Legislative Memos

Gavin Donohue Testimony on CCPA and Carbon Offsets

Climate and Community Protection Act
A.3876 (Englebright) / S.2992 (Kaminsky)

The Independent Power Producers of New York (IPPNY) is New York’s oldest trade association dedicated to representing the independent generators of electric power in New York State. Our members generate the majority of New York's electricity, utilizing almost every generation technology available today, such as wind, solar, natural gas, oil, hydro, coal, biomass, and nuclear.

The effects of climate change are well understood and addressing those impacts, while transitioning New York to a new energy future, is important. IPPNY actively supports a move to a more efficient electric system in a way that maintains the reliability of our grid and makes sure consumers are not met with significant financial burden.

One of the most essential aspects to consider under the Climate and Community Protection Act (CCPA) is the role of carbon offsets. The implementation of offsets allows for the continued use of efficient facilities that are the backbone of our reliable electric system while accounting for their emissions. Furthermore, the economy-wide approach needed to significantly cut emissions requires the flexibility for implementation that can be provided by offsets.

Many groups have expressed reservations or opposition to the use of offsets, stating that the approach would create a loophole that would not reduce emissions at the source or the emissions of co-pollutants. We believe a reasonable, practical, workable program can be developed to address these concerns, cutting emissions while preserving the flexibility, affordability, reliability, and efficiency of our electric system. An offsets program is especially important because carbon capture and sequestration technologies are not yet commercially available.

State of the Grid

It has been nearly 20 years since the inception of New York’s wholesale electricity markets. In that time, these markets have driven independent power producers to take tremendous strides to reduce emissions and provide significant environmental benefits. The State’s electric generation sector hasseen the sharpest decrease of emissions from 1990 levels of any sector. According to data from the New York State Energy Research and Development Authority (NYSERDA), from 1990 through 2016, the power sector reduced greenhouse gas emissions by 56 percent. This result is largely due to the forces of the competitive wholesale electricity market that leads to the operation of the most efficient facilities and without the availability of direct emission control technologies. In that same span of time, emissions from the transportation sector increased by 24.2 percent. Furthermore, since competitive markets were launched, sulfur dioxide emissions have decreased by 98 percent and nitrogen oxides are down 89 percent.

Offsets Under RGGI

Offset programs are not a new concept in environmental regulations and have been implemented in community benefit projects. Most notably in New York, offsets are part of the Regional Greenhouse Gas Initiative (RGGI). RGGI includes the following offset categories: landfill methane capture and destruction; reduction in emissions of sulfur hexafluoride; sequestration of carbon due to afforestation; agricultural manure management operations; and reduction or avoidance of carbon dioxide emissions from oil, natural gas, propane or coal end-use combustion due to end-use energy efficiency. The rules for these categories are extensive and were broadly debated, and they could result in real, additional, verifiable, enforceable, and permanent emission reductions.

One of the RGGI program’s offset project categories is sequestration of carbon through afforestation – a concept other states have also utilized. A 2017 Stanford University study[1] found that California’s pioneering forest offset program leads to emissions reductions that would have otherwise not occurred. At the time of the report’s issuance, the program had offset 25 million tons of carbon since 2013, which is equal to five percent of California’s annual passenger vehicle emissions. This success shows that the expansion of offset programs can make a real impact in reaching needed emissions reductions.

The role of offsets in the RGGI program is important, but their use has been limited due to the low price of allowances. Conceivably, any market-based mechanisms under the CCPA would likely result in higher allowances prices that would make the use of offsets more economic. Offsets are essential to achieve the CCPA’s desired emission reductions cost-effectively and for the increased likelihood of successful implementation of the program. Use of offset allowances will provide needed flexibility in program compliance, given the lack of back-end controls that normally would provide that flexibility and act as a check on allowance prices.

A cap and trade program like RGGI under an economy wide approach would apply to at least all Clean Air Act Title V permit holders. Offsets would not be used just by power plant owners. Under the economy-wide climate change bill, offsets would likely be used by other Title V permit holders: large apartment buildings; hospitals; colleges and universities; wastewater treatment plants; and businesses. A well-developed offsets program could be designed to provide these facilities with flexibility in achieving emission reduction requirements, including these facilities that are located in communities that also host power plants, in a way that provides benefits to those communities.

Not all parts of the economy will be able to reduce emissions at the same time and in the same manner. Having some emitters help others to cut their emissions is beneficial to all, as it would allow those emissions reductions to be counted sooner. However, at some point, there will be no sources of offsets left, as everyone will be reducing their emissions to zero. Carbon capture and sequestration technology also will be important, especially to allow for flexibility in fuel uses, including for heat, and to maintain electric system reliability.

Communities understandably are concerned about local emissions of existing facilities and the cumulative impact of their emission sources – not just power plants. Fortunately, for power plants, the State’s power plant siting law, and associated New York State Department of Environmental Conservation (DEC) regulations, have provisions in place to make sure that environmental justice impacts are addressed in communities. The DEC also has approved new regulations for a carbon dioxide emissions performance standard for existing power plant owners, and the DEC is in the process of promulgating a regulation to further reduce nitrogen oxide emissions from power plant peaking units. 

An Approach to Offsets Under the CCPA

Gas-fired baseload electric generating facilities can operate continuously to provide reliable and low-cost electricity. Currently, 35 percent of the State’s electricity consumed, and 67 percent of power downstate, is produced by dual-fuel (natural gas and oil) resources. The New York Independent System Operator relies on these resources to maintain reliability on hot summer evenings when intermittent solar and wind energy facilities are producing little-to-no electricity. To preserve grid reliability, a path forward must be found to incorporate these resources.

A prudent approach would be to include a definition of “carbon-neutral energy sources” within the legislation to address emissions of facilities through offsets and the use of carbon capture and sequestration technology so the backbone for our electric system can continue to function reliably. Carbon offsets would allow necessary generation infrastructure to stay online while accounting for its emissions.

Recently, offsets have been included within the pending NYC Local Law Int. No. 1253-C, which the New York City Council passed near-unanimously, and which also had the overwhelming support of environmental groups. Major environmental groups also are proposing amendments to the CCPA to include offset projects involving ecosystem restoration and the restoration and sustainable management of natural and urban forests or working lands, grasslands, coastal wetlands, and sub-tidal habitats.

The sources of these offsets must be from projects located within New York State and, in the case of environmental justice communities, located within those communities where practical. Consistent with the City Council’s approach and that of RGGI, offsets would be required to exhibit environmental integrity principles, including additionality to make sure that the offsets are not already required by local, national, or international regulations.

The Department of Environmental Conservation (DEC) should be required to consult with the proposed Climate Action Council and with the Environmental Justice Advisory Group on the development of the offsets program. The DEC should conduct an inventory of greenhouse gas emission sources within environmental justice communities to determine which sources of greenhouse gas emissions and co-pollutants are the highest, without presupposing that power plant owners may be the largest. Given the emission reduction success of power plant owners to date, it may be the case that buildings or other industrial sources may be the higher emitters. 

Conclusion

The goals of the CCPA are ambitious and mitigating the impact of climate change means an all-hands-on-deck approach is needed. An honest attempt at doing everything possible must include the adoption of a carbon offset and sequestration program to make sure we see the necessary emission reductions across the State’s entire economy. Successfully implementing this program would solidify New York’s place as a leader in combating climate change.

We at IPPNY thank you for the opportunity to submit this testimony, and we look forward to working with you. Please contact our offices with any questions.

[1] Anderson, C., Field, C. and Mach, K. (2017). Forest offsets partner climate‐change mitigation with conservation. Frontiers in Ecology and the Environment, 15(7), pp.359-365.