‘CAP AND INVEST’ SHOULD COVER POWER PLANTS, EJ GROUP SAYS: Leaving the electric sector out of a proposed cap-and-trade system, as New York officials have indicated they’re leaning toward, would increase harmful pollution from fossil fuel plants, according to new research. The latest report released today by the collaboration between Resources for the Future and the New York City Environmental Justice Alliance focuses on a key policy question facing the state as it works on draft regulations for “cap and invest.” That’s whether or not the electricity generation sector — a significant source of pollution although well behind buildings and transportation — should be “obligated” in the state’s cap-and-trade program. Modeling by NYSERDA indicated that including power plants would slightly accelerate renewable deployment and wouldn’t move up fossil fuel plant closures, but that it would raise prices for electricity. The authority is also concerned that higher electric costs could discourage heat pump adoption. Regional emissions reduction would be slightly lower under the program, as imports from fossil fuel plants to the state increase, according to the state’s analysis. But the state did not consider local effects of harmful co-pollutants in its analysis of the electric sector. The new report backed by NYC-EJA finds levels of particulate matter, sulfur dioxide and nitrogen oxides are higher from power plants in a scenario where the electric sector is not included in a cap versus when they are required to purchase allowances. Fine particulate matter emissions (PM2.5) would be reduced 60 percent with electricity in the cap compared to a business-as-usual case. Levels of the harmful pollutant would increase by about 10 percent if cap-and-invest does not include the electric sector, according to the report. That’s partly because electrification of heating and transportation drives fossil fuel plants to run more. “There's a chance that there will be higher greenhouse gas emissions in a scenario where there is cap-and-invest and the electricity sector is not obligated [compared to] not having cap-trade-and-invest,” said Eunice Ko, deputy director at NYC-EJA. “It impresses the point that we need to make sure we're designing it right and we're designing it well. Cap-trade-and-invest is not a guarantee to emission reductions.” Environmental justice groups have also been pushing for facility-specific limits on emissions to ensure disadvantaged communities see benefits of reductions under cap-and-trade. The research also includes scenarios with these types of individual limits, which are opposed by business groups and which state officials have indicated they are not considering as part of cap-and-trade regulations but may explore separately. These types of facility-level limits combined with including the electric sector in the cap-and-trade program provide even greater pollution reduction benefits. Facility caps can also provide air quality benefits — particularly for disadvantaged communities — without including electricity in the cap-and-trade program, according to the report. The costs to consumers from these additional policies are minimal, the report concludes. “This research shows that having these critical backstops doesn’t necessarily mean they’ll be cost prohibitive,” Ko said. One major driver of the different conclusions of the two analyses, including lower levels of greenhouse gas emissions regionally in the NYC-EJA analysis compared to the state’s, is different assumptions about renewable build-out. The state constrained build-out until 2031, whereas the model used in the NYC-EJA report allows more additions of renewables earlier. Environmental advocates are worried about Gov. Kathy Hochul backing away from “cap and invest,” given her abrupt reversal on congestion pricing due to cost concerns. But they also want to see a strong program with caps that will achieve the state’s goals. DEC and NYSERDA have previously said the draft regulations would be out this summer. Maureen Wren, a spokesperson for DEC, recently said in a statement the formal draft regulations are expected “this year,” and would not commit to the summer timeline. — Marie J. French HAPPY MONDAY MORNING: Let us know if you have tips, story ideas or life advice. We're always here at mfrench@politico.com and rrivard@politico.com. And if you like this letter, please tell a friend and/or loved one to sign up. Want to receive this newsletter every weekday? Subscribe to POLITICO Pro. You’ll also receive daily policy news and other intelligence you need to act on the day’s biggest stories. POWER MARKET DECISION WILL RAISE COSTS — POLITICO’s Marie J. French: A federal appeals court rejected an effort by New York’s utility regulator to lower costs for consumers by arguing that the state’s climate law doesn’t require fossil fuel plants to shut down in 2040. New York's Public Service Commission challenged a decision by the Federal Energy Regulatory Commission accepting a shorter life span for new gas plants in the power market rules set by the state’s grid operator. The D.C. Circuit Court of Appeals sided with FERC in a decision issued Friday. The battle highlights the uncertainty over how New York will meet the mandate for a “zero emissions” power sector by 2040. It’s a question the PSC is just starting to grapple with through a process it kicked off more than three years after the Climate Leadership and Community Protection Act was signed. The federal court’s decision faulted the PSC for failing to act more quickly and emphasized the uncertainty facing investors. It said that FERC and the New York Independent System Operator acted reasonably given the uncertainty about the state’s climate goals. The decision could have significant ripple effects. Right now, NYISO is undergoing the next iteration of the "demand curve reset" process the decision deals with. If the grid operator lowers the expected life span of new gas plants even further, costs for New York consumers would be significant. It could revive frustrations from policymakers over the tension between the state’s climate goals and power markets. — Key reaction: A spokesperson for PSC, Jim Denn, said the agency is reviewing its options. "We are disappointed in the court’s decision," he said in a statement. "The fact of the matter is that the effect of changing the amortization period for setting capacity prices is resulting in windfall profits to the existing fossil fuel power generators and does nothing to add the resources we need to meet the State’s climate and reliability objectives." THEY’RE COMING (WITH LABELS) FOR YOUR GAS STOVES — POLITICO’s Wes Venteicher and Marie J. French: A push by blue states to warn consumers that gas stoves release toxic fumes is the latest offensive in America’s culture war over cooktops. State legislators in California, New York and Illinois have pitched bills to tell shoppers that gas stoves — which are in some 40 percent of U.S. homes — put them, their children and even (in California) their pets at risk of asthma, leukemia and other illnesses. Appliance manufacturers behind major household brands like Samsung and LG are pushing back, accusing proponents of demonizing the fossil fuel for political gain and succeeding in weakening some of the warnings. CO2 FRACKING BAN HIGHLIGHTS CARBON CAPTURE DEBATE — POLITICO’s Allison Prang: Legislation awaiting action by New York Gov. Kathy Hochul that aims to block a plan for using captured carbon dioxide to extract natural gas from underground shale formations is reviving questions around what to do with the pollutant after it’s trapped. State lawmakers backed by environmental activists pushed the bill to expand an existing ban on hydraulic fracking after a company called Southern Tier Solutions proposed using liquefied carbon dioxide in place of substances explicitly prohibited in the 2020 law. Carbon capture and sequestration is viewed as a potentially valuable tool in efforts to fight global warming. But there is conflict in the carbon management industry and among advocacy groups over whether the captured gas should be stored or used in some fashion, particularly when it comes to the prospect of producing more fossil fuels. Here's what we're watching this week: MONDAY — NYC-DSA and other supporters of NYPA playing a large role in building new renewables gather to push for more investments, noon, 633 3rd Ave., New York. — Assemblymembers Dana Levenberg and MaryJane Shimsky, local elected officials and advocates oppose a new proposed pipeline capacity expansion project known as “Project Maple,” 11 a.m., Cortlandt Waterfront Park Stage, 41 Riverview Ave., Verplanck. —The New York State Drinking Water Quality Council meets to discuss new EPA PFAS limits, 10 a.m., Empire State Plaza Concourse, Meeting Room 6, Albany. TUESDAY — A group of environmental groups dubbed the “New York City Coalition to End Lead Poisoning” opposes a bill to require property owners to remove and replace their own lead pipes, shifting the financial burden from the city. 9 a.m., City Hall Park, New York.
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