Large greenhouse gas emitters and fuel distributors in New York will be required to pay more than $1 billion per year, according to a new “Cap-and-Invest” program unveiled by Governor Kathy Hochul in her 2023 State of the State address, with proceeds reinvested in emissions reduction initiatives and support for vulnerable communities facing rising energy prices.
Under the new program, large-scale greenhouse gas emitters and distributors of heating and transportation fuels will be required to purchase allowances for the emissions associated with their activities, based on an economy-wide emissions cap. The cap will be reduced every year, on a trajectory aligned with the state’s Climate Act. Passed into law in 2019, the Act requires New York to reduce economy-wide GHG emissions by 40% by 2030 and at least 85% by 2050, on a 1990 basis.
According to a statement released by the Governor, the new program will incentivize consumers, businesses, and other entities to transition to lower-carbon alternatives, while enabling investments in areas including climate mitigation, energy efficiency, clean transportation, and other projects, as well as funding rebates for New Yorkers to mitigate higher consumer costs associated with the program. The program is anticipated to generate more than $1 billion in proceeds annually.
“Big emitters will have to purchase permits to sell polluting fuels. The dirtier the fuel – the bigger the price tag. And the “invest” part of the program will accelerate the clean energy transition and include a universal Climate Action rebate that will provide $1 billion in revenues that we’ll allocate to help cover utility bills, transportation costs, and de-carbonization efforts.”
At least 35% of the proceeds are to be allocated to programs directly benefiting disadvantaged communities, including funding for programs to improve air quality, reduce reliance on polluting power plants, retrofit homes and schools, and decarbonize transportation systems.
New York’s cap-and-trade initiative also aims to catalyze a nationwide move towards carbon pricing, according to the statement, with the program to be designed with the capacity to join other current or future programs.
“Our ambitious Cap-and-Invest Program sets a cap on greenhouse gas emissions and shares the revenues with New Yorkers from disadvantaged communities to help cover utility bills, transportation costs and decarbonization efforts. Through our innovative efforts, we will create a cleaner, greener future while helping New Yorkers with the costs of the transition.”