less drastic action on New York’s existing housing stock.

Buildings are responsible for a third of New York’s greenhouse gas emissions, much of that from directly burning fossil fuel for heat. Meeting the state’s ambitious climate goals over the next few decades will require the conversion of millions of existing homes and buildings from gas and oil furnaces to high-efficiency electric heat pump systems, along with weatherization efforts. Heat pumps are generally less expensive to run than fossil fuel heating systems, but carry a higher price tag for consumers up front, which means that adoption rates will probably not meet state targets without significant investment.

Hochul’s budget proposal includes $250 million over five years for electrifying 50,000 homes. Sikora called that number a “cruel joke.” An advisory panel to the Climate Action Council estimated the cost of weatherizing and electrifying low- and moderate-income housing to be at least $1 billion a year. 

Former state senator Jen Metzger, now a policy expert with New Yorkers for Clean Power, says that buildings are “the single most challenging sector” of New York’s economy to decarbonize—and a place where Hochul’s budget falls short, she said.

“Close to half the population of New York is low- or moderate-income. It’s some of the oldest building stock in the country,” Metzger said. “It’s going to take resources to upgrade it sufficiently and electrify it.” 

Hochul’s budget does include proposals for stronger building codes and efficiency standards, as well as new emissions benchmarking standards for large buildings. Metzger said those will be key to making climate progress in the buildings sector.

“Benchmarking: Not very sexy. That bill has been around forever, but it’s absolutely essential,” Metzger said. “We are not going to hit our emissions targets if we don’t know what we’re emitting and we don’t have a way to track improvements over time. Advanced codes and standards: Similarly, not a sexy issue, but hugely important. You can’t have an all-electric code without getting this passed.” 

The budget would also disincentivize developers from using natural gas as a heating source for buildings, and incentivize the use of greener geothermal energy instead. Currently, gas companies are often permitted to connect new buildings to the gas heating grid without charging the building’s owners, while geothermal heating companies are not. The new bill would reverse this status quo, making geothermal hookups cheaper in cases where both are available. 

Raiding RGGI

Hochul continued a Cuomo-era practice that has rankled environmentalists and that they hoped she might reverse: her budget diverts funds earmarked for climate change efforts into the state’s general fund.

The multi-state Regional Greenhouse Gas Initiative program is a mandatory cap-and-trade program for power producers that requires large power plants to buy emissions allowances, with the proceeds flowing to state funds set aside for renewables and energy efficiency.

During his decade in office, Governor Cuomo frequently moved a portion of the funds raised by the program into the state’s general fund rather than spending them on their intended environmental purposes. Hochul’s budget honored that tradition, diverting about an eighth of the roughly $160 million that the state expects to collect through the program into the general fund.

Doreen Harris, president and CEO of the New York State Energy Research and Development Authority, the main agency responsible for spending RGGI funds on green energy projects, said that this diversion doesn’t interfere with the agency’s climate initiatives.

“We really utilize the vast majority of these RGGI funds to achieve really exciting investments in climate, clean energy, and notably a strong focus on bringing investment directly to disadvantaged communities,” she told New York Focus.

While the approximately $20 million move doesn’t represent a significant portion of the state’s total budget, Conor Bambrick, director of climate policy at Environmental Advocates New York, said that it demonstrated misplaced priorities—especially in a year of budgetary surplus.

“You’re sitting on a surplus right now, why are you nickel and diming the state’s sole climate fund?” he said.