Assessment of Public Comments 6 NYCRR Parts 242 and 200
Comments Received from July 10, 2013 to September 9, 2013
Comment 1: RGGI, by design, operates as a tax on fossil generators. From the outset, it is important to keep in mind that competitive power companies like NRG do not have the luxury of regulated utility rates and captive monopoly customers from whom they can recover the costs of complying with RGGI. The revenues raised by the tax are used primarily to support energy efficiency programs, and increasingly to replace general revenues, in a manner not contemplated by the RGGI accord. (Commenter 18)
Response to Comment 1: The Department disagrees that the Regional Greenhouse Gas Initiative (RGGI) operates as a tax on fossil generators by design. RGGI does not operate as a tax on fossil generators, either by design or in practice. Instead, RGGI is a cap-and-trade program that includes a regional limit on carbon dioxide (CO2) emissions from subject power plants. Through the revisions to the Program, the Department is not substantially altering the means by which the Program regulates emissions of CO2 from power plants. That is, the Program will continue to utilize an interstate market-based cap-and-trade mechanism, in order to control CO2 emissions from power plants.
The primary purpose and intent of the CO2 Budget Trading Program (Program) is to cap and reduce emissions of CO2, a greenhouse gas (GHG), from subject power plants, not to raise revenue for general governmental purposes. The CO2 emission budget under the Program is set by the Department to minimize contribution to climate change, at a level protective of public health and the environment.
RGGI utilizes a market-based mechanism, under which the primary requirement is for a CO2 budget source to hold a sufficient amount of CO2 allowances to cover its CO2 emissions, over the relevant control period or interim control period. A CO2 budget source may meet this primary requirement of the Program by a combination of methods, including by obtaining CO2 allowances, either at auction or in the secondary market, or by reducing CO2 emissions through efficiency improvements or fuel switching. A CO2 allowance therefore constitutes a part of the cost of complying with the Program for a CO2 budget source.
Under RGGI, most CO2 allowances are initially distributed through regional auctions, rather than given away directly to generators for free. In New York under the Program, the Department allocates CO2 allowances to the Energy Efficiency and Clean Energy Technology Account, which the New York State Energy Research and Development Authority (NYSERDA) or its agent auctions to promote the purpose of the Program.
This design feature of the Program is intended to further the CO2 emission reduction goals of the Program, increase economic efficiency, and reduce costs for consumers. Rather than being a means to generate revenue to support general governmental functions, the auctioning of CO2 allowances ensures that sources are able to meet Program requirements in the most cost-effective manner. The auctioning of CO2 allowances also ensures that their value is used to promote the emission reduction goals of the Program, through investment in energy efficiency, renewable energy, and carbon abatement technologies.
Moreover, while the Department determines the level of the CO2 emissions cap, which is established pursuant to regulation, neither the Department nor NYSERDA determines the price of CO2 allowances under the Program. Instead, the allowance market determines the price of CO2 allowances (the cost of complying with RGGI), based on numerous factors, including the cap level, CO2 emission levels, relative fuel prices, and energy demand.
The Department recognizes that, due to the nature of electricity markets, not all regulated entities are able to recover costs from customers in precisely the same manner. The Department does not necessarily intend or expect that all CO2 budget sources will be able to recover 100 percent of the costs of complying with the Program. RGGI is designed to cap and reduce CO2 emissions from subject sources in the most cost-effective manner.
Finally, the proceeds raised by the auction of CO2 allowances are used by NYSERDA to further the CO2 emission reduction goals of the Program, and are not primarily used to replace general revenues. New York State also does not allocate proceeds pursuant to any RGGI agreement with other participating states. Instead, NYSERDA allocates these auction proceeds pursuant to its Operating Plan [http://www.nyserda.ny.gov/Energy-and-the-Environment/Regional-Greenhouse-Gas-Initiative/Auction-Proceeds.aspx], and consistent with the Program. The Program sets forth that CO2 allowance proceeds are used by NYERDA to promote the Program's CO2 emission reduction goals through investments in energy efficiency, renewable energy, and carbon abatement technologies.
Comment 2: Increased end use efficiency certainly has a role to play in reducing CO2 emissions, but on its own cannot even come close to bringing about the significant emission reductions necessary to effectively address the risk of climate change. To achieve that end, efficiency must be coupled with a shift from high carbon to low and no carbon supply resources. Until RGGI states provide effective policies to support the deployment of low and no carbon resources, and cease their reliance on simply taxing existing generators to pay for subsidized energy efficiency, they are foregoing much more effective opportunities to reduce overall CO2 emissions and grow a greener, more sustainable economy. (Commenter 18)
Response to Comment 2: The Department agrees that numerous actions are needed by multiple entities to effectively address the risk of climate change. Increased end use efficiency cannot, by itself, completely address the risk of climate change. The Program is intended to reduce the State power sector's contribution to climate change.
The Program works in conjunction with other State policies to minimize the risks and impacts of climate change. A variety of programs and policies are required to effectively address climate change. For example, in addition to the Program, the Department also recently promulgated 6 NYCRR Part 251, CO2 Performance Standards for Major Electric Generating Facilities (Part 251), which serves to prevent new high carbon sources of energy.
The State already has a number of additional complementary policies to support the deployment of low and no carbon resources. The RGGI program investments in efficiency and clean energy supply sources complement a variety of other New York State programs, such as the Energy Efficiency Portfolio Standard (EEPS), the Renewable Portfolio Standard (RPS), New York Sun and the Green Bank fostering effective opportunities to reduce overall CO2 emissions and grow a greener, more sustainable economy. And pursuant to its most recent Operating Plan, NYSERDA already allocates some CO2 allowance proceeds for purposes of promoting solar technologies, to support the deployment of solar power generation throughout the state and thereby support the CO2 emission reduction goals of the Program. In addition, by establishing a cost associated with the emission of CO2 (i.e., the cost of a CO2 allowance) from CO2 budget sources, the Program creates an incentive for producing additional electricity by low or no carbon means. Finally, the Competitive Greenhouse Gas Reduction Pilot program ($14.5 million), which offers opportunities for emissions reductions and efficiency improvements in the power sector, is targeted for release during the fourth quarter of 2013.
Comment 3: A transfer of revenues from fossil generators to electric efficiency providers affirmatively limits the ability of fossil generator owners to invest in cleaner supply side. We know from experience that a balanced system consisting of a cap-and-trade system to limit CO2 emissions, strong incentives for energy efficiency, and complementary measures that incent the competitive deployment of large scale and distributed renewable energy (potentially through state-mandated long-term contracts), electric vehicle charging systems, and low carbon fuels can succeed in attracting significant low carbon technology investment and innovation to the state in a manner that both reduces emissions and benefits consumers. The glaring contrast between this vibrant ecosystem approach and the RGGI "tax fossil fuel and spend on efficiency" approach is a clear example of a fundamental flaw in RGGI's design: the state's program should enhance the ability of the electricity generation sector to invest in low carbon supply side solutions - instead of simply requiring the generation sector to pay for another sector's deployment of efficiency programs through an increasing tax burden. The RGGI program - particularly as it is now proposed to be revised - is not only an ineffective and incomplete solution to the climate problem; it is fundamentally unfair and prejudicial to electric power providers in the RGGI states. (Commenter 18)
Response to Comment 3: As described above in response to Comment 1, RGGI and the Program do not tax fossil fuel generators. Moreover, RGGI establishes a carbon price signal, which helps to encourage transition to cleaner energy sources and helps to promote low carbon technology investment.
By establishing a cost associated with the emissions of CO2 from CO2 budget sources, the Program actually creates an incentive for investing in no- or low-carbon generating resources. This is true because in a competitive market where the marginal unit is likely a fossil unit, all electricity generated (including that generated by low and no-carbon units) will be compensated at a rate which includes consideration of the carbon cost of the marginal unit.
In addition, NYSERDA's Competitive Greenhouse Gas Reduction Pilot program ($14.5 million), which offers opportunities for emissions reductions and efficiency improvements in the power sector, is targeted for release during the fourth quarter of 2013.
We agree that a balanced system of programs can reduce overall CO2 emissions and grow a greener, more sustainable economy. The Department believes that the "balanced system" approach described by the commenter is precisely what is in place in the State, including through the Program and other complementary policies, such as the EEPS and RPS programs. In fact, RGGI program investments by NYSERDA in efficiency and clean energy supply sources complement a variety of other programs in New York such as the EEPS, the RPS, New York Sun and the Green Bank to attract significant low carbon technology investment and innovation to the State in a manner that both reduces emissions and benefits consumers.
Comment 4: RGGI states should take significant steps to support private investment in clean generation. If they did so, power prices in both the RGGI states and the surrounding states would fall; emissions of CO2 and of criteria pollutants would be reduced both within and outside of the RGGI states; power companies would find it profitable to grow clean energy businesses in the RGGI states rather than simply finding it less profitable to operate fossil facilities; and clean energy jobs and employment would increase in the RGGI states. (Commenter 18)
Response to Comment 4: New York State is already taking significant steps to support private investment in clean generation. The Department agrees that these steps yield the benefits described by the commenter, including helping to limit and reduce electricity prices, reduce emissions of CO2 and other pollutants, and encourage the creation of clean energy jobs. The Program itself already provides support for private investment in clean generation, including through its establishment of a carbon price signal, and the investment of proceeds by NYSERDA.
New York has a broad RPS and the NY Sun initiative to foster more investment in renewable generation in the state. RGGI funds complement these initiatives by providing additional funding to support investment in the installation of photovoltaics (PV) on Long Island. Most recently, NYSERDA is working to establish and capitalize the Green Bank, which will accelerate the development of clean energy projects throughout the State by leveraging private sector capital. In particular, NYSERDA plans to use some CO2 allowance auction proceeds to fund the Green Bank, which would use innovative financing mechanisms to increase the adoption of renewable energy generation in New York. The Green Bank will leverage private capital to spur these projects that reduce carbon emissions.
Comment 5: New York is unique among the RGGI states in that it joined RGGI without the approval of its legislature. It adopted the program purely by administrative regulations, without express statutory authority. Because persons subject to RGGI must purchase allowances to operate, RGGI arguably constitutes a tax under New York law. The allowance purchase price may never go below a minimum dollar amount, and New York is proposing to reduce the number of allowances, which will cause the price to rise and to raise this minimum amount to $2.00 per allowance, with an increase in the minimum price of 2.5 percent per year beginning in 2015. Because the revenue raised from the sale of allowances in the state far exceeds the cost of administering RGGI, the requirement to purchase allowances does not constitute a "regulatory fee." 'See American Sugar Refining Co. of New York v. Waterfront Comm. of New York Harbor', 55 N.Y.2d 11, 25-27 (1982). The proposed regulations arguably violate the New York Constitution because only the legislature has the power to levy taxes in New York. N.Y. CONST. art. III, sections 1, 22, 23; art. XVI, section 1 (power to tax is granted to the legislature); 'see also Poughkeepsie Library Dist. v. Town of Poughkeepsie', 81 N.Y.2d 574, 579 (1993) ("The power to tax, of course, lies solely with the Legislature."). By levying a tax, DEC arguably has violated separation of powers principles enshrined in the state constitution. 'See Oneida County v. Berle', 49 N.Y.2d 515, 522 (1980); 'Under 21, Catholic Home Bureau for Dependent Children v. City of New York', 65 N.Y.2d 344, 356 (1985). Without having the authority to do so, DEC has imposed such a tax directly on power plants in the state. DEC's RGGI regulations may therefore be unconstitutional. (Commenter 18)
Response to Comment 5: The Department disagrees. New York is not unique among the RGGI participating states in the manner described by the commenter, because the State initially began participating in RGGI, and continues to do so through the revisions to the Program, with the authorization of the State Legislature.
The Department initially promulgated the Program in 2008, and is now revising the Program, pursuant to its existing statutory authority. As described in the Regulatory Impact Statement (RIS), through numerous enactments, the Legislature has granted broad authority to the Department to use all available methods to prevent and control air pollution from all sources. The Program, which utilizes a market-based mechanism as the means to control CO2 emissions from subject power plants, is consistent with this authority.
The Department has the power to promulgate "regulations for preventing, controlling or prohibiting air pollution, [including] controlling air contamination." Environmental Conservation Law (ECL) section 19-0301(1)(a). In any such regulations, the Department may prescribe "the extent to which air contaminants may be emitted to the air by any air contamination source." ECL section 19-0301(1)(b)(2). Further, the Department has a duty to "[p]repare and develop a general comprehensive plan for the control or abatement of existing air pollution and for the control or prevention of any new air pollution." ECL section 19-0301(2)(a).
CO2 is a gas that meets the definition of "air contaminant." ECL section 19-0107(2). As described in the RIS, CO2 causes "air pollution" as defined in the ECL, because it is present in the atmosphere in quantities that contribute to climate change, which is injurious to life and property in the State. ECL section 19-0107(3). Moreover, in Massachusetts v. EPA, 549 U.S. 497, 532 (2007), the U.S. Supreme Court held that GHGs, including CO2, "fit well within the Clean Air Act's capacious definition of 'air pollutant.'" The definitions of "air contaminant" and "air pollution" in the ECL under State law are broader than the definition of "air pollutant" under the federal Clean Air Act (CAA). Finally, CO2 budget sources subject to the Program are an "air contamination source" as defined in the ECL, because such power plants emit the air contaminant CO2 into the atmosphere. ECL section 19-0107(5).
It is the policy of the State "to require the use of all available practical and reasonable methods to prevent and control air pollution in the [S]tate." ECL section 19-0103. ECL section 19-0103 establishes the appropriate policy guidelines pursuant to which the Department promulgate regulations to limit emissions from any air contamination sources: Such regulations are to be "consistent with the public health and welfare and the public enjoyment thereof, the industrial development of the state, the propagation and protection of flora and fauna, and the protection of physical property and other resources [and] should be clearly premised upon scientific knowledge of causes as well as effects." In adopting regulations regarding the prevention and control of air pollution, the Department follows the procedures set forth in ECL section 19-0303, including that any such regulation "may differ in its terms and provisions as between particular types and conditions of air pollution or of air contamination [and] particular air contamination sources." ECL section 19-0303(2).
Moreover, the Legislature has also declared a policy "to improve and coordinate the environmental plans, functions, powers and programs of the state, in cooperation with . . . regions." ECL section 1-0101. Consistent with this policy, the Legislature has specifically authorized the Department to cooperate with other states in its promulgation of rules and regulations to prevent and control air pollution. See ECL sections 3-0301 and 19-0301. Finally, the Department can "[e]nter into contracts with any person to do all things necessary or convenient to carry out the functions, powers and duties of the department." ECL section 3-0301(2)(b)
Acting under this Legislative authority and pursuant to these collective Legislative policies and procedures, the Department initially determined that the interstate cap-and-trade mechanism utilized by the Program is the best method for preventing and controlling CO2 emissions from existing power plants. Through the revisions to the Program, the Department is not substantially altering the means by which the Program regulates emissions of CO2 from power plants. That is, the Program will continue to utilize an interstate market-based cap-and-trade mechanism, to control CO2 emissions from power plants.
In addition to being consistent with existing statutory authority, the Program, including the revisions to the Program, does not constitute a tax or fee under State law. As described in response to Comment 1, the intent of the Program and RGGI is not to raise revenue for general governmental purposes. Instead, the Program is intended to limit CO2 emissions from subject power plants, and the requirement for generators to hold sufficient CO2 allowances serves as the primary compliance obligation under the Program. Proceeds from the auction of CO2 allowances are used to further the emission reduction objectives of the Program, and to further reduce the costs of complying with the Program.
Further, the requirement to purchase allowances does not constitute a licensing or regulatory "fee." Under the Program, as a condition to its overarching operating permit issued pursuant to 6 NYCRR Parts 201 and 621, each CO2 budget source is required to hold in its compliance account allowances sufficient to cover total CO2 emissions for the control period from all CO2 budget units at the source. This constitutes one of several "conditions" to a CO2 budget source's operating permit. Purchasing CO2 allowances is one compliance mechanism available to covered sources to meet the regulatory limitation on CO2 emissions. Other compliance mechanisms include reducing emissions through heat rate improvements, fuel switching, co-firing of eligible biomass, environmental dispatch of a company portfolio of units that considers the CO2 emissions rate of individual units, and the use of emissions offsets. Thus, allowances are regulatory compliance mechanisms similar in nature to emission reduction technologies, not licenses. The cost of purchasing allowances is not a "fee" imposed by the Department, but rather is a compliance cost similar to the costs associated with alternative compliance mechanisms, such as the purchase of a control technology to reduce emissions. Further, such costs are not imposed by the Department because covered sources have a choice as to how they acquire the allowances and are not required to purchase allowances directly from any governmental agency, unlike a fee, which is imposed directly on a regulated source.
Finally, the minimum reserve price established for CO2 allowances under the Program helps to minimize the possibility of collusion in auctions, as it is a design feature that proactively limits potential financial gain associated with this type of behavior. In other words, the minimum reserve price may serve to act as a deterrent to collusive behavior.
In any case, the minimum reserve price under the Program is currently $1.98 per CO2 allowance in 2013, and will increase slightly to $2.00 in 2014 under the revisions to the Program. The 2.5 percent increase per year, included in the revisions to the Program, is intended to account for future inflation. While the Program previously included an adjustment for inflation, the change to using a 2.5 percent adjustment each year is intended to streamline this adjustment, and ensure that it is made in a manner that provides advance certainty to regulated entities and the marketplace.
The reduction in the CO2 emission cap, and the corresponding reduction in the amount of CO2 allowances available in the market, is projected to increase the price of CO2 allowances. In particular, as discussed in the RIS, the cost of CO2 allowances is projected to increase to $6.02/ton (2010 dollars) in 2014, to about $6.73/ton in 2016, and to about $8.41/ton in 2020 under the revisions to the Program. If such prices are in fact realized, then the minimum reserve price should not be directly relevant in terms of the operation of the RGGI CO2 allowance auctions and market, as CO2 allowance clearing prices will be much higher than the minimum reserve price.
Comment 6: RGGI may violate the United States Constitution - specifically the Compact Clause by encroaching on federal supremacy as an unconstitutional multi-state compact. RGGI is an agreement among multiple states - created without the consent of Congress - by which the states obligate themselves to a set of common rules and limitations that affect interstate commerce in a manner that an individual state, acting alone, could not. Because RGGI's constitutionality remains unresolved, there is legal uncertainty about the program that may adversely affect the clean energy investments that any program focused on reducing GHG emissions should be tailored to promote. RGGI also may conflict with section 102(c) of the federal Clean Air Act ("CAA"), which does not authorize an interstate compact such as RGGI. RGGI seeks to address global atmospheric concentrations of greenhouse gases, a matter on which a handful of states can have little or no impact. Moreover, RGGI is intended to be more than the type of non-binding mutual cooperation agreement contemplated and authorized by the CAA. RGGI's legal weaknesses are significant and, when combined with the design flaws described above, call for a substantial overhaul of the RGGI program. (Commenter 18)
Response to Comment 6: The Department disagrees that RGGI violates the United States Constitution, including specifically the Compact Clause. RGGI does not constitute a compact under the Constitution, and therefore does not require the consent of Congress.
First, the RGGI Memorandum of Understanding (RGGI MOU), which was initially signed by the Governors of several participating states in 2005, is merely a non-binding political agreement amongst the states regarding the establishment of a RGGI program. Contrary to the commenter's assertion, the RGGI MOU was not intended to be more than a non-binding mutual cooperation agreement. In fact, the State of New Jersey voluntarily withdrew from its participation in the RGGI program in 2012, further demonstrating the non-binding nature of the RGGI MOU. And even if the RGGI MOU was construed to be a binding agreement amongst the states, it would only have committed states to 'propose' respective programs in their individual states, pursuant to their own independent legal processes. New York and the other RGGI participating states discharged this non-binding political commitment when they initially proposed implementing regulations in approximately 2007.
Second, neither the RGGI MOU nor any other agreement amongst the states serves as the legal basis for the State's adoption of a RGGI program in New York. Instead, as described in response to Comment 5, the Program was initially adopted, and the revisions to the Program are now being promulgated, pursuant to the Department's existing statutory authority and consistent with the State's own regulatory process.
Third, New York and the other RGGI participating states are not obligated to a set of common rules or limitations. Instead, representatives of the participating states developed an Updated Model Rule, which as its name suggests, serves as a model for individual states to follow as they each implement their own regulatory revisions pursuant to their own legal process. States are free to, and in fact do, customize certain aspects of their individual programs that may deviate from the Updated Model Rule. Moreover, each state participating in RGGI, including New York, retains all of its authority, and makes all of its own policy and regulatory decisions regarding its own program.
Fourth, RGGI does not meet any of the traditional criteria used by courts to determine whether cooperation or agreements amongst states constitute a "compact" under the Compact Clause. In particular, RGGI does not impermissibly enlarge the participating states' political influence on environmental issues, interfere with the federal government's regulation of interstate commerce, or disrupt the federal government's climate policy. Under RGGI, the participating states are not together exercising any power they would not be able to employ individually. As described above, the Department is adopting the revisions to the Program pursuant to the authority granted by the State Legislature. And rather than disrupting federal climate policy, New York and the other participating states in fact welcome efforts by the federal government to address climate change.
Finally, Clean Air Act Section 102 actually demonstrates that Congress encourages, and explicitly gives approval to, multistate agreements designed to combat air pollution, such as RGGI. First, Section 102(a) encourages cooperation amongst the states, including the enactment of "uniform State and local laws relating to the prevention and control of air pollution; . . . and the making of agreements and compacts between States for the prevention and control of air pollution." And section 102(c) provides explicit Congressional consent for States to negotiate and enter into agreements or compacts regarding cooperative efforts to prevent and control air pollution. While section 102(c) also requires approval of Congress for such agreements to be binding or obligatory upon any state, as described above, neither the RGGI program nor the RGGI MOU is binding or obligatory upon any of the participating states.
Comment 7: The legal weaknesses and uncertainties present two distinct problems for RGGI. First, due to the policy and economic problems cited above, the adverse effects of which are all greatly exacerbated by the proposed revisions, RGGI may attract litigation from those materially disadvantaged by its flaws. Second, to the extent any private investment is elicited by RGGI's price signal that private investment will be limited and made more costly by the significant legal uncertainty and risk created by the RGGI framework. There are numerous examples at both the federal and state level of environmental initiatives that have failed to accomplish their laudable purposes altogether or were significantly delayed because they were placed on a weak legal footing and as a result attracted litigation and adverse court rulings. For these reasons, NRG urges a thoughtful and considered set of revisions to the RGGI program. (Commenter 18)
Response to Comment 7: The Department disagrees that there are legal weaknesses and uncertainties regarding the Program. As described above in response to Comments 1, 5, and 6, and in the RIS, the promulgation of these revisions to the Program is consistent with State and Federal law. The Department does not believe the Program is on weak legal footing or that adverse court rulings will be issued.
While the Program was the subject of two prior legal challenges, both have been dismissed. One was dismissed through settlement, and one by order of the court in part based on grounds that the challenge, brought two and a half years after the Department promulgated the Program, was untimely. Any future challenges to the Department's authority to promulgate the Program or on the constitutionality of the Program would be similarly barred as untimely.
The Department nevertheless recognizes that legal challenges limited to the Program revisions are possible, just as litigation is always a possibility in relation to other Departmental rulemaking activities. The mere possibility of legal challenge does not necessarily require a reconsideration of the Program.
While any litigation may contribute to legal uncertainty and therefore impact private investment decisions, RGGI has continued to operate effectively even while the two prior legal challenges were pending. The RGGI CO2 allowance market provides market participants with the ability to independently factor any legal uncertainty, as well as any other considerations, into their decisions regarding CO2 allowance transactions.
Comments in Support
Comment 8: The Empire State Forest Products Association generally supports the amendments to Part 242. We believe that the proposed amendments will advance the goal of reducing carbon emissions, combating climate change, and ensuring a sustainable future while also supporting New York's forest products industry. (Commenter 1)
Response to Comment 8: Thank you for your comment. As described below in response to Comment 30, the primary purpose of the revisions to the Program is to further reduce CO2 emissions from the power sector. The Department recognizes that revisions to the voluntary renewable energy set-aside, as well as the ongoing ability for sources to deduct CO2 emissions attributable to the burning of eligible biomass, may also have positive impacts for the State's forest products industry.
Comment 9: The New York League of Conservation Voters strongly supports the proposed changes to the Regional Greenhouse Gas Initiative. (Commenter 2)
Response to Comment 9: Thank you for your comment.
Comment 10: The Adirondack Council applauds the efforts of the NYSDEC, as we are generally pleased with the proposed language. (Commenter 3)
Response to Comment 10: Thank you for your comment.
Comment 11: We commend Governor Cuomo and the Department for advancing the proposed regulatory amendments in adherence to the model rule and urge swift adoption. Implementing a strict cap will immediately reduce carbon emissions by an additional 45 percent will only strengthen New York's already successful RGGI programs, thereby boosting the state's clean energy economy and better protecting our communities and treasured landscapes from the most severe consequences of climate change. (Commenter 4)
Response to Comment 11: Thank you for your comment. The Department agrees that the revisions to the Program, including the approximately 45 percent reduction in the CO2 emissions cap, will serve to better protect the State from the impacts of climate change while also helping to encourage the State's clean energy economy.
Comment 12: We want to express our strong support and gratitude to Governor Cuomo and the Department for the leadership in developing the proposed regulatory amendments for the new RGGI model role. If adopted and implemented, the strict pollution cap will reduce harmful CO2 emissions by 45 percent, further strengthening the success of the RGGI program.
The science is clear that we are already feeling the consequences of global climate change. An action must be taken before it is too late. Look no further than Super Storm Sandy as well as Hurricanes Irene and Lee to see that these extreme weather events are becoming much more frequent and destructive. Rising sea levels threaten our Atlantic coast. Lower lake levels in the Great Lakes will exacerbate pollution problems and could reduce hydro power production. Droughts and other extreme weather events threaten the State's agricultural production. As New York faces the consequences of climate change we must also be on the forefront to provide solutions.
As the first market-based program to reduce greenhouse gas emissions from power plants, RGGI serves as a model for the nation to follow. Now more than ever it is essential that New York take this opportunity and extend and strengthen the RGGI program. (Commenter 8)
Response to Comment 12: Thank you for your comment. The Department agrees that the science is clear that we are already feeling the consequences of climate change, including here in the State. The revisions to the program will serve to minimize the State's contribution to climate change and its impacts on the State.
Comment 13: The Independent Power Producers of New York, Inc. supports the goal of reducing greenhouse gas emissions from 'all' sectors and the ongoing development of a fair and appropriate national program. (Commenter 6)
Response to Comment 13: Thank you for your comment. The Department shares the goal of reducing GHG emissions from all sectors, and supports the development of a federal program to address climate change. While the revisions to the Program address emissions from the electric sector, the investment of auction proceeds is beginning to achieve additional reductions in both the electric sector and other sectors. Moreover, consistent with Section 177 of the Clean Air Act, the Department has adopted California's more stringent GHG exhaust emission standards for new motor vehicles since the early 1990s, including most recently with amendments to 6 NYCRR Subpart 218-8 adopted in 2012. In addition, the Department, NYSERDA, the Department of Public Service, and the Department of Transportation are all actively participating in the Transportation Climate Initiative to continue to address emissions from the mobile sector. As described below in response to Comment 120, the Department is also actively participating in the U.S. Environmental Protection Agency's (EPA's) federal stakeholder process to implement national programs for new and existing electric generating facilities.
Comment 14: We commend the Cuomo administration's bold leadership on the strengthening of the Regional Greenhouse Gas Initiative (RGGI). New York has an opportunity to build on the successes of RGGI through the adoption of a strict cap that will cut carbon emissions by another 45 percent. This is equivalent to taking 7.2 million cars off the road, or the emissions of nine coal plants annually. A lower, more aggressive cap will strengthen and expand RGGI's successful programs including promoting more reliance on renewable energy, helping homeowners make energy efficient upgrades and clear our air. The aggressive cap will help to boost New York's clean energy economy, and improve public health while also protecting New York's communities and treasured landscapes from the most severe consequences of climate change. (Commenters 802-2255)
Response to Comment 14: Thank you for your comment.
Comment 15: We stand with Audubon New York in strongly supporting the proposed amendments to Parts 200 and 242 (CO2 Budget Trading Program) to Title 6 of the New York State Codes, Rules and Regulations. This important proposal will greatly enhance the effectiveness of the Regional Greenhouse Gas Initiative (RGGI) by lowering the cap on allowable emissions by forty five percent, and further reducing it incrementally through 2020. (Commenters 23-779)
Response to Comment 15: Thank you for your comment.
Comment 16: We support adopting a carbon pollution cap that reduces power plant emissions in New York State by 45 percent putting New York on track to further reduce emissions by 20 percent by 2020. (Commenters 781-800)
Response to Comment 16: Thank you for your comment.
Comment 17: We support the RGGI efforts to reduce greenhouse gas emissions in the northeast and to stop pollution. I am glad to read that our governor is joining an effort to reduce emissions from power plants. I have been waiting many years for this. Praise to Governor Cuomo. (Commenter 780)
Response to Comment 17: Thank you for your comment.
Comment 18: CCE strongly supports the proposed regulations for the new RGGI model rule and urges the Department to adopt without delay. CCE supports key provisions in the proposal, including first adopting a carbon pollution cap that reduces power plant emissions in New York State by 45 percent to 35 million tons, on par with its share of the 91 million tons agreed to by the broader RGGI state coalition, placing the State on track to further reduce emissions by 20 percent by 2020. (Commenter 8)
Response to Comment 18: Thank you for your comment.
Comment 19: We strongly support and urge the swift adoption of the Department of Environmental Conservation's Adopting a carbon pollution cap that reduces power plant emissions in New York State by 45 percent in 2014 and places the state on track to further reduce emissions by an additional 20 percent by the end of this decade. (Commenters 802-2255)
Response to Comment 19: Thank you for your comment.
Comment 20: We commend the New York Department of Environmental Conservation for moving to improve the Regional Greenhouse Gas Initiative (RGGI) in a way that ensures that it will yield significant reductions in carbon pollution from power plants. We strongly support the adoption of this rule that would cap emissions from power plants in the RGGI region at 91 million metric tons in 2014 and lower emissions by 2.5 percent per year. (Commenter 12)
Response to Comment 20: Thank you for your comment. The Department notes that, consistent with the revisions to the Program, the RGGI regional CO2 emissions cap will be 91 million short tons in 2014, not metric tons. The Program defines a "ton" as a short ton, or 2,000 pounds, and a short ton is equal to 0.9072 metric tons.
Comment 21: Global warming threatens public welfare and the Northeast's economy. More than $2 trillion of private property and public infrastructure could be exposed to damage in the Baltimore, Boston, New York-Newark, Philadelphia and Providence areas in the event of a 0.65 meter (2.1 foot) increase in sea level by 2050.
At the same time, the Northeast spent nearly $130 billion in 2010 on fossil fuels, 98.5 percent of which were imported from outside the region. RGGI helps reduce the region's dependence on fossil fuels by driving investments in energy efficiency measures and homegrown renewable energy sources that keep money and jobs in the Northeast.
The good news is that tackling carbon emissions is consistent with a growing economy. Between 2000 and 2010, the economies of the RGGI states grew twice as fast per capita as non-RGGI states while cutting carbon dioxide pollution 25 percent faster per capita. (Commenter 12)
Response to Comment 21: Thank you for your comment. The Department agrees that climate change threatens public welfare and the State's economy. The Department also agrees that, in addition to reducing CO2 emissions, revisions to the Program will help to reduce the region's dependence on fossil fuels. Finally, the Department agrees that RGGI demonstrates that it is possible to reduce CO2 emissions and grow the economy at the same time.
Comment 22: Were the Northeast its own country, its emissions would rank 10th in the world, ahead of the United Kingdom, Saudi Arabia, Mexico, Brazil and France. Our leadership can have a significant impact on emissions while showing the nation and the world that policies to reduce carbon pollution are both feasible and desirable.
Global warming already affects the Northeast. Hurricane Irene in 2011 and Hurricane Sandy in 2012 demonstrated that the Northeast has much to lose from global warming. Hurricane Irene was responsible for 45 deaths and more than $6.5 billion in damage, while Hurricane Sandy was responsible for 72 deaths in the Northeast and Mid-Atlantic. The storm caused $65 billion in damage in the U.S. and other affected countries. Should current emission trends continue, scientists anticipate that the Northeast will be vulnerable to more extreme storms, rising seas, higher temperatures and other threats from global warming.
RGGI has already shown that a program that caps pollution and sells pollution permits can work. Of equal importance, as the first program to auction emission allowances, it has shown that investing auction revenues in measures that help reduce pollution can yield tremendous benefits.
Clean energy investments driven by RGGI through 2011 are expected to reduce global warming pollution by 12 million tons over their lifetimes, the equivalent of taking two million cars off the road for a year. It has also helped reduce other air pollutants that harm our health.
These clean energy investments have also yielded an economic boost of $1.6 billion to the area, and the creation 16,000 jobs during its first years; while providing over $1 billion in energy bill savings; including an $326 million in economic benefits, employment growth of 4,620 job years and eight percent change in bill savings in New York.
The success of the program to date should give us the confidence that the proposed improvements will provide further environmental and economic benefits. Reducing RGGI's cap will lock in significant reductions in GHG pollution and ensure that power sector emissions continue to decline.
Strengthening RGGI would cut emissions further, avoiding 86 to 91 million tons of carbon dioxide pollution (78 million to 83 million metric tons) between 2013 and 2020 according to an analysis conducted by RGGI, Inc. That is the equivalent annual emissions from 16 million cars. Re-investment of RGGI allowance auction revenues in programs to reduce direct consumption of fossil fuels would lead to further emission reductions.
A stronger RGGI will also provide continuing economic benefits. The proposed cap could provide states $3.8 billion in revenue through 2020, which would increase economic output by $8.2 billion and create 123,000 job years of employment. (Commenter 12)
Response to Comment 22: Thank you for your comment.
Comment 23: Climate change is likely to result in immediate impacts on birds and other wildlife that live in specialized ecosystems, such as high elevation species like Bicknell's Thrush, as well as disrupting patterns of migration and food availability.
Already, we have observed numerous changes in bird species distribution in response to a warming climate. Many species of migratory birds are already shifting their ranges both toward the poles and steadily upward (known as the escalator effect) in response to parallel shifts in their habitat fueled by climate change, as well as migrating and breeding earlier in the spring. Specifically in New York, from data collected over the past 40 years, Audubon has found that more birds are shifting their ranges further north in the state.
Reducing greenhouse gas emissions is essential to mitigating the inescapable effects of climate change and this is why Audubon has strongly supported the Regional Greenhouse Gas Initiative (RGGI). This innovative program has reduced carbon dioxide emissions in the Northeast, and through these proposed amendments to further reduce the cap on emissions by 45 percent to 35 million tons of CO2, these actions will greatly enhance the state's efforts to combat climate change. In addition, we greatly support that this cap has been made binding by proposing to retire undistributed auctions from prior allowances. We applaud Governor Andrew Cuomo and the Department of Environmental Conservation for advancing this strong proposal, and urge for its swift adoption and implementation. (Commenters 21, 801)
Response to Comment 23: Thank you for your comment.
Comment 24: While we understand that CO2 Allowance Auction Program administered by the New York State Energy Research and Development Authority (NYSERDA) will not be revised as part of this rulemaking, we do support that the proceeds from the sale of New York's allowances will continue to be dedicated to strategic energy or consumer benefits. These investments in clean energy and energy efficiency will reduce our dependence on harmful fossil fuels while also lowering our carbon footprint and further mitigating climate change pollution. However, as leading scientists have indicated that even under the most ambitious greenhouse gas emissions reduction strategies climate change will still happen, it is imperative that we develop strategies to help ecosystems and the species they support adapt to the changing climate. In the future we strongly urge for a portion of these proceeds to be dedicated toward implementing these types of climate change adaptation strategies, and look forward to working with the state to advance this concept further. (Commenters 21, 801)
Response to Comment 24: Thank you for your comment. The Department agrees that it is imperative that we continue to develop strategies to adapt to climate change that may be inevitable. As described, for example, in response to Comment 1, the proceeds from the sale of CO2 allowances are used by NYSERDA to further the emission reduction objectives of the Program. In particular, the Program provides that NYSERDA use such proceeds to promote or reward investments in energy efficiency, renewable or non-carbon-emitting technologies, and/or innovative carbon emissions abatement technologies with significant carbon reduction potential.
Moreover, NYSERDA's CO2 Allowance Auction regulation includes a provision for the creation of an Advisory Group of stakeholders representing a broad array of energy and environmental interests to advise it on how best to utilize said funds to achieve the goals of the program. The Operating Plan is reviewed and revised on an annual basis, and the Advisory Group is convened to provide input.
Comment 25: In addition, reducing the cap on emissions will not only ensure that meaningful reductions in carbon dioxide continue, it also will potentially trigger the use of offsets to further enhance the effectiveness of the program at combating climate change. During the 2012 RGGI program review, we supported the development of a forest offset program to utilize protection and management of forests to reach emissions reduction targets. Such an approach has the dual benefit of sequestering Carbon Dioxide emissions while providing important ecosystem services that enhance the resiliency of our forests and communities in the face of climate change. While this offset component was not adopted by New York in the most recent program review, we look forward to working with the State to continue to advance this important tool in the future. (Commenter 21)
Response to Comment 25: Thank you for your comment. See response to Comments 131 and 132.
Comment 26: With regards to the draft regulation to revise the New York State DEC's existing RGGI program and its SGEIS on its revised RGGI program, NextEra views the DEC's proposed revisions as a marked improvement. We believe that the revised RGGI cap beginning in 2014 is considerably more aligned with current emissions and therefore will more effectively drive emissions reductions from current levels, better support a viable carbon allowance market, and help create price signals that support low carbon investments. We also believe that the establishment of a Cost Containment Reserve is a reasonable mechanism to mitigate unexpected allowance price increases that could occur in the future. Furthermore, the First and Second Control Period Interim Adjustment for Banked Allowances appears to appropriately honor private allowances while helping to create a binding cap. Finally, while NextEra believes that the creation of an interim compliance obligation reduces some flexibility of the multi-year compliance period, we consider the 50 percent obligation to be a reasonable compromise between State and stakeholder interests. (Commenter 20)
Response to Comment 26: Thank you for your comment.
Comment 27: Regarding the use of the proceeds from the sale of New York's allowances, NextEra urges all RGGI states to dedicate funds to strategic energy or consumer benefits, such as energy efficiency and clean energy technologies. New York's Energy Efficiency Program for Homeowners and LIPA's Solar Rebate Program are examples of highly successful programs that have flourished with funds from the State's participation in RGGI. (Commenter 20)
Response to Comment 27: Thank you for your comment.
Disagree with the Program
Comment 28: I strongly disagree with the proposed program (Commenter 2256)
Response to Comment 28: Thank you for your comment. In the RIS, the Department explains the need for and justification of the revisions to the Program.
Comment 29: The proposed amendments to Part 242 are consistent with the appropriate treatment of woody biomass as an important renewable energy resource. We support the proposed amendment to the definition of eligible biomass to specifically include forest and mill residue. (Commenter 1)
Response to Comment 29: Sustainably harvested forest and mill residue was already considered to be "eligible biomass" under the prior definition. The Department's edits to the definition of "eligible biomass" are not intended to substantially change the meaning of that term. In other words, the types of fuel that may qualify as "eligible biomass" are unchanged as part of the revisions to the Program. Instead, the edits to the definition are merely intended to help clarify the existing meaning of the term "eligible biomass." Forest and mill residue may be a sustainably harvested woody fuel source, and so the definition of "eligible biomass" will now specifically include forest and mill residue.
Comment 30: The proposed amendments to Part 242 will provide biomass-to-energy facilities with a greater capacity to produce renewable energy with low-grade wood products that are sometimes wasted because of a lack of viable markets. Improved markets for this type of woody biomass will not only provide a source of revenue for businesses and individuals and an opportunity for increased employment and production, but will also promote sustainable forest management and healthier agricultural land. (Commenter 1)
Response to Comment 30: The primary purpose of the Program is to reduce CO2 emissions from the power sector, rather than to specifically promote improved markets for woody biomass. The Department recognizes that the ability for certain woody biomass to qualify as "eligible biomass" may encourage additional opportunities for increased employment and production, and may also promote more sustainable forest management.
Comment 31: The Empire State Forest Products Association supports the proposal to modify the existing voluntary renewable energy market set-aside to include eligible biomass. By expanding eligibility for retiring CO2 allowances from the set-aside to include budget sources that co-fire eligible biomass, this mechanism will help to ensure that generation and use of renewable energy does not simply add megawatts to the grid, but will actually replace and reduce fossil fuel-generated electricity. (Commenter 1)
Response to Comment 31: As stated in the RIS, the Department agrees that the expansion of the voluntary renewable energy set-aside to also allow for the retirement of CO2 allowances based on CO2 emissions attributable to the burning of eligible biomass will have a positive impact. The Program allows a CO2 budget source to deduct, as a compliance mechanism, any CO2 emissions attributable to the burning of eligible biomass from its compliance obligation. When this occurs, the amount of CO2 emissions covered by the Program decreases, but the amount of CO2 allowances available does not automatically decrease in a corresponding manner. Therefore, allowing for the retirement of CO2 allowances for emissions attributable to eligible biomass helps to maintain the integrity of the Program's emission budget and RGGI's overall regional CO2 emission cap.
Comment 32: This proposed amendment will have multiple salutary effects. First, the amendments will reduce the number of allowances available for use by fossil fuel-fired facilities, thereby reducing state-wide carbon emissions and mitigating climate change. Second, it will encourage the use of biomass as an alternative to fossil fuels and the productive use of sustainably harvested biomass, which promotes forest ownership, sustainable forestry practices, and greater carbon sequestration in New York State's existing forests. (Commenter 1)
Response to Comment 32: As stated in the RIS and in response to Comment 31 above, the Department agrees that the expansion of the voluntary renewable set-aside to also allow for the retirement of CO2 emissions attributable to the burning of eligible biomass will have a positive impact. Moreover, as stated in response to Comment 30 above, while the Department recognizes that the expansion of the set-aside may also have other benefits, the primary purpose of the expansion is to help ensure the overall effectiveness of the Program in accomplishing its CO2 emission reduction objectives.
Comment 33: We support the proposed amendments to 242-5.3(c), to modify the existing voluntary renewable energy set-aside by expanding eligibility for retiring CO2 allowance to include CO2 budget sources that co-fire "eligible biomass," as it furthers the policy objectives of Part 242. This proposed amendment increases the likelihood that the set-aside will be fully utilized; meaningless CO2 allowances will be available for use by fossil fuel-fired EGUs. This helps to reduce emissions of CO2 from combustion of fossil fuels, and supports the integrity of the overall cap on CO2 emissions. (Commenters 11, 13)
Response to Comment 33: As started in the RIS and in response to Comments 31 and 32 above, the Department agrees that the expansion of the set-aside in subdivision 242-5.3(c) will support the integrity of the CO2 emissions cap under the Program. Furthermore, the Department agrees that this revision furthers the policy objectives of the Program, namely in helping to ensure CO2 emission reductions.
Comment 34: We support the proposed amendments to the definition of "eligible biomass" to expressly include forest and mill residue. Increased use of woody biomass, in the form of forest and mill residue, at EGUs furthers the policy objectives of Part 242 while also improving the economics and viability of forest and farm ownership. Low-grade wood products are sometimes wasted because of a lack of viable markets, and improved markets will increase employment and production and promote sustainable forest management. (Commenters 11, 13)
Response to Comment 34: See response to Comments 29 and 30 above.
Comment 35: Upstate New York Power Producers last point is on long-term contract allowance set-asides. There is also some concern that the size of this set-aside is not large enough given the proposed reduced emission cap and projected higher allowance costs. Upstate New York Power Producers is strongly opposed to any restructuring of the allowance of set-asides. This would have a huge impact to the effect on the market and that a larger set-aside would create a tremendous competitive disadvantage and significant financial impact on companies that are required to buy allowances in the market. (Commenter 10)
Response to Comment 35: The changes to the long-term contract (LTC) set-aside under subdivision 242-5.3(d) are not intended to be a restructuring of the LTC set-aside. Instead, as described in the RIS, these changes are merely intended to codify existing practice and more closely align the regulatory text with the interpretation set forth in the Department's Declaratory Ruling 19-18, issued on November 5, 2009. The Department is not increasing the annual amount of CO2 allowances in the existing LTC set-aside, or making any other significant changes to the existing LTC set-aside.
Comment 36: The DEC's draft RGGI regulation proposes to retain the current 1.5 million ton size of the LTC Allowance Set-Aside. IPPNY notes, however that the LTC set-aside continues to be under allocated relative to the legitimate needs of generators with LTCs that do not allow for any opportunity to recover RGGI costs. Taking into account its actual experience with the program, the DEC should meet with holders of LTCs to address the size of the set-aside, so that it may be structured fairly and appropriately relative to its need. In determining the size of the set-aside, it is also important to consider effects on the market and that a larger set-aside creates competitive impacts on other companies that need to buy allowances in the market. Furthermore, given the continued likelihood of higher allowance prices in future auctions, an increase in the LTC set-aside may not impact overall allowance auction revenue to a significant degree, but it will relieve the hardship faced by those IPPNY members that operate LTCs that pre-dated the RGGI program. (Commenter 6)
Response to Comment 36: The Department disagrees that a change in the size of the LTC set-aside is necessary at this time.
First, the Department notes that, while the absolute size of the set-aside is not changing, the relative amount is increasing in proportion to the State's CO2 emissions budget. While the 1.5 million tons in the LTC set-aside previously constituted approximately 2.3 percent of the State's annual CO2 emission budget under the Program, the set-aside will now constitute approximately 4.3 percent of the State's annual CO2 emission budget in 2014 under the Program revisions.
Second, while the Department has received annual requests for allowances from the LTC set-aside in excess of the 1.5 million available, the Department anticipates that the amount of allowances requested from the set-aside will decrease in the future. This is because existing LTCs will expire, meaning generators currently subject to LTCs that pre-date the RGGI program will then be able to recover the cost of CO2 allowances like other generators that are not party to LTCs, and will no longer be eligible for allowances from the set-aside. Under the terms of the Program, including the revisions to the Program, a CO2 budget source must be party to an LTC that was entered into prior to March 2006, in order to be potentially eligible to receive allowances from the LTC set-aside.
Third, as described above in response to Comment 1, a central design feature of the Program is the auctioning of CO2 allowances in order to further its emission reduction goals and reduce the cost of compliance. Therefore, the LTC set-aside provision is intended to be limited in scope. In particular, the Department initially created the LTC set-aside as a limited provision to provide some allowances to sources that are unable to pass on the cost of CO2 allowances to the purchasing party under the terms of their LTC. Any increase in the size of the LTC set-aside would be counter to the Department's intent to generally auction CO2 allowances, and to keep the set-aside limited and focused in nature.
Fourth, the Department also notes that none of the CO2 budget sources that have received CO2 allowances from the set-aside have recently expressed any concerns regarding the size of the set-aside. As described above, under the terms of the Program, no additional sources can become eligible for allowances from the LTC set-aside in the future.
Fifth, as stated by the commenter, any change in the size of the set-aside may have effects on the allowance market, including competitive impacts on other companies that do not operate under the terms of an LTC.
Finally, any impact a change in the size of the LTC set-aside might have on the overall amount of CO2 allowance auction proceeds is not relevant to the Department's consideration of whether such a change is necessary. That is, regardless of any impact on auction proceeds, the Department does not believe an increase in the size of the LTC set-aside is necessary or appropriate at this time.
Cap Reduction (including 2.5 percent decline)
Comment 37: We applaud the creation of the program and the nine participating states for remaining committed to the initiative since its 2009 inception, many observers believe that the carbon dioxide cap is set too high, arguably diminishing the full potential of the Regional Greenhouse Gas Initiative.
At a moment when the impacts of a changing climate could not be felt more acutely by New Yorkers, creating a regional cap-and-trade program that more effectively addresses the root causes of climate change is essential.
In New York, Hurricane Irene resulted in devastating upstate flooding damaging farmland, central business districts and critical infrastructure. A year after what some describe as the perfect storm, many downstate communities are still dealing with the aftermath of Superstorm Sandy. Combined, these extreme weather events cost the state of New York tens of billions of dollars in damages and billions more in lost economic activity.
The evidence is incontrovertible that earth's climate is changing due to anthropogenic activity, mainly with the release of elevated CO2 and other greenhouse gases into the atmosphere. It is also accepted that left unabated, climate change will result in more frequent and extreme weather vents.
New York and the other eight participating Regional Greenhouse Gas Initiative states have demonstrated leadership on perhaps the definitive health, environmental and economic issue of our time by creating the nation's first and only successful and economically efficient carbon cap-and-trade program in the United States. And once again these same states are taking the lead in amending the program to more effectively address the root causes of climate change.
The current CO2 emissions cap is 165 million tons annually, whereas actual CO2 production levels are 91 million tons annually. These proposed rule changes will adjust regional carbon dioxide emissions to actual CO2 levels. In addition to the initial 45 percent reduction in the CO2 cap beginning in 2014, NYLCV strongly supports the proposal to reduce those levels by 2.5 percent each year through 2020.
Under this proposal, participating states will achieve a reduction of 80 million to 90 million tons of carbon emissions by 2020, the equivalent of taking 16 million cars off the road. (Commenter 2)
Response to Comment 37: Thank you for the comment.
Comment 38: We believe that the carbon cap should be smaller than proposed with annual reductions tied to a 2014 baseline without offering the fallback of the Cost Containment Reserve.
While the new opportunity afforded by the revised RGGI model rule brings hope for a tangible impact on limiting carbon change, the Adirondack Council believes there is still "room to shrink." The 91 million ton cap agreed upon in the model rule and proposed in the regulatory amendment is a giant leap from the previous cap set at 163 million tons, but should the regulations be approved, New York will have fallen short of an opportunity to provide strong leadership in this northeastern effort to make real change for our planet. (Commenter 3)
Response to Comment 38: Thank you for the comment. See responses to Comments 39 and 40 below.
Comment 39: Throughout the stakeholder process leading up to the proposed and final model rule, the Adirondack Council called for an 85 million ton carbon cap to be tested alongside the 91 and 97 million ton caps. Given the fact that annual emissions among participating states RGGI states totaled roughly 91 million tons for the year 2012, there would be no upfront reductions. While we understand that a 2.5 percent annual cap reduction would amount to a 78 million ton cap by the year 2020, there are other factors that pad the efficacy of this reduction plan. Our organization is disappointed that he 85 million ton model was not presented alongside the other models, because we are confident that the 85 million cap would not have placed undue financial burdens on the rate payers or service providers. This slightly more ambitious reduction goal would more significantly reduce our annual carbon emissions, ultimately resulting in a 73 million ton cap in year 2020. We encourage DEC to reconsider how the baseline will be considered. (Commenter 3)
Response to Comment 39: The Participating States proposed lowering the regional CO2 emissions cap to align it with current emissions levels while accounting for allowances held by market participants through the first and second control period interim adjustments. There were calls to evaluate many different alternatives for most of the revised program elements, such as: the stringency of the cap; size and trigger levels for the cost containment reserve; the use of the interim control period and the first and second control period interim adjustments for banked allowances. The Department determined that a cap of 91 million tons coupled with these other program elements best achieves the purposes of the RGGI program while also minimizing costs and impacts on ratepayers.
All of the program elements, including the stringency of the cap, will be evaluated during the next program review starting no later than 2016. This will allow the Department and Participating States to assess the efficacy of the program while also tracking and participating in the development of EPA's federal program for regulating CO2 emissions from new and existing electric generating sources.
Comment 40: Even greater reductions could be achieved if annual reductions were tied to the 2014 baseline, as other RGGI states have done. Only 59 percent reduction in carbon emissions would be achieved by the year 2050 as per the proposed reduction model. If the annual 2.5 percent reduction were tied to the 2014 baseline, a roughly 90 percent reduction would be achieved by 2050, making this methodology preferable to what is currently proposed. In doing so, New York would follow a number of northeastern states who have already committed to this goal, implying that the time has come for New York to take a more prominent role in this carbon reduction plan. (Commenter 3)
Response to Comment 40: The 2.5 percent per year reduction methodology utilized under the revisions to the Program is consistent with the modeling conducted during RGGI Program Review. The Department agrees that the CO2 emission budget under the Program would have been reduced slightly more, had the 2.5 percent annual reductions been held constant relative to the 2014 baseline of 91 million tons. In particular, using this alternative baseline methodology described by the commenter would have yielded a 15 percent reduction from 2014 through 2020, instead of the 14.09 percent reduction achieved through 2020 under the revisions to the Program. This translates into a difference of 78,175,215 tons of CO2 for the regional RGGI cap in 2020 under the changes to the Program, compared to 77,350,000 in 2020 using the methodology suggested by the commenter.
The Department respectfully disagrees that other RGGI states have calculated their annual reductions in this alternative manner. In fact, all other participating states used the same methodology used by the Department under the Program to calculate their annual budgets under proposed revisions to the program in their respective state process.
The Department also notes that, under the Program, the 2.5 percent per year reduction in the CO2 emissions budget is through 2020, with the annual CO2 emission budget remaining constant thereafter. Any additional reductions, including through 2050, will be considered as part of the 2016 Program Review committed to by the Participating States, as described in response to Comment 39.
Comment 41: Environmental Advocates strongly supports adopting of a carbon pollution cap that reduces power plant emissions in New York State by 45 percent to 35 million tons - on par with its share of the 91 million tons agreed to by the broader RGGI state coalition - placing the state on track to further reduce emissions by 2.5 percent annually thereafter. (Commenter 4)
Response to Comment 41: Thank you for the comment.
Comment 42: Instead of declining by a fixed tonnage quantity equivalent to 2.5 percent of the 2014 baseline (35 million tons), the allowance budget, as currently proposed, would decline annually by 2.5 percent of the previous year's cap, leading to smaller reductions each year. This approach would only deliver a 59 percent reduction in emissions by the year 2050 as opposed to an estimated 90 percent if the annual adjustments were tied to the 2014 baseline as envisioned in the development of the model rule. New York should follow the lead of coalition partners including Maine, New Hampshire, Rhode Island and Vermont and adjust the proposed allowance reduction methodology to tie annual declines to the 2014 baseline. Expeditious action to correct the cap reduction methodology will provide compliance entities with the long-term certainty and predictability necessary to implement the most cost effective carbon reduction investment strategies. (Commenter4)
Response to Comment 42: See response to Comment 40.
Comment 43: CCE is concerned with the Department's application of the carbon cap reduction methodology. Instead of declining by a fixed tonnage quantity equivalent to 2.5 percent of the 2014 baseline, or 35 million tons, the allowance budget as currently proposed would decline annually by 2.5 percent of the previous year's cap, leading to a smaller reduction each year. This approach would only deliver a 59 percent reduction in emissions by the year 2050 as opposed to an estimated 90 percent if the annual adjustments were tied to the 2014 baseline as envisioned in the development of the model rule. Maine, New Hampshire, Rhode Island and Vermont will all use the 2014 baseline, and it is critical that New York follow their lead to maximize the benefit of the RGGI program. We support tying the carbon reductions to a 2014 baseline. (Commenters 8, 781-800)
Response to Comment 43: See response to Comment 40.
Comment 44: While we strongly support the proposals, we believe that the carbon cap reduction methodology could be improved. States such as Maine, New Hampshire, Rhode Island and Vermont all have chosen to adjust the proposed allowance reduction methodology so that annual declines are linked to the 2014 baseline. If New York were to adopt a fixed tonnage quantity equivalent to 2.5 percent of the 2014 baseline (35 million tons), we would only see a 59 percent reduction in emissions by the year 2050 as opposed to an estimated 90 percent percent if the annual adjustments were tied to the 2014 baseline as envisioned in the development of the model rule. (Commenter 14)
Response to Comment 44: See response to Comment 40.
Use of Proceeds
Comment 45: The New York League of Conservation Voters is also pleased to note that the Department of Environmental Conservation will continue to dedicate most of the auction proceeds to New York's energy efficiency and clean-technology programs. If we are going to meet the challenge of significantly reducing our carbon footprint, New York must remain committed to investing in more efficient buildings and clean-energy technologies, such as wind, solar and geothermal. (Commenter 2)
Response to Comment 45: Thank you for your comment.
Comment 46: CCE strongly supports continuing the State's commitment through NYSERDA to invest RGGI proceeds in ways that help us spur the clean energy economy, reduce greenhouse gas emissions, provide consumer health and environmental benefits, and offset disproportionate impacts on underserved communities. (Commenter 8)
Response to Comment 46: Thank you for your comment.
Comment 47: We strongly support continuing the state's commitment to invest RGGI proceeds in ways that spurs the clean energy economy; reduces greenhouse gas emissions; provides consumer, health, and environmental benefits; and offsets disproportionate health and environmental impacts on underserved communities. (Commenters 802-2255)
Response to Comment 47: Thank you for your comment.
Comment 48: We support continuing to invest RGGI funds in ways that spur New York's clean energy economy. (Commenters 781-800)
Response to Comment 48: Thank you for your comment.
Comment 49: Environmental Advocates strongly supports continuing the state's commitment through NYSERDA, to invest RGGI proceeds in ways that help spur the clean energy economy; reduce greenhouse gas emissions; provide consumer, health, and environmental benefits; and offset disproportionate impacts on underserved communities. (Commenter 4)
Response to Comment 49: Thank you for your comment.
Comment 50: RGGI should create programs that encourage private investment in low- and no-carbon generation particularly through financing incentives for replacing coal plants with cost effective combinations of renewable energy and efficient natural gas plants, enhanced renewable portfolio standards, and provisions to expand clean and resilient distributed energy resources. (Commenter 18)
Response to Comment 50: The 2013 New York RGGI Operating Plan, which summarizes and describes the initiatives to be supported by NYSERDA using CO2 allowance auction proceeds, provides incentives and financing for renewable energy sources. These investments complement other initiatives such as the RPS, NY-Sun, and the Green Bank. Collectively, these activities foster additional clean energy sources that help transition the State to a portfolio of cleaner power plants.
Moreover, the carbon price signal created by the Program itself, in the form of CO2 allowance costs, also helps to encourage the transition to less carbon intensive sources of energy. A combination of these and others factors has already led to a decreased use of coal-fired power plants in the State, which are indeed being replaced by natural gas-fired plants, renewable sources, and energy efficiency improvements.
Comment 51: DEC should make a commitment to invest increased proceeds from RGGI allowance auctions on measures that will allow customers to reduce energy usage and thereby mitigate the impact of higher allowance prices on customers' bills. (Commenter 19)
Response to Comment 51: The programs described in the response to Comment 52 help foster investment in electricity related measures that can help reduce energy usage and thereby help mitigate the potential impact of higher allowance prices on customers' bills.
Comment 52: Use RGGI proceeds to either offset collections for other programs funded by surcharges on electric bills, or invest in additional end-use electric energy efficiency programs. We urge the States, New York in particular, to consider using incremental RGGI funds to offset collections for clean energy programs. Existing program vehicles should be used, such as the Energy Efficiency Portfolio Standard program ("EEPS") and the Renewable Portfolio Standard program ("RPS"). By investing incremental RGGI dollars in existing program vehicles, the States not only invest in carbon reduction, they also ensure that customers mitigate the overall bill impact of the increase RGGI costs. The Companies note that the EEPS and RPS programs are overseen by the New York State Public Service Commission (the "PSC"). The Companies are proposing that increased RGGI funds be used to replace RPS and EEPS collections authorized by the PSC, but believe that the PSC is best placed to oversee the RPS and EEPS programs, regardless of where the funding comes from, and are not advocating for any change in the oversight of those programs. (Commenter 19)
Response to Comment 52: A substantial portion of New York's auction proceeds are allocated to programs where electricity related measures (energy efficiency and renewable energy generation) are eligible to receive funding. For instance, almost 70 percent of the program funding allocations shown in the New York's 2013 RGGI Operating plan is made to programs that can foster electricity related measures (e.g., Green Jobs/Green New York, Municipal Wastewater, PV programs, Competitive Greenhouse Reduction Pilot, Green Bank, Regional Economic Development and Greenhouse Gas Reduction, and Cleaner Greener Communities programs).
The investment of RGGI auction proceeds complement existing programs or program goals, including the System Benefits Charge (SBC), RPS, Weatherization Assistance Program, EEPS, and various transportation programs funded by the federal Congestion Mitigation and Air Quality Improvement Program. RGGI-funded programs are designed to augment and create synergies with existing efficiency and clean energy programs, and to encourage a redefinition of program goals in the context of a more comprehensive GHG emission reduction strategy. The goals of increased energy efficiency, increased renewable energy generation, reduced criteria and GHG pollution, and low-income weatherization will be enhanced by these complementary resources. The investments are intended to advance the State's broad energy goal of providing reductions in GHGs in the near term and by positioning New York to make additional long term reductions.
Comment 53: If RGGI program changes are approved, the majority of electricity producers in the RGGI states will have few options but to pay higher prices for emissions allowances, which will then be factored into their wholesale power market bids. Ultimately, the Companies believe that the cost of a tighter regional emissions cap will be borne by electricity customers through the supply portion of their utility bill. If generators have limited means to reduce their GHG emissions, it becomes that much more important that RGGI proceeds be used to help electric customers reduce their consumption through efficiency investments. (Commenter 19)
Response to Comment 53: As described in the RIS and in response to Comment 136, the revisions to the Program are projected to slightly increase wholesale electricity prices, which translates into a slight increase in retail prices for electricity customers. The inherent flexibility in the market-based mechanism utilized by the Program, as well as other design features such as the addition of the Cost Containment Reserve, help to minimize the cost impacts on customers.
Furthermore, as described in the response to Comment 52, RGGI funds do foster renewable energy and electricity related energy efficiency savings that complement other electricity related programs offered under the EEPS, RPS, NY-Sun and Green Bank programs. In addition, the Competitive Greenhouse Gas Reduction Pilot program ($14.5 million) which offers opportunities for emissions reductions and efficiency improvements in the power sector is targeted for release during the fourth quarter of 2013.
For example, the $249.6 million in total investments of RGGI proceeds described in the 2013 RGGI Operating Plan, through fiscal year 2015-16m are anticipated to result in CO2e1 emission reductions, energy savings, and bill savings.
In particular, the Green Jobs-Green New York, Residential Energy Services, Regional Economic Development and Greenhouse Gas Reduction, LIPA PV/Efficiency, and Industrial Innovations are the five deployment program areas that are expected to realize savings during this three-year investment period. These programs represent approximately 38 percent ($95 million) of the anticipated three-year funding and commitments described in this plan. Approximately 22,081,000 MMBtu of expected lifetime energy savings across all fuel types are anticipated to result from these investments of RGGI proceeds. Additionally, electricity savings would account for approximately 773,000 megawatt-hours (MWh) of additional expected lifetime savings. The estimated bill savings related to the investment of RGGI proceeds in these programs is approximately $606.7 million in total expected non-discounted lifetime savings. Investments of RGGI proceeds into these programs are anticipated to result in approximately 1.9 million tons of CO2e emission reductions over the expected lifetime of the measures and practices.
Estimated benefits related to the Cleaner Greener Communities program, the Competitive Greenhouse Gas Reduction Pilot, New York Green Bank, or other research and development (R&D) initiatives are not included in these estimates, due to the uncertainty of project activities and associated savings at this time. Nevertheless, some benefits can be anticipated from these program areas, including long- and short-term job creation, economic development benefits, efficiency improvements, increased use of renewable energy, pollution prevention, abatement of fuel use, annual electric savings, and associated CO2e emissions reductions.
Comment 54: RGGI auction revenues should be reinvested in programs to benefit electric sector customers. Such revenues could be used to offset the additional RGGI costs incurred in their electricity bill for example by encouraging adoption of additional electric efficiency measures or by funding zero-emission distributed generation, such as solar. Policymakers should consider using incremental RGGI funds to offset collections for existing clean energy programs where such incentives already exist. (Commenter 19)
Response to Comment 54: See response to Comment 52. A portion of CO2 allowance proceeds are indeed reinvested in programs that benefit electric sector customers, in addition to furthering the emission reduction objectives of the Program. Also, the RGGI funded programs are intended to supplement, not supplant, other programs, therefore using incremental RGGI funds to offset collections for existing clean energy programs would reduce the level of overall benefits.
Comment 55: Historically, only 40 percent of NY's RGGI funds have been allocated for programs that directly benefit electricity customers. Three-quarters of those allocations are the result of a legislatively-mandated transfer of RGGI funds to support the State's Green Jobs-Green NY program, which provides free energy audits and on-bill financing for energy efficiency projects. As of December 31, 2012, only half of the allocations that directly benefit electricity customers were actually spent or legally obligated in contractual commitments. (Commenter 19)
Response to Comment 55: See response to Comment 52. Also, as of March 31, 2013, approximately 55 percent of the funds allocated to these programs have been committed. However, a substantial quantity of new funding commitments is anticipated in the near future. For instance, projects related to the $30 million Cleaner Greener Communities component of the recent Consolidated Funding Application are currently being evaluated for potential funding. In addition, the Competitive Greenhouse Gas Reduction Pilot program ($14.5 million) which offers opportunities for emissions reductions and efficiency improvements in the power sector is targeted for release during the fourth quarter of 2013.
Comment 56: While Companies have previously objected to the State's investment strategy regarding RGGI proceeds, in written comments and at public meetings of the RGGI Advisory Group, which does not include utility representation, the State has not taken any steps to use RGGI proceeds to further reduce electric sector emissions. DEC has also declined to consider this issue as part of its proposal to implement changes to NY's RGGI program. (Commenter 19)
Response to Comment 56: The revisions to the Program do not change existing provisions which have, since the inception of the Program, provided that CO2 allowance proceeds be used to further the emission reduction objectives of the Program, through investments in energy efficiency, renewable energy, and carbon abatement technologies. NYSERDA allocates proceeds pursuant to its Operating Plan and consistent with the Program. See also response to Comment 52.
Comment 57: At the inception of the program, NYS policymakers assured stakeholders that auction proceeds would be reinvested in ways that lowered the overall cost of compliance borne by electric customers. However, this reinvestment loop has not taken shape, leaving electricity customers with higher energy costs and no benefits to help reduce emissions and lower the impact of RGGI on their bills. NYS has used the funds for general budget purposes, heating oil efficiency programs and cultivation of the State's clean technology sector. While several of these programs contribute to emissions reductions, they deny electric customers the opportunity to control their supply costs and achieve RGGI's goals. Instead, the NY RGGI programs function more like a societal tax, whereby general revenue is collected and re-distributed to according to the state's Executive and Legislative priorities. (Commenter 19)
Response to Comment 57: The Department disagrees. CO2 allowance proceeds, in addition to other existing programs funded through the RPS and EEPS, help to reduce the cost of compliance for generators and the cost of the Program on electric customers. For example, by furthering the emission reduction objectives of the Program, CO2 allowance proceeds can also have the co-benefit of reducing demand for CO2 allowances and thereby reducing the cost of such allowances in the market. See responses to Comments 1, 52 and 53.
Cost Containment Reserve (CCR)
Comment 58: The Cost Containment Reserve for this proposed rulemaking is intended to, "provide additional flexibility and cost containment for the Program." This extra bank of allowances is set to be infused into the program at graduating trigger prices, should that price be met at an auction, and contributes nothing to the integrity of the RGGI program. It is by default an opportunity to expand a carbon cap that already provides zero net reductions in 2014. If the CCR was designed to protect suppliers and ratepayers from unexpectedly high prices, then our organization is left wondering how this concern derived from a projected monthly bill increase of $0.71 in the year 2020, when the carbon cap will be set at 78 million tons. For the average customer, the $5.00 increase over the next seven years will be exponentially offset by the benefits derived in the long-term when climate is mitigated. We encourage DEC to reconsider the CCR. (Commenter 3)
Response to Comment 58: The Participating States proposed the establishment of the CCR, a reserved quantity of allowances, in addition to the cap, that are only available if defined allowance price triggers are exceeded. While there were calls to evaluate many different alternatives for most of the revised program elements, such as: the stringency of the cap; size and trigger levels for the cost containment reserve; the use of the interim control period and the first and second control period interim adjustments for banked allowances; the Department and the other participating states determined that a CCR coupled with these other program elements accomplishes the goals of the program while adding flexibility to guard against unforeseen events and to minimize any dramatic or volatile CO2 allowance price increases. The CCR replaces other elements of the Program, including offset price triggers and the potential extension of the control period to four years, because of its ability to provide measurable cost control in an efficient, transparent and predictable manner.
Moreover, the modeling conducted by the Participating States during RGGI program review projected cumulative emission reductions of 86 million tons of CO2 from 2014 through 2020 across the RGGI region. This projection incorporates any impact the CCR might have on the overall amount of CO2 emission reductions. Finally, by helping to minimize and control the potential costs of the Program, the establishment of the CCR helps to enable the setting of the regional CO2 emissions cap at a level lower than what otherwise may have been feasible or appropriate based on numerous factors.
As described in response to Comments 39 and 40, all of the program elements, including the CCR, will be evaluated during the next program review starting no later than 2016. This will allow the Department and Participating States to assess the efficacy of the Program, including new elements such as the CCR.
Comment 59: RGGI should be reformulated to lower the trigger for the cost containment reserve (CCR) to further guard against the unintended and perverse results of leakage driven by high allowance prices. Further, the CCR should establish a maximum price for additional allocations rather than a minimum as the rule suggests. (Commenter 18)
Response to Comment 59: The CCR trigger prices are set at a level that balances the CO2 emission reduction objectives of the Program with the potential cost of the Program. The CCR trigger prices increase from 2014 through 2017 in order to help provide for a graduated or phased increase in potential CO2 allowance prices.
Furthermore, as described in response to Comment 58, the modeling conducted as part of RGGI Program Review projected overall CO2 emission reductions from the revisions to the Program with the CCR trigger prices at these specified levels. Lowering the CCR trigger prices may reduce the CO2 emission reductions achieved by the revisions to the Program. This is because lower CCR trigger prices would increase the likelihood that the trigger price would be reached, thereby increasing the likelihood that additional CCR CO2 allowances would be distributed to the market, in addition to the cap. If additional allowances became available, which were not previously projected to be available to the market, this could have the effect of reducing the CO2 emission reductions required by the revisions to the Program.
In addition, CCR trigger prices should be set at a level high enough to generally allow for the market place to determine the price of CO2 allowances, except in the case of potential unforeseen or unusual circumstances in which CO2 allowance prices may exceed certain levels. In other words, lower CCR trigger prices may have disadvantageous effects on the efficiency of the CO2 allowance market.
Moreover, the CCR is not intended to provide a hard ceiling on the price of CO2 allowances. Instead, the CCR is intended to provide some price relief, in order to provide additional flexibility and help control costs, in the event that CO2 allowance prices reach higher than anticipated levels.
See also response to Comment 58.
Comment 60: As noted in previous comments, the Companies support the concept of, and the proposed design for, cost containment reserves which release additional allowances into RGGI allowance auctions when specific price triggers are reached. While there has been a great deal of RGGI stakeholder input on where the cost containment reserve (CCR) allowances should come from (i.e. 'under the cap' or 'above the cap'), the Companies propose that all reserve allowances come from outside the cap so as to avoid unnecessarily volatile allowance prices. (Commenter 19)
Response to Comment 60: As designed and specified in the revisions to the Program, CCR allowances are indeed in addition to the cap set under the Program.
Impacts of Climate Change
Comment 61: The economic impacts of the RGGI program are negligible when compared to the fiscal implications posed by climate change. Just the financial burden we face in the aftermath of Hurricane's Irene, Lee and Super storm Sandy make this case on their own merits, but to then consider impacts that have not yet been felt: the decline in New York's prominent maple syrup industry; more consistent damage to all crop types due to floods and storms; the costly impacts of invasive species on tourism and ecosystem goods and services; a reduced winter tourism season; municipal infrastructure upgrades to accommodate larger storms and increased flooding; the imminent reshaping of New York's coastlines; increased hospital visits from increased heat related illnesses and disease spread; these are all costly changes that are expected and will prove even more costly as we continue to miss our full potential with the RGGI program. In the Adirondacks, we are especially concerned about the reoccurring flooding, the diminishing winter tourism opportunities, and the impacts to agriculture. With regards to ecology, we anticipate the in coming generations, we will see a northward migration of species that have long thrived in the Adirondacks. Jerry Jenkins, the indisputable expert on Adirondack ecology, claims in his 'Adirondack Almanac' that, "if current climate change models are correct, the climate a century from now will be too warm for any of the characteristics of the Adirondack trees to prosper...we may be the last generation to see spruce covered mountains or walk through the great spruce-tamarack bogs."(Jenkins/39) As a result of RGGI's shortcomings, we will watch the very character of the Adirondacks slip northward over the next century. (Commenter 3)
Response to Comment 61: Thank you for the comment. The Department agrees that the impacts of climate change pose significant fiscal implications, in addition to impacts on public health and the environment. However, contrary to the commenter's suggestion that any shortcomings in RGGI result in such impacts, RGGI and the revisions to the Program serve to help lessen the State's contribution to climate change and its impacts. For example, as described in the RIS and in response to Comment 58, the revisions to the Program are projected to result in cumulative emission reductions of 86 million tons of CO2 from 2014 through 2020 across the RGGI region.
Retirement of Unsold and Undistributed Allowances
Comment 62: Environmental Advocates strongly supports establishing a binding cap by using the state's authority to retire and/or permanently withhold undistributed allowances from prior auctions. (Commenter 4)
Response to Comment 62: The Department already retired unsold allowances from the first control period (2009-11) and, together with the other participating states, announced its intention to not reoffer for sale unsold 2012 and 2013 CO2 allowances. The proposed revisions to the Program continue to provide the Department with the ability to retire unsold and undistributed allowances at the end of the control period.
Comment 63: CCE strongly supports establishing a binding cap by using and preserving the state's authority to retire and/or permanently withhold undistributed allowances from prior auctions. (Commenter 8)
Response to Comment 63: See the response to Comment 62.
Comment 64: We strongly support creating a lockbox that uses the state's authority to retire and/or permanently withhold unsold and undistributed allowances from prior auctions to prevent dirty power plants from circumventing critical reforms. (Commenters 802-2255)
Response to Comment 64: See the response to Comment 62.
Comment 65: Reducing greenhouse gas emissions is essential to mitigating the inescapable effects of climate change and we strongly support the proposed amendments to further reduce the cap on emissions and ensure the cap is binding by retiring undistributed auctions from prior allowances. This will greatly enhance the State's efforts to combat climate change, and I applaud Governor Andrew Cuomo and the Department of Environmental Conservation for advancing this strong proposal. (Commenters 23-779)
Response to Comment 65: See the response to Comment 62.
Comment 66: We support preserving the State's authority to retire and/or permanently withhold undistributed allowances from prior auctions. (Commenters 781-800)
Response to Comment 66: See the response to Comment 62.
Comment 67: Clarify the State's proposal to manage unsold allowances and account for privately-held allowances through 2020 so that market participants can plan their procurement strategies without risk of unexpected regulatory changes to the allowance supply. (Commenter 19)
Response to Comment 67: The proposed revisions retain the Department's ability to retire unsold allowances at the end of the control period. The Department retired all unsold allowances from the first control period. As stated in the "Summary of Recommendations to Accompany Model Rule Amendments" posted in February by the Participating States2, and consistent with the language in the proposed revisions, the Department and the other Participating States do not intend to reoffer unsold 2012 and 2013 allocation year CO2 allowances during the second control period. The retirement of unsold 2012 and 2013 allocation year CO2 allowances will occur at the end of the second control period, subject to each state's own administrative process.
At the same time, in order to account for privately-held allowances through 2020, the language in revisions to the Program clearly defines the first and second control period interim adjustments for banked allowances. The regulation is clear that these adjustments are for allowances held in general and compliance accounts for 2009, 2010, 2011, 2012 and 2013. The regulation clearly states when the adjustments will be made, how they will be made, and the time period the adjustments will cover. There are no provisions in the regulation for further adjustments. Moreover, under the revisions to the Program, there are no changes in market participants' ability to indefinitely bank CO2 allowances to be used in the future for compliance purposes. Any consideration of further adjustments will occur during the next program review.
Comment 68: The Companies support a one-time and irrevocable decision from NYS, included in Parts 242 and/or 200 as appropriate, about how the DEC will manage unsold allowances and account for banked allowances for the duration of the program. For example, a clause could be inserted at Part 242-5.3, CO2 Allowance Allocations (a)(3)(ii,iii) that states, "the department or its agent will continue to offer unsold and/or undistributed allowances in subsequent allowance auctions until the end of each compliance period, at which time it will retire any remaining unsold allowances." We strongly encourage the DEC to include such language. (Commenter 19)
Response to Comment 68: The Department does not see a need for additional language addressing unsold and undistributed allowances. The proposed revisions retain the Department's ability to retire unsold and undistributed allowances at the end of the control period. It also retains the ability to reoffer unsold allowances in any subsequent allowance auction. The commenter's proposed language does not address banked allowances, but as noted in the response to Comment 67, the allowance adjustment language in the proposed revisions clearly defines this process and market participants' ability to bank allowances is unchanged.
Comment 69: The Companies support making these changes known to market participants sufficiently in advance of the first auction subject to the RGGI program changes so that participates can appropriately plan for the changes, including any changes to the treatment of unsold and/or banked allowances from the initial RGGI program years. (Commenter 19)
Response to Comment 69: Per the language in the revisions to the Program, the first and second control period interim adjustments for banked allowances will be made prior to January 15, 2014 and on March 17, 2014, respectively. While auction dates for 2014 have not been set, these dates were chosen to allow for the proper calculation of the adjustments based on the availability of the necessary data and to ensure that the necessary regulatory revisions are in place. Under the revisions to the Program, the first control period interim adjustment will be made prior to the first auction of 2014, while the second control period interim adjustment will not be applied until 2015. Finally, while the precise amounts of the two interim adjustments will not be known until such adjustments are actually made under the Program, the regulatory language clearly sets forth the formula for making the adjustments. Reasonable estimates of the two adjustments can be made using data currently available to the public
Comment 70: The sole purpose of the draft SGEIS was to examine leakage caused by importing electricity from sources outside the purview of RGGI. In its review, the Department only considered leakage in terms of imports driven by program compliance rather than addressing imports generally. This led the Department to determine that carbon emissions associated with electricity imported from sources outside of the scope of RGGI have not increased as a result of the program.
The Department's modeling under the new rule estimates potential cumulative leakage at 58 million tons or 67 percent of the projected emission reductions. This is hardly an insignificant number.
We reject the argument that this potential outcome would not constitute an adverse environmental impact given the overall net reduction in emissions. Complacency in this regard is a failure to appreciate the magnitude and severity of climate change and the need to take aggressive actions to reduce emission levels as quickly as possible. Moreover, the achievement of just one-third the state's carbon reduction goal would serve as an economic insult to New Yorkers charged for 100 percent compliance.
The Department's plan for leakage mitigation, in the event it becomes necessary, envisions a multi-state effort in the following areas: establishing energy efficiency portfolio standards, stricter building codes, appliance and equipment efficiency standards and combined heat and power distributed generation systems.
The draft SGEIS ignores the fact that these actions are already ongoing in New York and supported to a certain extent by revenues gained through the RGGI auction process. It is unclear, especially in the absence of additional funding, that efforts to enhance the state's clean energy and efficiency activities would be able to achieve the level of emission reductions required to offset the impact of leakage.
In accordance with the agreement reached upon the adoption of the model rule, the Department is coordinating with the Department of Public Service (DPS), NYSERDA, the New York Independent System Operator (NYISO) and others to examine and explore possible solutions to the leakage issue for presentation to the broader RGGI coalition in 2014. We encourage the Department to open this process to the public and expand participation opportunities to a broader array of interested stakeholders. (Commenter 4)
Response to Comment 70: The Department respectfully disagrees that the purpose of the draft SGEIS was to consider all emissions associated with importing electricity from sources outside the purview of RGGI. Instead, as described in the Final Scope, the SGEIS was developed to examine the potential leakage associated with the proposed Program revisions, including the cap reduction and budget adjustments. In particular, the Final Scope made clear that the SGEIS would focus solely on the revisions to the Program and the potential issue of emissions leakage caused by the revisions to the Program. The SGEIS does not address, and was not intended to address, all CO2 emissions associated with all electricity imported into the RGGI region.
When referring to so-called "emissions leakage," it is important to recognize that, at least as used by the Department, this term only refers to any changes caused by the Program itself. In particular, the Final Scope made clear that "emissions leakage refers to the potential 'for the Program to cause' a shift of electricity generation from capped sources subject to the Program to higher-emitting sources not subject to the program. . " (emphasis added). In other words, the SGEIS only considers any emissions leakage to the extent it may be caused by the revisions to the Program itself, because that is the action subject to review under the State Environmental Quality Review Act (SEQRA).
Therefore, the separate issue of imports more generally, including all CO2 emissions associated with all electricity imports, is beyond the scope of the SGEIS because it is not related to the action - i.e., the revisions to the Program - being evaluated under SEQRA. Notwithstanding this fact, the Department recognizes that, regardless of the revisions to Program, there are already considerable CO2 emissions associated with electricity that is generated outside of the State and imported into the State. This is why the Department is now engaged in a collaborative process with other Participating States and stakeholders, as described below, in order to identify a mechanism that could address this issue in the future.
The Department's conclusion that there is no evidence to date of leakage associated with the existing Program is based on the reports and studies conducted to date, as described in the SGEIS.
Moreover, in the future under the revisions to the Program, the Department has clearly stated that modeling of the Program revisions might project some "leakage," because cumulative emission reduction projections are larger for the RGGI region itself than for the Eastern Interconnection3 (which includes the RGGI region) plus the eastern Canadian provinces. In particular, modeling projects 86 million tons in cumulative CO2 emission reductions across the RGGI region through 2020 as a result of the revisions to the Program. However, because some emissions may shift location to areas outside of the RGGI region, modeling projects 28 million tons in cumulative emission reductions across the Eastern Interconnection.
In other words, even when taking into account that the location of some emissions may change as a result of the revisions to the Program, the revisions to the Program will still have a positive environmental impact. As described in the SGEIS, the conclusion that the Program revisions will nevertheless have a positive and not an adverse impact on the environment, even when taking into account potential leakage, is based on the fact that the modeling still projects net CO2 emission reductions across the Eastern Interconnection as a result of the Program revisions. The potential for leakage to reduce the overall effectiveness of the Program, in that some of the CO2 emission reductions achieved within the RGGI region may be offset by emission shifts to areas outside of RGGI, does not change the fact that emissions are still projected to decrease overall as a result of the Program revisions. In other words, as described above, the potential for the overall effectiveness of the revisions to the Program - measured in terms of cumulative CO2 emission reductions across the Eastern Interconnection - to be reduced by "leakage" does not constitute an adverse environmental impact of the action under SEQRA.
Contrary to the commenter's statement, the Department does not believe these factual representations in the SGEIS and RIS represent complacency, but instead finds that the Program revisions represent a significant next step in addressing CO2 emissions from the electric generating sector.
The SGEIS has highlighted strategies that New York and other Participating States are implementing and/or would implement that reduce electricity demand and that could act as a complement to the Program. These are offered as mitigation strategies that can be expected to help indirectly reduce emissions leakage by reducing demand for electricity within the RGGI region. These efforts, along with EPA's planned standards for existing power plants under Section 111(d) of the Clean Air Act (111(d)), will help to mitigate any emissions leakage that might be attributable to the revisions to the Program.
Finally, although the broader issue of all CO2 emissions associated with electricity imports is separate from the more narrow issue of potential emissions leakage caused by the Program, the Department does recognize the importance of considering all CO2 emissions from electricity imported into the State. Thus, the Department is committed to engage in a collaborative effort leading to a workable, practicable, and legal mechanism to address CO2 emissions associated with imported electricity. This ongoing effort, however, is separate from the proposed rulemaking that is the subject of the SGEIS. New York and the other Participating States have already started this separate process, including through discussions with the NYISO and other Regional Transmission Organizations (RTOs)/ISOs throughout the RGGI region, energy sector experts, and other stakeholders. The Department and other Participating States envision that these discussions will be opened to a broader array of interested stakeholders in the near future.
Comment 71: Upstate New York Power Producers is concerned that electricity from imports from facilities which do not participate in the RGGI program are at competitive advantages to facilities which provide electricity within the state. Some neighboring states and countries which import electricity into New York are not part of the nine-state RGGI program; and therefore, the facilities in these areas have no economic incentives to reduce CO2 emissions. We urge that the Department conduct a more comprehensive review than what has previously been conducted of the electricity output which is imported into the state, the specific source of that generation being either coal, gas, nuclear, renewables, etcetera, and the impact this leakage has on electricity pricing and reliability in the state.
Now, there is some concern that the analysis conducted thus far on leakage does not take all the factors as mentioned earlier into consideration. This comprehensive review should be shared with all RGGI stakeholders and, based on the significance of the impact, would request that the implementation of a RGGI tax on all imported generation from facilities which do not participate in the RGGI program. (Commenter 10)
Response to Comment 71: The SGEIS evaluates the potential emissions leakage caused by the revisions to the Program. As described above in response to Comment 70, even assuming potential emissions leakage, the revisions to the Program do not have an adverse impact on the environment. Instead, the revisions to the Program have a positive impact on the environment, because the revisions to the Program will still result in overall CO2 emission reductions across the Eastern Interconnection. Moreover, the broader issue of CO2 emissions associated with all electricity imports is the subject of a separate ongoing effort by the Department and other Participating States.
In fact, consistent with the RGGI 2012 Program Review: "Summary of Recommendations to Accompany Model Rule Amendments" and as noted in the RIS and SGEIS, the Department is committed to engage in a collaborative effort leading to a workable, practicable, and legal mechanism to address emissions associated with imported electricity. This effort is attempting to: identify and evaluate potential imports tracking tools; conduct further modeling to ascertain energy and price implications of any potential policy on emissions associated with imported electricity; and pursue additional legal research.
As described in response to Comment 70, New York and the other Participating States have already started this process, and it is envisioned that discussions will be opened to a broader array of interested stakeholders in the near future. While part of this process may include consideration of placing some type of CO2 emission compliance obligation on imported electricity not currently subject to RGGI, the RGGI program does not constitute a tax on generation, as described in response to Comment 1.
Comment 72: DEC should work with other states to expand the RGGI program. A broader program will level the playing field and reduce over-arching leakage concerns. (Commenter 6)
Response to Comment 72: The Department and other Participating States welcome a discussion with other states that may be interested in participating in the RGGI program. EPA's planned CO2 emission standards applicable to existing power plants, under Section 111(d) of the Clean Air Act, may provide new opportunities for engagement with other states while also helping to reduce any emissions leakage. See also the response to Comments 70 and 71.
Comment 73: IPPNY remains very concerned that a large amount of the emission reductions that would be made in the RGGI region under the new proposed CO2 emissions cap could be displaced outside the region as leakage. According to DEC's draft SGEIS, the potential amount of emissions leakage is projected to be 58 million tons of CO2, or approximately 67 percent of the projected RGGI region cumulative emission reductions of 86 million tons. However, DEC has indicated that it does not consider emissions leakage to constitute an adverse environmental impact.
IPPNY urges the DEC to remain vigilant about the potential for leakage from all emissions categories. IPPNY underscores that New York should not be competitively disadvantaged by the RGGI program in relation to other states that are not part of the program because RGGI allowance prices are projected to reach a level that could make imports more economic than in-state resources. IPPNY urges the DEC and the RGGI states to conduct and share with stakeholders a more comprehensive review of the electricity output that is imported into New York State and the impact leakage would have on electricity pricing and reliability in this state. Due to the increased importation of power and associated leakage, in-state generation may not be as available because of the associated economic impacts. During peak demand, other states may decide to retain, for their own reliability needs, the power they normally export, and, as a result, New York may end up being short on power supply. The information provided by this comprehensive review also should be made available, as part of the next re-evaluation period for the program. (Commenter 6).
Response to Comment 73: As described in response to Comments 70 and 71, and in the SGEIS, the potential for CO2 emission reductions inside the RGGI region to be partially displaced outside of the region may reduce the effectiveness of the revisions to the Program, but does not constitute an adverse environmental impact of the action. While the Department states that modeling of the Program revisions might project some "leakage," the proposed Program revisions will have a positive and not an adverse impact on the environment, even when taking into account potential leakage. This is because, as described above in response to Comments 70 and 71, the revisions to the Program are still projected to result in cumulative CO2 emission reductions across the Eastern Interconnection.
While the location of the source of some CO2 emissions may shift, this is not significant from an environmental impact perspective when considering GHG emissions. This is because, unlike some other pollutants, GHG emissions have a similar environmental impact regardless of their location. That is, GHG emissions from any location contribute to increased atmospheric concentrations of GHGs, which in turn contributes to climate change. Conversely, reductions in CO2 emissions serve to minimize contribution to climate change. Thus, because the revisions to the Program are projected to result in overall CO2 emissions across the Eastern Interconnection, even when taking into account that emissions may shift outside of the RGGI region, the revisions will have positive and not adverse environmental impacts.
The Department agrees with the need to remain vigilant about the potential for leakage. As described in the SGEIS, the Department and the other Participating States will continue to monitor these issues.
Although the broader issue of CO2 emissions associated with electricity imports is beyond the scope of the SGEIS, as noted in response to Comments 70 and 71, the Department is committed to an open and collaborative effort with the other Participating States and stakeholders. Any CO2 emission leakage caused by the revisions to the Program, as well as broader issues regarding CO2 emissions associated with electricity imports, will be considered as part of the next comprehensive program review by the Participating States, which is scheduled to take place by 2016.
Comment 74: IPPNY is concerned about the adverse impacts, especially in relation to the increased transport of emissions of criteria pollutants from the west to east as a result of leakage. While the RGGI program might help to reduce local emissions of criteria pollutants, these emissions reductions could be displaced by western generation sources because of the tighter RGGI emissions cap and associated price disadvantage for generation located in the RGGI region. This displacement could exacerbate the current Northeast attainment challenge from the transport of emissions. This issue is a concern, especially during the years of the revised RGGI program, while broader federal transport rules are pending. (Commenter 6)
Response to Comment 74: The Department disagrees that the revisions to the Program will result in significant adverse impacts from criteria pollutants. The Department believes the current attainment challenge (the inability to attain the National Ambient Air Quality Standard (NAAQS) for Ozone) from the transport of criteria pollutant emissions is directly related to the stringency of the federal programs that regulate transport. As stated in the SGEIS, since there are federal programs in place under the Clean Air Interstate Rule (CAIR) emissions may shift, but they will not increase as a result of the Program or the Program revisions. The Department is well aware of the ozone attainment challenge it faces and is committed to work with stakeholders to push EPA to develop a program that addresses transport under the current NAAQS. Finally, as described in the SGEIS, the modeling conducted during RGGI Program Review projects that the revisions to the Program will cause cumulative emission reductions of NOX and SO2 through 2020 within the RGGI region of 38,000 tons and 68,000 tons, respectively.
Comment 75: We support expanding RGGI to other power generators. (Commenters 781-800)
Response to Comment 75: The revisions to the Program are primarily aimed at correcting the significant over-allocation of allowances under the Program. The primary goal of the Program is to reduce CO2 emissions from power plants, while maintaining energy affordability and reliability. The expansion of the Program to generators smaller than 25 MW in capacity is not included in the revisions to the Program. The expansion of RGGI to other power generators may be considered as part of the next RGGI comprehensive program review, which is scheduled for 2016.
The Department acknowledges that adequately addressing climate change issues requires broader regulation of GHG emissions, including from other sectors and potentially from smaller-scale power generation and emission sources. The Department's Office of Climate Change continues to conduct research and develop policy as it relates to all areas of climate change. The Department is also developing its first ever base year inventory for GHG emissions, and will use this to evaluate other areas to address in New York.
Comment 76: The Alliance strongly encourages the Department to supplement the manner in which the SGEIS addresses the leakage issue. (Commenter 16)
Response to Comment 76: The Department does not believe that any supplementation is needed. While the Final SGEIS includes some additions to the draft SGEIS, the draft and Final SGEIS both adequately address the issue identified for review by the Final Scope, namely the potential for emissions leakage caused by the revisions to the Program. As described in response to comments 70, 71, and 73, the revisions to the Program will not result in any adverse environmental impacts, including as a result of potential emissions leakage caused by the revisions to the Program.
Comment 77: The SGEIS notes that modeling of the proposed revisions to the Program projects cumulative reductions in NOX, SO2, and Mercury emissions in the RGGI region. The SGEIS claims that emissions leakage for those pollutants is not an issue because "Federal standards applicable to power plants outside the RGGI region will limit the potential for any emissions leakage of these pollutants as a result of the proposed revisions to the Program" and the RGGI modeling predicts that leaked generation goes primarily to gas-fired facilities.
However, New York State emission regulations for all three pollutants are more stringent than most upwind states and the cost of natural gas is the primary driver for determining which sources pick up the leaked load. Therefore, DEC should actively monitor what sources increase load outside of RGGI to insure that emissions only shift and do not increase as a result of RGGI. (Commenter 16)
Response to Comment 77: As noted in response to Comments 70, 71 and 73, the Department is committed to the collaborative effort with the other Participating States which includes the evaluation of potential tracking systems. Moreover, as described in response to Comment 74 and in the SGEIS, the revisions to the Program will not have any significant adverse environmental impacts, including regarding emissions of NOx, SO2, and mercury. The relative stringency of New York's emission regulations for these three pollutants, as compared to those of upwind states, is not being changed as part of this action. The Department will continue to actively monitor sources of increased load outside of the RGGI region, including assessing impacts on emissions.
Comment 78: The emphasis on emissions leakage overlooks economic leakage. Generation leakage will occur if the price of generation becomes cheaper outside RGGI. While using that power is cheaper for RGGI rate-payers the fact is that were it not for the RGGI added cost, that power would already be used. As a result leakage not only means added costs for ratepayers it also means that RGGI-affected sources are economically disadvantaged. (Commenter 16)
Response to Comment 78: Consistent with the Final Scope, the SGEIS focuses on emissions leakage caused by the revisions to the Program, as opposed to any economic leakage. In part, this was because it is the single issue identified in the initial final GEIS as having a potential environmental impact attributable to the Program. The economic impacts on generators and ratepayers were not overlooked, as they were incorporated into the electricity sector, macroeconomic, and bill impact analyses conducted by the Department and the other Participating States and described in the RIS.
As described in response to Comments 70, 71 and 73, the Department is actively engaged in an effort to identify a policy to address emissions associated with electricity imports. Any such policy that is adopted to address emissions associated with imports would also address any economic impacts from leakage. Finally, the development by EPA of a federal standard to address CO2 emissions from existing power plants, under Section 111(d) of the Clean Air Act, will serve to mitigate any economic disadvantage as described by the commenter.
Comment 79: If a leakage problem develops a timely and effective response must be readily available; that response strategy must be developed by taking into account a wide range of policy, technical and economic issues in a stakeholder-based transparent process. (Commenter 16)
Response to Comment 79: The Department agrees. As noted in response to Comments 70, 71 and 73, the Department has already started to work on the collaborative effort with the other Participating States to develop a workable, practicable, and legal mechanism to address emissions associated with imported electricity. This effort is in fact based on a wide-range of policy, technical, and economic issues and will incorporate a stakeholder-based transparent process. While this effort is focused on the broader issue of all CO2 emissions associated with electricity imports, rather than just emissions leakage caused by the Program, any policy to address the emissions from imports would also inherently address emissions leakage.
Comment 80: The 2011 market monitoring report came out on June 27, 2013 nearly 18 months after the end of the year. That is not responsive enough.
The RGGI Electricity Monitoring Group has been working on the leakage issue for several years and, according to the SGEIS "will develop a work plan over the next year to outline monitoring efforts." The time to kick the leakage can down the road once again is over. The Alliance believes simply developing a work plan is insufficient and that the RGGI Electricity Monitoring Group effort should result in a revised leakage monitoring methodology that can be completed no later than six months after the end of each year and which can be subject to extensive public input, review and comment. (Commenter 16)
Response to Comment 80: The preparation of the RGGI Electricity Monitoring Group's annual reports is a complex undertaking. While emissions from CO2 budget sources subject to the Program are submitted electronically, emissions from non-RGGI sources are gathered pursuant to other state and federal reporting requirements. It takes almost a full year just to "QA/QC" all of the emissions data required to support the Electricity Monitoring Group's work. That, coupled with the need to get associated generation data from three different independent system operators and merge the data sets to get a complete picture of what is occurring in complex electricity generating systems and markets, takes a significant amount of time and effort. The Department and the Participating States hope to be able to streamline the process for releasing the annual reports, in order to enable their release in a more timely fashion.
As noted in response to Comments 70, 71 and 73, the Department is committed to a collaborative effort with the other Participating States, which includes the evaluation of potential tracking systems that could address the concern raised over timing.
Comment 81: One potential approach for the leakage tracking system is to monitor allowance price and if it exceeds a certain and clearly defined trigger price that the energy economic analyses indicates will cause leakage, a predetermined amount of "leakage reduction allowances" could flow into the marketplace in much the same way that the cost containment reserve is designed to respond. Clearly, the RGGI Electricity Monitoring Group effort should also develop a definition of significant leakage that would require a response, again, by utilizing a stakeholder-based transparent process. (Commenter 16)
Response to Comment 81: Thank you for the input. The Department will take note of this comment as stakeholder input on the collaborative effort to address CO2 emissions associated with electricity imports, as described in response to Comments 70, 71 and 73. As noted in response to Comment 79, although more broad in nature, this collaborative effort would also inherently address any emissions leakage caused by the revisions to the Program.
Comment 82: The Alliance believes that there has been sufficient research for the RGGI Electricity Monitoring Group to develop a monitoring methodology that can be turned around much quicker than recent market monitoring reports and that the potential for leakage has been adequately analyzed. (Commenter 16)
Response to Comment 82: As noted in response to comment 80, only emissions from CO2 budget sources is readily available. Therefore, although there is a monitoring methodology developed by the Electricity Monitoring Group in place, allowing time for data availability delays the timely turn-around of these reports. As noted in response to Comments 70, 71 and 73 the Department is committed to the collaborative effort with the other Participating States which includes the evaluation of potential tracking systems that could address the concern raised over timing.
Comment 83: An allowance market that is not designed to address leakage could, in turn, inadvertently encourage electricity markets towards leakage. Fundamentally, a competitive wholesale electricity market could drive emissions leakage if allowance prices provide a sufficient net financial incentive to shift electric generation to units not subject to CO2 regulation. (Commenter 16)
Response to Comment 83: As described in the SGEIS, the Department agrees that "leakage" may occur under the Program if the cost of CO2 allowances for sources subject to RGGI is sufficient to shift electric generation to sources not subject to a similar CO2 compliance obligation. The modeling conducted as part of RGGI Program Review incorporates this price differential.
As described in the SGEIS and in response to Comment 70, this modeling projects that the location of some CO2 emissions may shift outside of the RGGI region. However, cumulative CO2 emission reductions will still result from the revision to the Program. As noted above, these projections take into account the projected increased allowance prices under the revisions to the Program.
Although emissions leakage does not constitute an adverse environmental impact under the revisions to the Program, as described in the SGEIS and in response to Comments 70, 71 and 73, the Department recognizes the potential importance of the issue of CO2 emissions associated with electricity imports. This is why the Department is committed to the collaborative process described in response to those comments.
Comment 84: The Alliance is particularly concerned that none of the studies completed to date has specifically defined "problem" leakage. The Alliance strongly recommends that the DEC and the relevant RGGI working groups consider this definition a priority. The trigger level for action - and the actions that would be taken -- should be in place no later than the end of 2014. The Alliance suggests that significant leakage threshold should be no less than 35 percent. (EEANY)
Response to Comment 84: Thank you for the input. As described above in response to Comments 70, 71, and 73, potential leakage may reduce the effectiveness of the Program, measured in terms of overall CO2 emission reductions across the Eastern Interconnection. However, this does not constitute an adverse environmental impact, because overall CO2 emissions are still projected to decrease as a result of the revisions to the Program. Therefore, the revisions to the Program are projected to have positive environmental impacts. If leakage were to become so significant that the revisions to the Program cause an increase in overall CO2 emissions across the Eastern Interconnection, then this may require additional mitigation actions by the Department.
Moreover, as noted in response to Comment 79, any policy that addresses CO2 emissions associated with electricity imports would also address the smaller universe of any emissions leakage caused by the revisions to the Program. Thus, the Department will take note of this comment as stakeholder input on the collaborative effort identified in response to Comments 70, 71 and 73.
Comment 85: Whatever steps are taken to abate emission leakage, the "cure must not be worse than the sickness" and the leakage control strategy must not be constructed so as to increase costs of electricity to ratepayers. (Commenter 16)
Response to Comment 85: Thank you for the input. The Department will take note of this comment as stakeholder input on the collaborative effort identified in response to Comments 70, 71 and 73. Moreover, as noted in response to Comment 79, any policy may be directed at all CO2 emissions associated with electricity imports, as opposed to just any CO2 emissions leakage that is attributable to the revisions to the Program.
Comment 86: The Alliance commends DEC and RGGI for its stakeholder process during the recent RGGI Program Review. We believe that this practice of significant stakeholder participation must continue throughout the leakage workgroup process that should begin immediately. The Alliance would like to work collaboratively with the DEC, NYSERDA, and RGGI to develop the leakage monitoring and mitigation policy. (Commenter 16)
Response to Comment 86: Thank you for the input. The Department agrees and as noted in response to Comment 70, New York and the other Participating States have started this process and it is envisioned that discussions will be opened to a broader array of interested stakeholders in the near future.
Comment 87: RGGI is further flawed by its regional nature. Climate change and CO2 emissions are a global problem (unlike criteria pollutants such as nitrogen oxides, sulfur dioxide, and particulate matter, which present regional issues). Only a broad national, and ultimately an international, regulatory framework can effectively address climate change. RGGI's current efforts to reduce CO2 emission by dramatically reducing the overall cap from 165 million tons to 91 million tons runs headlong into a major design flaw inherent in any regional program: the relocation of generation (and associated emissions of CO2 and traditional criteria pollutants) from the RGGI states into nearby non-RGGI states. The higher allowance prices that will be produced by the more stringent cap will cause non-RGGI generators to become more cost competitive in the regional wholesale markets relative to generators in RGGI states. As a result, generation in non-RGGI states will increase and displace generation in RGGI states. This will increase the emission of both CO2 and criteria pollutants outside of the RGGI region, with negative environmental impacts both outside and within the RGGI region. Furthermore, this will result in higher power prices not just in the RGGI states, but in non-RGGI states as well. (Commenter 18)
Response to Comment 87: The Department agrees that, in order to completely and effectively address the climate change caused by GHG emissions, an effort is needed at both the national and international levels, in addition to the state and regional levels. RGGI is intended to reduce the State and region's contribution to climate change, recognizing that additional action is needed at other levels to fully address the problem.
The relocation of generation, emission shifts, and other regional impacts caused by the higher allowance prices projected under the revisions to the Program are all considered as part of the modeling analyses. As described in the SGEIS, the revisions to the Program will not have any adverse environmental impacts, including related to emissions of both CO2 and criteria pollutants. Even when taking into account regional generation shifts, the revisions to the Program will still result in a cumulative reduction in CO2 emissions and therefore will have positive environmental impacts.
As described in response to Comments 78 and 83, the various modeling analyses conducted by the Participating States and described in the RIS incorporate the cost impacts of higher allowance prices under the revisions to the Program. Finally, as described in response to Comments 70, 71 and 73, the Department is committed to a collaborative and open effort with stakeholders in order to indentify a mechanism to address CO2 emissions associated with electricity imports.
Comment 88: RGGI should be reformulated to address these concerns by, among other things: 1. Creating programs that encourage private investment in low- and no-carbon generation particularly through financing incentives for replacing coal plants with cost effective combinations of renewable energy and efficient natural gas plants, enhanced renewable portfolio standards, and provisions to expand clean and resilient distributed energy resources; 2. Reducing the cap less drastically to align what can be achieved through the first step above with the reductions demanded by the cap. Further, the CO2 emissions from the regulated units during the last few years are not representative as emissions in those years were unusually low because (a) we have experienced the worst economic recession in 80 years, which dampened demand for power and (b) the price of natural gas, which historically has been very volatile, has been very low, causing significant switching from coal to gas generation. Since current emissions are not truly representative, leakage problems will be exacerbated when the economy improves and the price of natural gas reverts to a more normal price. (Commenter 18)
Response to Comment 88: First, as described in response to Comment 4, the State already has programs that encourage private investment in low- and no-carbon generation. This includes NYSERDA programs funded with proceeds from the sale of CO2 allowances, as well as the RPS and other efforts. Second, while the economic recession likely had some impact on CO2 emission reductions from the power sector, other factors - such as relative fuel prices, weather, and energy efficiency measures - have likely had just as much if not more of an impact. Many factors that have contributed to reduced CO2 emissions are likely to be permanent.
In any case, the modeling conducted during RGGI Program Review already factors in projections in future economic growth, as well as projected changes in relative fuel price. As demonstrated by the various modeling analyses, the Department believes that the cap reduction is achievable with the programs and policies already in place.
Analysis by NYSERDA staff of the factors that contributed to the reduction in electricity sector CO2 emissions in the RGGI states in 2009 compared to 2005, indicates that only 4.4 percent or 2.7 million tons of the reduction in emissions over that period was due to the economic recession which lowered the demand for electricity. From 2005 to 2009, RGGI region electricity load (gWh) decreased by about seven percent. About half of this decrease in load is accounted for by a directional swing in summer weather conditions, as 2005 was an unusually warm year and 2009 was an unusually cool year. The swing in weather conditions accounted for 14.7 million tons or 24.2 percent of the total CO2 reduction from 2005 to 2009. Increased end-use energy efficiency and customer-sited generation accounted for 7.2 million tons or 11.9 percent of the total CO2 reduction over that period.
Natural gas commodity prices decreased by about 42 percent from 2005 to 2009, which resulted in a substantial shift in electricity generation from petroleum and coal-fired generation to gas-fired generation. It is estimated that shifting from petroleum to natural gas generation due to relatively low natural gas prices accounted for 14.0 million tons or 23.0 percent of the total CO2 reduction over that period, while shifting from coal to natural gas generation accounts for 4.9 million tons or 8.1 percent of the total CO2 reduction.
As the region's economy is expected to grow over the long term, the CO2 reduction attributed to the economic recession is not expected to be permanent; however, as indicated above, this reduction represented only a small proportion of the total CO2 reduction (4.4 percent). In contrast, the CO2 reduction attributed to relatively low natural gas prices is expected to be largely sustained in the long term. Natural gas prices are expected to remain low relative to petroleum in the foreseeable future, so all or most of the 14 million tons of CO2 reduction due to shifting from petroleum to gas are expected to be enduring. Similarly, most though not all of the CO2 reductions due to reduced coal generation associated with low gas prices are expected to be sustained. There could be some periodic modest increases in natural gas prices that could cause some coal units to run for more hours in future years. However, it is not expected that future natural gas prices will increase to the point that coal generation and associated CO2 emissions will return to anywhere near 2005 levels.
Comment 89: Eliminate the SGEIS suggestion that reducing market barriers to distributed generation is a way to mitigate the risk of emissions leakage, because such a strategy is not realistic and could result in a net increase in NY's carbon footprint. (Commenter 19)
Response to Comment 89: Reducing market barriers to distributed generation is one way to potentially mitigate the risk of emissions leakage. This would be only one of several means to mitigate any future impact of emissions leakage, which as described in the SGEIS, the Department does not anticipate will be a significant adverse environmental impact. The Department recognizes the challenges associated with such a strategy, and will continue to evaluate mechanisms to reduce barriers in an effort to make the strategy more realistic. Finally, the Department acknowledges that increased distributed generation's impact on the State's carbon footprint will depend on the type of such distributed generation.
Comment 90: Make a commitment to hold a public stakeholder process that includes utility representation before moving forward with additional changes to the RGGI program, especially if the RGGI states consider implementing new rules to address emissions leakage, or consider merging the RGGI cap and trade system with another region. (Commenter 19)
Response to Comment 90: Thank you for the input. The Department agrees and does commit to hold a public stakeholder process, including utility representation, prior to adopting any new rules to address emissions leakage. As noted in Comment 70, New York and the other Participating States have started this process and it is envisioned that discussions will be opened to a broader array of interested stakeholders in the near future.
Comment 91: The Companies note that they support the development of combined heat and power (CHP), have advocated for additional CHP funding in the SBC program, and made process changes to make it easier for customers to install CHP systems. But the Companies disagree that support for CHP and other forms of distributed generation (DG) are a viable means of reducing the likelihood that NY generation will be displaced by more carbon-intensive generation from non-RGGI states. First, there would have to be a substantial amount of incremental CHP and DG installed to have a measurable impact on the State's need for out-of-state imports. Second, unless it is powered with renewable fuel, installation of new CHP systems or other DG will likely result in a new increase in NY's CO2 emissions, not to mention other harmful emissions such as nitrous oxides and sulfur dioxide, which contribute to smog formation and other local-level air pollution. (Commenter 19)
Response to Comment 91: The Department agrees that CHP and DG installation would have to increase measurably in order to have an impact on the State's need for out-of-state imports. The Department also agrees that new CHP and DG installation could actually increase the State's CO2 emissions, depending on the type of fuel used to power such installations. See also response to Comment 89.
Comment 92: Under existing RGGI rules, electric generating units less than 25 MW in size are not subject to compliance with RGGI, and therefore are not included under the State's carbon budget. However, the DEC cannot ignore the fact that incremental DG or CHP units would increase the State's carbon footprint and degrade local air quality. The DEC should therefore remove the SGEIS language in question. (Commenter 19)
Response to Comment 92: See responses to Comments 89 and 91.
Comment 93: Decisions on addressing leakage or entering into agreements with other jurisdictions should be made as part of an open stakeholder process that includes utility representation. To implement this, we suggest that the DEC included language in Part 242 specifying that if the RGGI states move to address the strategic direction of the RGGI program, including but not limited to consideration of leakage from non-RGGI states or potential linkage with cap-and-trade program in other jurisdictions, NY will engage its stakeholders in a process that gives all parties an opportunity to offer comments before any actions by the NYS or the RGGI partnership as a whole. The most expedient was to effectuate such a stakeholder process and to ensure adequate representation would be to appoint a utility representative to the NY RGGI Advisory Council, and utilize the Council as the forum for conducting in-state stakeholder proceedings. (Commenter 19)
Response to Comment 93: Thank you for the input. The Department agrees that an open stakeholder process is necessary to inform any decisions on addressing potential emissions leakage. As described in response to Comment 90, the Department commits to hold a public stakeholder process, including participation by utility representatives, prior to adopting any new rules to address emissions leakage. Moreover, as noted in Comment 70, New York and the other Participating States have already started this process and it is envisioned that discussions will be opened to a broader array of interested stakeholders in the near future.
The RGGI process has been an open process regionally, and in New York State where efforts have been made to seek input throughout the process. Therefore, the Department does not believe regulatory language is necessary to facilitate stakeholder input in the development of a leakage policy, or potential linkage decisions in the future. The Department anticipates that any future policies regarding emissions leakage, or any future "linkage" with programs in other jurisdictions would be subject to additional public input prior to adoption.
Finally, the existing Advisory Group of stakeholders, established under NYSERDA's CO2 Allowance Auction regulation, advises NYSERDA on how to best utilize RGGI CO2 allowance proceeds to achieve the goals of the Program. The Department does not feel that this particular forum would be the most beneficial or appropriate for conducting in-state stakeholder proceedings regarding any leakage or linkage policies. Instead, as described above, the Department will continue to conduct an open RGGI stakeholder process, including specifically addressing issues surrounding leakage.
Comment 94: More importantly the remainder of the benefits sections lists benefits from the investment of auction proceeds but never does quantify the effect on any of the purported environmental impacts described earlier in the document. I believe that it is incumbent on the Department to quantify the expected changes particularly in light of the proposed binding cap. In the absence of a Department analysis I have adapted data for the proposed action by the Regional Greenhouse Gas Initiative states in Table 1 from the analysis available at http://scienceandpublicpolicy.org/originals/state_by_state.html. The original analysis of U.S. and state by state carbon dioxide 2009 emissions relative to global emissions quantifies the relative numbers and the potential "savings" in future global temperature and global sea level rise from a complete cessation of all CO2 emissions. The current growth rate in CO2 emissions from other countries of the world will quickly subsume any reductions in New York and RGGI CO2 emissions. According to data from the U.S. Energy Information Administration (EIA) and based on trends in CO2 emissions growth over the past decade, global growth will completely replace an elimination of all CO2 emissions from the RGGI region in 188 days and all CO2 emissions from New York State in 78 days. For the emissions reductions listed in the DGEIS, global growth will completely replace the expected reductions in less than two days.
Furthermore, using assumptions based on the Intergovernmental Panel on Climate Change (IPCC) Assessment Reports we can estimate the actual impact to the environment. If the RGGI states as a whole stopped emitting all carbon dioxide (CO2 emissions immediately, the ultimate impact on projected global temperature rise would be a reduction, or a "savings," of approximately 0.0065°C by the year 2050 and 0.0134°C by the year 2100-amounts that are, for all intents and purposes, negligible. Applying those assumptions to all the New York State emissions of 175 million tons the ultimate impact on projected global temperature rise would be a reduction, or a "savings," of approximately 0.0027°C by the year 2050 and 0.0056°C by the year 2100. Applying those assumptions to the expected reductions of RGGI of 28 million tons, the ultimate impact on projected global temperature rise would be a reduction, or a "savings," of approximately 0.000043°C by the year 2050 and 0.000089°C by the year 2100. Clearly, if the effects of the expected emissions reductions on global temperature rise are so small the potential effect on the purported environmental impacts of climate change in New York State will be similarly small. When the actual potential effects of the proposed revisions on projected global temperature rise are considered the importance of developing an effective policy option to mitigate emissions leakage if it exceeds a threshold that is determined to be serious cannot be denied. Because the economic benefits of the investment of RGGI auction proceeds are the only tangible benefits of the program, emissions leakage consequences should not be allowed to devalue those benefits.
The potential for warming depends on how sensitive the planet is to increasing CO2 concentrations. During 2012, several groups of researchers noted that recent data and modern diagnostics now showed that the 30-year old 3°C mid-point had been over-stated. Peer-reviewed journal papers included:
- 'Ring et al': estimates of climate sensitivity ranged from 1.5 to 2.0°C.
- 'Van Hateren': millennium-scale sensitivity found to be 2.0 ±0.3°C.
- 'Aldrin et al': the 90 percent credible interval ranges from 1.2°C to 3.5°C, with a mean of 2°C. In January 2013, the British media reported that the UK Met Office was projecting a 20-year standstill in global warming by 2017. This 'pause' had not been predicted by climate models. In February, IPCC chairman Pachauri admitted that the temperature data had already been flat for 17 years, while opining that a standstill of 30 years would be required to rebut the previous consensus. Both "cause" and "extent" issues are heavily dependent on the validity of climate simulations by the current Coupled Model Intercomparison Project (CMIP5), as are all IPCC projections of future planetary temperatures and their impacts.
Serious scientific doubts about either ECS-related inputs or the accuracy of temperature predictions undermine the effectiveness of the RGGI emission reduction effects. After the March cut-off date for WG1 papers, the following 2013 papers have strongly reinforced concerns regarding the exaggeration of climate sensitivity:
- 'Otto et al': the best estimate of sensitivity is 30% below the CMIP5 multi-model mean.
- 'Forster et al': analysis of CMIP5 shows that 2/3 are above the Otto 'likely' range.
- 'Masters': median estimate of ECS is 1.98°C.
- 'Lewis': improved methodology shows the mode and median to be 1.6K
In congressional testimony, Judith Curry cited the Hawkins graph depicting observed trends below 90% of CMIP5 projections, and notes that warming may not resume until mid-century. Clearly the global mean temperature rise has slowed or paused for over ten years. However, once observed it takes time to determine potential causes. As a result it has only been within the last several months that papers have appeared discussing the issue.
In August 2013 five papers appeared: 'von Storch & Zorita' found that observed temperatures 1998-2012 were not consistent with 23 tested CMIP3 and CMIP5 models, even at the 2 percent confidence level. The inconsistency increases rapidly with trend length and a 20-year trend (i.e. to 2017) would lie outside the ensemble of all model-simulated trends. They conclude that 'natural' internal variability and/or external forcing has probably offset the anthropogenic warming during the standstill. Overestimated sensitivity may also have contributed.
- 'Tung & Zhou' reported that the "underlying net anthropogenic warming rate has been steady since 1910 at 0.07-0.08°C/decade, with superimposed AMO-related ups and downs..." The sharply increased CO2 concentration of recent decades has not caused warming to accelerate, as was predicted by the models.
- 'Yu Kosaka & Shang-Ping Zie' plausibly found that climate models have vastly under-estimated natural variation. La-Nina-like cooling in the Eastern Pacific throughout the 21st century (since the PDO turned negative) has conquered the projected greenhouse warming. The 0.68°C warming trend during 1975-98 (when the PDO was positive) would have been 0.4°C natural and only 0.28°C anthropogenic.
- 'Katz et al' says the critical uncertainty measures used by the IPCC are "out of date by well over a decade". Modern statistical techniques could improve assessments "dramatically".
- 'Fyfe Gillett & Zwiers' focused on the extraordinary gap between the temperature simulations of 37 CIMP5 models and the observed outcomes. Due to a 'combination of errors', the models have overestimated warming by 100% over the past 20 years and by 400 percent over the past 15 years. These new papers suggest that the IPCC belief that current and future global temperatures are mostly driven by greenhouse gas emissions is mistaken. RGGI was justified based on the IPCC analyses. However, nearly all the work done to date has not handled the recent data well. The IPCC's 2001 report cautioned: In climate research and modeling, we should recognize that we are dealing with a coupled non-linear chaotic system, and therefore that the long-term prediction of future climate states is not possible. The most we can expect to achieve is the prediction of the probability distribution of the system's future possible states by the generation of ensembles of model solutions. This reduces climate change to the discernment of significant differences in the statistics of such ensembles.
My major concern is the lack of specificity of the climate change benefits of the proposed action. The SGEIS essentially refers to the RIS analysis when discussing the purported impacts of GHG emissions and benefits of the proposed action, so I will limit my reference to the RIS section entitled Benefits from the Proposed Program Revisions. The third sentence in the first paragraph of the Benefits from the Proposed Program Revisions section has to be revised to be consistent with the RIS vis-à-vis the total expected emissions reductions. Because of emissions leakage total emissions reduction is not 86 million tons, it is 28 million tons.
The intent of these comments is not to undermine the rationale for RGGI emission reduction program. Instead they are intended to bolster the contention that RGGI benefits are economic rather than global warming mitigation. Emissions leakage consequences should not be allowed to devalue those benefits. (Commenter 17)
Response to Comment 94: As the nation's first market-based program to cap and cost-effectively reduce the GHG emissions that cause climate change, RGGI serves as an effective model to bolster the economic benefits of GHG emissions reductions and influence national and international policy to mitigate climate change. New York State has in place several policies and programs that currently are reducing GHG emissions. Programs that reduce GHG emissions are also expected to produce significant environmental co-benefits in the form of improved local air quality, and a more robust, diverse and clean energy supply in the State.
As your comment identifies, some scientific papers have suggested that the planet's climate sensitivity may fall on the lower end of IPCC's suggested range. A more recent analysis considering climate feedbacks finds an increased sensitivity toward warmer climates in the upper part of the range [3-4°C (5.4-7.2°F)].4 The IPCC Fifth Assessment Report, Summary for Policy Makers, states, "Equilibrium climate sensitivity is 'likely' in the range 1.5°C to 4.5°C ('high confidence), extremely unlikely' less than 1°C ('high confidence'), and 'very unlikely' greater than 6°C ('medium confidence')."5
Even if the precise range of warming is uncertain, the overwhelming scientific evidence still provides more than enough certainty regarding the need to act now to reduce CO2 emissions.
While the extent of the range is important, there is high confidence that temperatures are still within a range that warrants immediate action. There are inaccurate claims that global warming has "paused" or global surface temperature has not risen since 1998. These claims are based upon a 15-year time period which is too short of a time period to establish a trend.6 Research has shown a warming trend over the last 30 years.7 According to the IPCC Fifth Assessment Report, each of the last three decades has been successively warmer at the Earth's surface than any preceding decade since 1850. A 2013 study incorporating deep ocean data reports a significant warming trend below 700 meters depth.8 'The State of the Climate in 2012' found several important climate indicators set new records or were near record levels during 2012.9
The cumulative CO2 emission reductions projected to be achieved under the revisions to the Program, whether considered in terms of the RGGI region or more broadly across the Eastern Interconnection, are beneficial because they reduce contribution to climate change and decrease the risk of the occurrence of the most severe impacts. As suggested by the commenter, the benefits of RGGI are both environmental and economic. While the primary purpose of the Program and the revisions to the Program is to reduce CO2 emissions, the design of the Program demonstrates that it is possible to reduce emissions while also improving the economy. Various studies of the Program to date, as well as projections of the Program under the revisions, show that RGGI is serving to benefit the region's economy while also reducing CO2 emissions.
Comment 95: Finally, NextEra appreciates the analysis on leakage in the draft SGEIS and while the DEC has indicated that it does not consider emissions leakage to constitute an adverse environmental impact at this time, we hope that all the RGGI states will continue to closely monitor this issue. If, in the future, the impact from emissions outside of the RGGI region is found to have an adverse impact, we urge the RGGI states to devise a comprehensive and coordinated approach that considers any action in relation to the reliability impacts that might result. (Commenter 20)
Response to Comment 95: The Department and other RGGI Participating States will indeed continue to closely monitor the issue of emissions leakage. Moreover, if the impact of emissions leakage is found to have an adverse impact in the future, the Department will develop a comprehensive and coordinated approach that considers any reliability impacts. As noted in response to Comments 70, 71 and 73 the Department has already started to work on the collaborative effort with the other Participating States to develop a workable, practicable, and legal mechanism to address emissions associated with imported electricity.
Expansion to Other Sectors
Comment 96: From the outset, Environmental Advocates has supported the expansion of RGGI to all sectors of the economy. The organization remains committed to that position. Five years of program implementation combined with the real world examples of cap-and-trade programs operating in other regions - California for example - has provided the state with the experience necessary to confidently move forward with plans to widen the scope of RGGI beyond power plants.
We encourage the Department to use the planned leakage review as an opportunity to also propose expanding the program to cover emissions from other economic sectors including industrial stationary sources, buildings, transportation and energy infrastructure like pipelines and well pads. Additionally, the cap should be amended to include all known greenhouse gas pollutants including methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons, and sulfur hexafluoride. (Commenter 4)
Response to Comment 96: The proposed revisions to the Program were aimed at correcting the significant over-allocation of allowances under the Program. The primary goal of the Program is to reduce CO2 emissions from power plants, while maintaining energy affordability and reliability. Expansion to other sectors or GHGs was not adopted as part of the revisions to the Program.
Nevertheless, the State and the Department are already engaged in efforts to address GHG emissions from all sectors. For example, the Department has already promulgated Greenhouse Gas Exhaust Emission Standards (6 NYCRR Part 218-8) for mobile sources and is actively participating in the Transportation and Climate Initiative to help develop other strategies that can result in emission reductions from this sector. Moreover, NYSERDA programs contribute to reduced emissions from the building sector.
The Department acknowledges that adequately addressing climate issues requires regulation of GHG emissions from all sectors. The Department's Office of Climate Change continues to conduct research and develop policy as it relates to all areas of climate change. The Department is also developing its first ever base year inventory for GHG emissions and will use this to evaluate other areas to address in New York.
Comment 97: We strongly encourage the Department to continue to push the envelope by exploring ways to expand the reach of the Program to cover other economic sectors, cap additional greenhouse gasses and finally take on the challenge of pollution generated through electricity imports. (Commenter 8)
Response to Comment 97: Thank you for your comment. The revisions to the Program are focused on reducing emissions from the power sector. See also response to Comment 96.
Comment 98: We encourage the Cuomo administration to push the envelope by exploring ways to expand the reach of the program to cover other economic sectors, cap additional greenhouse gases, and address the challenge of pollution generated through electricity imported from regions that have failed to act to limit carbon pollution. (Commenters 802-2255)
Response to Comment 98: Thank you for your comment. The revisions to the Program are focused on reducing emissions from the power sector. See also response to Comment 96.
Comment 99: RGGI's ineffectiveness and the perverse results of the proposed revisions are magnified because RGGI affects only units that serve an electricity generator with a nameplate capacity equal to or greater than 25 MW. RGGI advantages smaller units, which generate significantly higher CO2 and criteria pollutant emissions on a lb/MWh basis when compared to larger units because they are significantly less efficient, generally burn lower quality fuels, have fewer emissions controls, have shorter stacks, and are predominately oil-fired. This exempts many fossil fuel-fired facilities from the provisions and requirements of RGGI even though these units will have a significant impact on CO2 emissions and displace RGGI-affected facilities in the RGGI region. (Commenter 18)
Response to Comment 99: The proposed revisions to the Program were aimed at correcting the significant over-allocation of allowances under the Program. The primary goal of the Program is to reduce CO2 emissions from power plants, while maintaining energy affordability and reliability; expansion of the Program to generators smaller than 25 MW in capacity is not included in the revisions to the Program. The expansion of RGGI to other power generators may be considered as part of the next RGGI comprehensive program review, which is scheduled for 2016.
The 25 MW threshold was selected based on an analysis of the total CO2 emissions contribution from the universe of affected generators. The Department agrees that a number of the generators that are not subject to the Program emit more on a lb/MWh basis. However, in part because of their unique operating characteristics of running at times of peak demand, the Department believes that when these units run, they generally do not displace generators affected by the Program, but instead supplements them. In addition, as noted in the latest monitoring report "CO2 Emissions from Electricity Generation and Imports in the Regional Greenhouse Gas Initiative: 2011 Monitoring Report," June 27, 2013,10 the latest monitoring results do not show an increase of annual CO2 emissions related to either net electricity imports into the ten-state RGGI region, or from small fossil fuel-fired electric generators in the ten-state RGGI region that are not subject to state CO2 Budget Trading Program regulations in the first three years of the program, 2009 to 2011.
Comment 100: The Business Council agrees that human actions may contribute to climate change, but the Business Council will not embrace out of fear, a myopic single-sector, approach to global matters. Our collective goal should be the broad-based support for the acceleration in decarbonisation of the New York and world economy, in a manner that seeks to meet the needs and aspirations of the present, without compromising the ability to meet those future needs. We do not believe the acceleration in decarbonisation of the New York can or should result in the cessation of economic growth. (Commenter 22)
Response to Comment 100: The Department agrees that a single-sector approach is insufficient to address climate change. The Department agrees that a goal should be the acceleration in reducing the carbon intensity of the State and world economy. While the revisions to the Program help to reduce the power sector's contribution to climate change, the Department and the State are already engaged in other efforts to address GHG emissions from other sectors, as described in response to Comment 13.
Moreover, the Department does not believe that the revisions to the Program will result in the cessation of economic growth. In fact, as demonstrated by the macroeconomic analyses conducted as part of RGGI Program Review and described in the RIS, the revisions to the Program are projected to have economic benefits.
Comment 101: Clearly more efficient and effective solutions to addressing the release of GHG must be considered. We believe that it is unwise to focus climate policy merely on carbon dioxide to the exclusion of other human influences on the climate system. In fact early action on a wider range of human influences on climate could be timelier and less costly. (Commenter 22)
Response to Comment 101: The Department agrees that a wide range of efficient and effective solutions to addressing GHG emissions should be considered. Moreover, climate policy will have to include all GHGs that influence the climate system, and not just CO2 emissions. The Department agrees that early action to address human influence on climate change is more beneficial, both in terms of adequately addressing the most severe impacts of climate change, and in terms of minimizing the cost of action.
Comment 102: The Business Council supports the adoption of climate policies with co-benefits. We support the adoption of climate policies that provide near-term, concrete benefits that have a co-benefit to reduce the scale of human activity on the climate system. At this time, faced with the undeniable fact the RGGI program's emissions cap has not resulted in substantive emissions reductions, and proven costly to consumers, the Business Council does not support the adoption of the proposed regulations and strongly suggests that New York reconsider the RGGI program, and look to obtain decarbonization in a less costly and more effective manner. The Business Council of New York State's comprehensive concerns about this program are rooted in the inefficiency of the program itself to address climate change, balanced with the price tag of the program. (Commenter 22)
Response to Comment 102: The Department also supports climate policies with co-benefits. As described in the RIS, the revisions to the Program have concrete benefits in terms of CO2 emission reductions, as well as co-benefits in terms of other emission reductions and economic benefits.
Even without a binding emission cap, the Program has already been effective and successful, in terms of both environmental and economic benefits. For example, the carbon price and policy signal provided by CO2 allowances under the Program have already helped to encourage the transition to cleaner sources of energy in the State. In fact, CO2 emissions from the power sector have decreased since the Program's inception, while at the same time, the Program has provided economic benefits.
The revisions to the Program are intended to correct the over-allocation of allowances in the RGGI market, which will help to ensure that the RGGI emission cap becomes binding, and make the Program even more effective in limiting and reducing CO2 emissions from the power sector in the State.
Moreover, in addition to reducing CO2 emissions, as described in the RIS, the revisions to the Program are projected to have significant macroeconomic benefits, including in terms of both overall economic activity and job creation. In particular, the cumulative changes in New York's Gross State Product and Personal Income associated with the revisions to the Program will be about $5.8 billion and $4.7 billion, respectively. The cumulative change in employment in New York associated with the revisions to the Program will be about 80,500 job-years over the period 2012 to 2040.
Finally, the projected costs of the revisions to the Program are minimal, as described in the RIS and response to Comment 142. For example, for an average commercial customer, the projected retail price impact of the revisions to the Program is about 1.1 percent in 2016 and 0.7 percent in 2020 ($7.87 and $5.00 per month, respectively). For an average industrial customer, the projected retail price impact of the revisions to the Program is about 1.7 percent in 2016 and 1.2 percent in 2020.
Comment 103: The Department has neglected to remove the exemption for units that supply less than or equal to 10 percent of the power generated on-site to the electric grid, also known as the "inside-the-fence" or "behind-the-meter" exemption. These sources account for millions of tons of carbon emissions annually and should therefore be required to comply with the same standards applied to other sources. (Commenter 4)
Response to Comment 103: The Department did not intend to remove this provision as part of program review. The Department included this provision to exempt industrial sources, not typically regulated in New York as electric generators, that provide little or no electrical output to the grid. This exemption is currently limited to only two sources in the State; pursuant to the terms of the Program, the amount of sources covered by the exemption cannot increase. As described above in response to Comment 96, the Department is confident that future GHG reduction strategies, such as expansion to other sectors, will address GHG emissions from the industrial sector.
Comment 104: Will there be any changes considered because of the expected retirement of Entergy's Vermont Yankee nuclear power plant? It seems that its retirement will necessitate the generation of about 500 MW of power from other sources, and if it comes from units subject to RGGI regulation then it will cause somewhere between 1.5 - two million additional tons of CO2 to be emitted. (Commenter 5)
Response to Comment 104: The retirement of Vermont Yankee was incorporated in the RGGI Program Review electricity modeling process. The Reference Case, as described in the RIS, assumed that Vermont Yankee would retire in 2014. Therefore, this change was considered in the development of the modified RGGI program, and any additional tons of CO2 emissions were already factored in to the consideration of the new cap level.
Comment 105: RGGI's Reference Case includes a critical assumption that Units 2 and 3 at the Indian Point (IP) nuclear power plant are retired when their current nuclear operating licenses expire in 2013 and 2015, respectively. The Companies believe that the IP units should be included in the RGGI Reference Case as operating at their current capability through the 2020 planning period, with scenarios used to evaluate IP units retired, as a sensitivity to the Reference Case. As discussed above, sound energy policy should be built on a foundation of the best available information and consistent assumptions, with scenarios developed for the study of potentially significant events. Applying this principle to the modeling of the IP units, consistent with the NYISO and other regional plans, it is more appropriate to assume that the IP units are operating for the period covered by the RGGI baseline scenario. (Commenter 19)
Response to Comment 105: It was a New York State policy assumption that both IP units will be retired upon their respective nuclear operating license expiration in 2013 and 2015, respectively. While this policy assumption was made for purposes of the RGGI Reference and Program Cases, the continued operation of both units was incorporated in the low emissions sensitivity scenario. Thus, the Department made its decisions regarding the revisions to the Program based on all available information, and taking into account multiple potential scenarios.
Comment 106: The Companies also are concerned that RGGI's modeling solution for a Reference Case that includes IP retirement may be insufficient to meet bulk system loss of load reliability criteria of one day in ten years. The NYISO's 2010 RNA shows that under a scenario where each of the two IP units retires at the end of its nuclear operating license, a resource adequacy need is immediately triggered upon retirement of Unit 3 in December 2015. RGGI's Reference Case solution only adds 1,318 MWs of new combined cycle capacity in New York State over the planning horizon, which is just enough to meet New York State load growth from 2016 to 2020, plus the corresponding reserve requirement. This would leave none of the new capacity in the Reference Case to replace approximately 2,000 MWs of retiring IP capacity. (Commenter 19)
Response to Comment 106: IPM must meet assumed energy and peak demand requirements, including local and state reserve margin requirements. It does this through the use of existing in-state resources, by adding new in-state capacity, or through transfers of energy and capacity from other regions. The Reference Case projects 2,300 MW of new combined cycle capacity and over 1,000 MW of new peaking capacity through 2020, in addition to new firm capacity and renewable capacity. Those additions, as well as increased utilization of existing combined cycle resources, provide backfill for generation lost due to the retirement of Indian Point in the modeling.
Comment 107: In the Category B Assumptions as described in the Integrated Planning Model Overview presentation, the slide titled, "Regional Energy and Peak Demand" indicates that RGGI is leaning towards using, "ISO projections, adjusted for efficiency as provided by the States." Con Edison urges RGGI to use the RTO/ISO adjustments for efficiency to extent that they are available. For example, the New York Independent System Operator's (NYISO) most recent Reliability Needs Assessment contains an assessment of the amount of demand and consumption growth that will occur for the period 2010-2020. This assessment was subject to full NYISO stakeholder review and was unanimously approved by the NYIO's Management Committee on August 25, 2010. As such, it represents a consensus view of the amount of demand and consumption growth that will occur (inclusive of energy efficiency) by 2020 and should be used by RGGI for the modeling reference case. To the extent that other ISOs/RTOs have produced similar kinds of forecasts (inclusive of energy efficiency), they should also be used. (Commenter 19)
Response to Comment 107: New York used the NYISO load forecast and energy efficiency assumptions. Most other participating states also used their ISO/RTO assumptions. Maryland and Delaware made additional refinements to reflect their perspective on achieving their energy efficiency goals.
Comment 108: In the Category D Assumptions, as described in the Integrated Planning Model Overview presentation, the slide titled, "Renewable Portfolio Standards (RPSs)," indicates that RGGI is leaning towards using regional alternative compliance payments (ACP) as specified by States. As New York doesn't have ACP, Con Edison suggests that RGGI utilize the NYISO forecast for RPS achievement as set forth in its RNA base case. Here, too, if similar forecasts are available from other ISOs/RTOs, they should be used. (Commenter 19)
Response to Comment 108: New York does not have ACP and therefore did not specify one for modeling purposes. Partial fulfillment of RPS targets were assumed for New York based upon NYISO certainty criteria, capacity under RPS contract and RPS funds currently approved for future solicitations.
Comment 109: There are two additional questions that the Companies would like to pose to RGGI, Inc. and the States to clarify the results of the policy scenarios. First, do the policy scenarios assume that all allowances are offered and sold by the States during each compliance period? In past auctions the States have chosen to hold back some of their allowances for state-specific set asides and other reasons, and the Companies are interested to know if the policy scenarios assume this will continue to be the case. If RGGI, Inc. is assuming there are no allowance holdbacks, it may be useful to model a sensitivity showing how such hold-backs could impact allowance prices. Second, the Companies expect to see increases in emissions from non-RGGI sources as the caps ratchet down and power imports grow. Will these emissions increases be quantified and factored into the macroeconomic analysis? (Commenter 19)
Response to Comment 109: The answer to the first question is yes. The modeling assumed that all allowances, including those in state-specific set-asides, would eventually wind up in the broader CO2 allowance market.
The Department has already distributed all remaining allowances from its two set-aside accounts for the first control period. For the second control period and beyond, the Department will ultimately distribute allowances from its set-aside accounts pursuant to the terms of the Program. Likewise, the ultimate disposition of set-aside allowances by other Participating States will be determined pursuant to their respective administrative processes.
While it is not possible to predict the precise amount of allowances that could be held back from the market pursuant to state-specific set-asides, the Department anticipates the amount to be relatively small because the set-asides have been historically undersubscribed. The Department does not anticipate that this would have a significant impact on modeling projections of CO2 allowance prices relative to all of the other modeling assumptions. Moreover, the Department believes that the modeling analyses already performed, including the existing sensitivity analyses, already accounts for any potential impacts that might result from this relatively small amount of allowance retirements in the RGGI region.
In response to the second question, emissions changes are not an input for macroeconomic modeling. However, the economic impacts of importing more electricity were incorporated in the macroeconomic modeling. Moreover, emissions from non-RGGI sources will continue to be monitored and quantified by the Department and the other Participating States, including by the RGGI Electricity Monitoring Group as described in the SGEIS.
Comment 110: The Companies recommend that the Participating States reconsider the Reference Case assumptions related to reserve margins in the NYISO control area. As modeled, RGGI's Reference Case assumes that the NYISO installed reserve margin (IRM) remains at a steady 15.5 percent throughout the scenario timeline, with local reserve requirements of 80 percent and 104.5 percent for Zones J and K, respectively. However, a steady IRM requirement set at the current level does not consider the process by which the IRM is set nor recent history of the IRM itself. The IRM is recalculated annually in New York and has varied between 15 and 18 percent in the last six years. In order to reflect the likely variation of the IRM during the planning horizon, the Companies suggest that RGGI consider an IRM for the NYISO that reflects a historical average, such as the average of IRMs from 2006 to 2011, or 16.5 percent. (Commenter 19)
Response to Comment 110: An IRM of 16 percent was used for 2012 based upon the requirement that was currently in effect at that time. Requirements were increased to 17 percent in 2014 and 18 percent in 2016 in the modeling, to approximate the directional impact that may be associated with retiring Indian Point units 2 and 3.
Comment 111: The Companies recommend that RGGI, Inc. carefully evaluate any output generated by Integrated Planning Model (IPM) in light of the recent experience with the United States Environmental Protection Agency (EPA) Cross State Air Pollution Rule (CSAPR). The IPM output files provided by EPA, and the technical support documents provided in the rulemaking docket, indicate that the IPM did not correctly incorporate any of the local reliability rules and the minimum oil burn rules that are so critical to the reliable operation of the New York City electric and steam systems. Among other issues, the IPM modeled a significant under generation of units in New York City and Long Island when compared to historic levels, and calculated more out of state imports compared to historic levels. Additionally, the IPM technical support documents clearly stated that the model was not able to take into account dual-fueled (oil and gas) units, black start units, spinning reserve units and "must-run" units. In all of these cases, the amount of fossil fuel and related CO2 emissions would be understated relative to historic operation of the system, before taking into account expected future changes in the generating mix. (Commenter 19)
Response to Comment 111: This study did not use EPA's assumptions, and therefore the modeling conducted as part of RGGI Program Review does not have any of the issues that may have been associated with EPA's IPM modeling for the CSAPR. Instead, this analysis included the minimum unit operation levels to meet reliability and minimum fuel burn requirements in New York based upon guidance from the NYISO.
Comment 112: The Companies recommend that RGGI Inc. revisit the assumptions made for nitrous oxide (NOX) and sulfur dioxide (SO2) allowance prices that are included in the Reference Case, and particularly in the Federal Regulatory Sensitivity Case. The criteria documents provided for the September 19, 2011 RGGI Stakeholder meeting indicate that the Reference Case modeling includes the finalization of CSAPR. Yet, none of the cases presented include the projected allowance costs as modeled by EPA in the final CSAPR, and in most cases, the projected NOX and SO2 allowance costs are significantly lower than those projected by EPA. (Commenter 19)
Response to Comment 112: Allowance prices were treated as an output in this analysis. The SO2 and NOx allowance price estimates produced in the RGGI analysis are different from those in the CSAPR analysis for a variety of reasons. EPA performed its analysis in early 2011 and many of the assumptions differed from those that were used under the RGGI analysis in mid-2012. For instance, Henry Hub natural gas prices are about $1/MMBtu lower in the RGGI case than in the EPA CSAPR case, which would discourage coal generation and reduce pressure on SO2 and NOx emissions. Also, the EPA analysis did not incorporate the Mercury Air Toxics Standard (MATS) in its modeling whereas the RGGI analysis did. The inclusion of MATS leads to coal retirements throughout the time horizon that would not have been projected in the EPA analysis. Similar to the lower gas prices, this difference would result in fewer SO2 and NOx emissions in the RGGI case and, therefore, lower allowance prices.
Comment 113: Additionally, it is not clear from the information presented that the IPM model deals with the fact that not all of the Participating States are covered by CSAPR, and how the differential costs associated with allowance prices would impact transfers of power from one state to another state. (Commenter 19)
Response to Comment 113: The allowance prices shown are applicable to the states covered by the assumed emission control programs, as presented in the Reference Case assumptions document dated August 13, 2012. CSAPR does not cover participating RGGI states in New England, nor does it cover Delaware.
Comment 114: Future policy analyses that evaluate a change in the CO2 cap level, the effect of a different cap on CO2 allowance prices, and the interactions between CSAPR allowance prices and CO2 allowance prices, should only be considered after undertaking a more rigorous review of potential CSAPR allowance prices. (Commenter 19)
Response to Comment 114: See response to Comment 112.
Comment 115: To better respond to RGGI's future requests for input on policy scenarios, it would be helpful to have a list of all of the assumptions made for the Reference Case and sensitivities, categorized by the source of information, such as the 2010 NYISO RNA, 2011 Congestion Assessment and Resource Integration Study (CARIS), and the annual NYISO IRM study, and an indication of how the assumptions were used or modified across the Reference Case and sensitivity runs. In particular, the Companies would like to gain a better perspective on how assumed changes to transmission imports and exports contribute to the IPM's tally of resource adequacy over time in southeastern New York. (Commenter 19)
Response to Comment 115: There are no assumed changes to transmission imports and exports. The amount of electricity imported or exported is an output of the model that is based upon economic dispatch of the modeled generators that, among other things, must meet installed reserve margins, local reserve requirements, and transfer limits developed in cooperation with the NYISO. Comments related to the organization of modeling assumptions information will be taken into consideration for any future modeling activities.
Comment 116: Are the public comments going to be made available in either summary or detail? (Commenter 5)
Response to Comment 116: Yes, this document summarizes all of the comments received by the Department during the public comment period.
Comment 117: During the first public meeting at 2:00 PM on August 26, 2013 there was a significant drop to the market price for RGGI CO2 credits. While that may be a coincidence, it typically means something surprising happened. Were there any changes to the proposed rule which were made public at that time? (Commenter 5)
Response to Comment 117: The Department did not make any changes or announcements of changes to the proposed revisions of the Program at any of the public hearings.
Comment 118: Is there still any meaningful quantity of No. 6 or No. 2 oil used for power generation in New York State? If so, biodiesel is a drop-in replacement for petroleum and can be used in boilers and turbines for power generation by those companies seeking to reduce their CO2 emissions. CO2 allowance values in the range of $10 (plus or minus) per ton could help make it economical to replace oil with biodiesel. Natural gas is far too cheap for biodiesel to compete with - so that option would be out of the picture even in spite of the fact that biodiesel saves about 70 percent on CO2 emissions compared to natural gas. (Commenter 7)
Response to Comment 118: Petroleum is used for only a small portion of power generation in the State. In 2011, for example, electricity generated from petroleum accounted for approximately 0.7 percent of the electricity generated in the State. Many of the sources that burn oil for power generation have a capacity of less than 25 MW, and are therefore not subject to the Program.
While CO2 allowance values in the range of $10 per ton could help encourage additional biodiesel usage or other fuel switching, CO2 allowance prices are not set by the Department, and are instead determined by the market, as described in response to Comment 1.
As described in the RIS, under the changes to the Program, CO2 allowance prices are projected to increase to $6.02/ton (2010 dollars) in 2014, to about $6.73/ton in 2016, and to about $8.41/ton in 2020. Under the "Alt Bank" scenario described in the RIS, CO2 allowance prices under the revised Program are protected to increase from approximately $3.60/ton (2010 dollars) in 2014 to about $6.57/ton in 2016 and about $10.21/ton in 2020.
Moreover, as described in response to Comment 119, the Program is not intended to specifically promote any particular fuel type. Instead, the Program is intended to limit and reduce CO2 emissions from subject sources, without dictating the use of any specific fuel. Finally, while CO2 allowances are not projected to potentially reach the $10 range under the Program until 2020, the Program's carbon price signal helps to encourage transition to less carbon intensive forms of energy generation.
Comment 119: Does the RGGI program have any eligibility rules re: liquid renewable fuels that might affect whether biodiesel could be used under the program? (Commenter 7)
Response to Comment 119: Any fuel, including liquid renewable fuels, may be used under the Program, consistent with other legal and regulatory requirements. That is, the Program does not dictate particular fuel types that may used by specific CO2 budget sources, as long as a source meets its primary compliance obligation of holding a sufficient amount of CO2 allowances to cover its CO2 emissions over the relevant control period or interim control period.
The Program also provides that CO2 emissions attributable to the burning of "eligible biomass" may be deducted from a source's compliance obligation. Liquid biofuels do not qualify as "eligible biomass" under the Program.
Comment 120: By 2010, New York's power plant owners already had reduced their greenhouse gas emissions by 40 percent from 1990 levels, accomplishing this 20 years earlier than what was required to reduce their share of the state's emissions goals. EPA Administrator Gina McCarthy has been quoted as saying that the EPA will respect state efforts to cut CO2 emissions taken in advance of the implementation of federal greenhouse gas rules for power plants and will focus on collaboration and moving forward together. Upstate New York Power Producers urges the DEC to work with the EPA to ensure that power plant owners receive full credit for the emission reductions they have accomplished to date and those that would occur as a result of the revised Regional Greenhouse Gas Initiative rule and other DEC initiatives to address climate change. (Commenter 10)
Response to Comment 120: The Department recognizes that CO2 emission reductions have already taken place in the State's power sector. The revisions to the Program are intended to maintain the emission reductions already achieved and to achieve additional emission reductions.
The Department is already working collaboratively with EPA, as well as other states and stakeholders, as it develops CO2 standards for existing power plants under 111(d). The Department believes that EPA should recognize the CO2 pollution reductions already achieved by states that have already implemented power sector CO2 emission reduction programs like the Program. Moreover, the Department believes that EPA should allow states flexibility in the manner in which they meet EPA's standards, including by allowing for RGGI to serve as a state's compliance mechanism under 111(d).
The Department will continue to work collaboratively with EPA, other states, and stakeholders in order to advance these principles, as EPA develops its CO2 standards for existing power plants under 111(d).
Comment 121: According to the New York State Energy Research and Development Authority's June 2013 'Patterns and Trends', the electric generation sector has reduced GHG emissions the most of any sector. From 1990 through 2011, this sector cut emissions by 47 percent below 1990 levels. By 2010, New York's power plant owners already reduced their GHG emissions by 40 percent from 1990 levels, accomplishing twenty years early, their share of the state's goal to reduce emissions by this amount. From 2000 to 2012, through the implementation of the competitive wholesale electricity market and regulatory requirements, power producers have provided dramatic environmental benefits. According to the New York Independent System Operator's 'Power Trends 2013: Alternating Currents', the rate of power plant emissions of carbon dioxide declined 37 percent, of sulfur dioxide by more than 94 percent, and or nitrogen oxides has been reduced by over 80 percent. (Commenter 6)
Response to Comment 121: As described in response to Comment 120 above, the Department recognizes that CO2 emission reductions have already taken place in the State's power sector. Moreover, the Department recognizes that emissions of other pollutants, including SO2 and NOx, have also decreased from the State's power sector.
Comment 122: The DEC intends to work with other states and the United States Environmental Protection Agency on federal CO2 emission standards applicable to both new and existing power plants. EPA administrator Gina McCarthy has been quoted as saying that the EPA will respect state efforts to cut CO2 emissions taken in advance of the implementation of federal greenhouse gas rules for power plants and will focus on collaboration and moving forward together. IPPNY urges the DEC to work with the EPA to ensure that RGGI power plant owners receive full credit for the emission reductions that they have accomplished to date, that would occur under the revised RGGI rule, and that result pursuant to other DEC activities to address climate change. (Commenter 6)
Response to Comment 122: The commenter is correct that the Department intends to work with EPA and other states as EPA develops its CO2 emission standards applicable to both new and existing power plants. In fact, as described above in response to Comment 120, the Department is already working collaboratively with EPA, other states, and other stakeholders as EPA moves forward with CO2 emission regulations for the power sector under Section 111 of the Clean Air Act, as directed in the Presidential Memorandum issued on June 25, 2013 (Presidential Memorandum, available at http://www.whitehouse.gov/the-press-office/2013/06/25/presidential-memorandum-power-sector-carbon-pollution-standards).
Consistent with the Presidential Memorandum, on September 20, 2013, EPA proposed a CO2 emission performance standard applicable to new fossil fuel-fired power plants. The Department notes that EPA's proposal is generally less stringent than the Department's existing Part 251, which already establishes a CO2 emission limit applicable to new and expanding power plants. Therefore, any new or expanding power plants proposed in the State that meet the existing standards in Part 251 will likely also meet EPA's proposed CO2 emission limits. Regardless, the Department will continue to work with EPA and stakeholders as EPA moves to finalize the proposed CO2 performance standards for new power plants.
For existing power plants, the Presidential Memorandum directs EPA to propose CO2 standards under 111(d) by June 1, 2014. The Presidential Memorandum also directs EPA to directly engage with states in the development of these standards, as states will play a central role in their implementation.
As describe in response to Comment 120, the Department is already engaged in these collaborative efforts regarding EPA's development of 111(d) CO2 standards for existing power plants. For example, the Department believes that EPA should recognize CO2 emission reductions already achieved by states under power sector CO2 emission reduction programs, and that EPA should allow RGGI to serve as a state's compliance mechanism under 111(d). The Department will continue to work with EPA, other states, and stakeholders in order to advance these principles.
Comment 123: Upstate New York Power Producers is concerned that with the implementation of the 91 million ton emissions cap, compliance entities like ourselves will have the significant burden to ensure that they have the required allowances to cover all emissions at the end of the three-year and interim compliance periods. Due to the reduction in the cap and consequential increase in CO2 prices, noncompliance entities will use the auction process for strictly financial gain and not to further reduce carbon dioxide emissions. As seen from the recent RGGI auctions, there has been a correlation with an increase in noncompliance participants and a significant increase in the clearing price in comparison to past auctions. This overinflated allowance price places additional burden on compliance entities, which are not only required under the program to purchase these allowances but also create a significant financial impact to these businesses.
Currently the maximum number of CO2 allowances that any applicant or group of associated applicants may bid for in a single auction is 25 percent of the CO2 allowances offered for sale in that auction. Upstate New York Power Producers requests that this concept should be tailored to ensure that no more than 10 percent of the allowances can be purchased by a non-generator entity for each auction while retaining the current 25 percent limit for the purchase of allowances by a generator entity. (Commenter 10)
Response to Comment 123: The Auction regulations adopted by NYSERDA were not revised as part of this rulemaking. The CO2 Allowance Auction Program, 21 NYCRR Part 507, retains the ability to potentially close auctions to participation by noncompliance entities, as well as decrease the existing 25 percent bid limitation.
In particular, the NYSERDA regulations states at 507.8(c): "For the initial CO2 Allowance Auction, all categories of bidders will be eligible to participate. For each subsequent auction, the Authority, in consultation with the Committee, may preclude or limit the participation of any one or all of the categories of bidders. Notification of eligible categories of bidders will be included in each Notice of CO2 Allowance Auction."
In addition, at 507.8(f), NYSERDA retained the ability to adjust the purchasing limitation, "(f) The Authority shall institute a purchasing and/or bidding limitation in each auction. In no instance shall this limitation be greater than 25 percent of the allowances available in an auction. Any such limitations shall be included in the Notice of CO2 Allowance Auction."
At this time, NYERDA and the Auction Advisory Committee have not determined that revisions to the current auction participation or bid limitations are required. The Department and NYSERDA, along with the RGGI Market Monitor and the other Participating States, will continue to evaluate whether changes may be necessary or appropriate in the future. Any future changes will be set forth, at a minimum, in the CO2 Allowance Auction Notice for a particular auction.
Comment 124: The new emissions cap is tight with little wiggle-room. Compliance entities have a significant burden to ensure that they have the required allowances to cover all emissions at the end of the three year compliance period.
Because of this RGGI cap realignment, IPPNY recommends that DEC more closely monitor whether commodity traders (i.e. non-compliance entities) are buying - potentially hoarding - more allowances. Since the RGGI program was changed at the regional level, the June 2013 allowance auction was the second time that all allowances were sold at a higher price than previous auctions. According to the Market Monitor's reports, compliance entities or their affiliates purchased only 68 percent of the allowances in the June auction as compared to 69 percent in the March auction. In contrast, during the 2012 auctions that occurred in September and December, compliance entities purchased 100 percent of the allowances in the auction. IPPNY would be concerned if what is essentially an emissions compliance program were to become overly speculative commodities market, with potential implications for compliance entities and, ultimately, for system reliability.
The RGGI program has a protection mechanism in place to ensure that no one purchaser of allowances can dominate in allowance auctions and imposes a limit on the amount of allowances that one buying entity can purchase. Currently, the maximum number of allowances that any applicant, or group of associated applicants, may bid for in a single auction is 25 percent of the allowances offered for sale in that auction. This concept should be tailored to ensure no more than 10 percent of the allowances can be purchased by a non-generator entity for each auction, while, while retaining the 25 percent limit for the purchase of allowances by a generator entity. This approach would relieve some of the competitive disadvantage for the compliance entities that are required to purchase these allowances. (Commenter 6)
Response to Comment 124: See the response to Comment 123
Comment 125: If additional steps become necessary to ensure that generators have more overt ability to buy the allowances they need, the program could allow one auction to be conducted for generators and another auction to include entities that are not generators. (Commenter 6)
Response to Comment 125: See the response to Comment 123.
Minimum Reserve Price/Reserve Price
Comment 126: The DEC's draft RGGI regulation proposes to increase the minimum reserve price for the RGGI allowance auction from $1.93 per ton to $2 per ton in 2014 and escalated by 2.5 percent each year thereafter. Upstate New York Power Producers requests that the minimum reserve price should not deviate from the current formula, whereby generators do not have the sole ability to buy allowances. In addition, current pricing that power producers in New York have borne, as previously mentioned, have provided the economic incentive to significantly reduce greenhouse gas emissions. This is an unnecessary additional burden on the power producers that will further erode their ability to remain in New York and deter further investment in new generation in New York. Consumers will also be adversely affected, as these costs will be reflected in electric power pricing. (Commenter 10)
Response to Comment 126: The minimum reserve price for 2013, based on the existing formula under the Program, is $1.98 per ton. The transition to $2.00 in 2014 represents an increase of approximately one percent, a value lower than the percentages that would have been applied under the existing formula. While the existing program relied on an updating Consumer Product Index (CPI) adjustment, the current formula relies on an assessment of a historic CPI average. The formula also simplifies the process and gives advance notice of the minimum reserve price to market participants. See also response to Comment 5.
Comment 127: The DEC's draft RGGI regulation proposes to increase the minimum reserve price for the RGGI allowance auction from $1.93 per ton to $2 per ton in 2014 and escalated by 2.5 percent each year thereafter. The minimum reserve price should not deviate from the current formula, when generators do not have the sole ability to buy allowances. (Commenter 6)
Response to Comment 127: See the response to Comments 5 and 126.
Comment 128: As part of the original RGGI program design, the RGGI States retained the option to use a current market reserve price, which is set based on the clearing price of allowances in prior RGGI auctions, to establish the minimum floor price in future RGGI auctions. In the October 18th webinar the RGGI States raised the possibility of eliminating this option and simply using the existing minimum reserve price, adjusted each year based on the Consumer Price Index (CPI). The Companies previously stated their support for the RGGI States' proposal to remove provisions in regulations for a current market reserve price, where applicable. We reiterate our support for such a decision here. Additionally, we find it reasonable to simplify the annual CPI adjustment to the auction reserve price to an annual increase of 2.5 percent, which conforms to recent experience with changes in CPI. (Commenter 19)
Response to Comment 128: Thank you for your comment.
Combined Heat and Power
Comment 129: All CO2 emissions from combined heat and power (CHP) units are subject to the DEC's RGGI program, if the unit is connected to a turbine generator with a nameplate capacity of 25 megawatts or greater, regardless of the amount of fuel used for steam generation. In fact, the more energy that is used to generate steam and the less used to generate electricity, the more allowances required per mega-watt hour generated. From a different perspective, the program requires allowances for the generation of heat at CHP facilities, despite the program's focus on electricity generation. The CO2 obligation is based on the CHP facility's total emissions, even though only a portion would be associated with the electricity placed on the grid. A stand-alone steam-only facility has no compliance obligation under the DEC's draft regulation. To mitigate the inherent disincentive for CHP facilities, the DEC only should require allowances for those emissions attributable to electricity generation. (Commenter 6).
Response to Comment 129: The revisions to the Program do not alter the applicability provisions of the Program. The Program is intended to cover CO2 emissions from electric generation sources, including CHP units that may also generate steam.
The commenter is correct that, if a unit is subject to the Program, then all CO2 emissions from that unit are subject to the Program. In particular, if a source is subject to the Program, then all of its CO2 emissions are subject to the CO2 allowance compliance obligations of the Program, except for any CO2 emissions attributable to the verified combustion of eligible biomass. The Program does not distinguish between thermal-related emissions and electricity-related emissions. This is consistent with other cap-and-trade programs.
Crediting thermal-related emissions for CHP units under the Program was previously suggested by stakeholders during the initial promulgation of the Program, and was also considered in the Department's Declaratory Ruling 19-18 (http://www.dec.ny.gov/regulations/59649.html). In all cases, the Department determined that providing for a thermal-related emission exemption under the Program was not necessary or appropriate. The Department has not identified any reason to change these provisions under the Program.
As such, all emissions from a source, with the exception of those attributable to the verified combustion of eligible biomass, remain subject to the allowance requirements of the Program. The Department does not believe a change to accommodate this request is necessary at this time.
The Department will continue to evaluate any impact of the Program revisions on CHP facilities. The Department will also reconsider this comment in the next evaluation of the Program, and in an assessment of opportunities to expand the Program to other sectors where the promotion of CHP may be better served.
Comment 130: We ask that the proposed regulations be amended to more equitably treat GHG emissions from combined heat and power ("CHP") installations. Currently, the more energy that is used to generate steam and the less used to generate electricity, the more allowances required per MWh generated. From a different perspective, the program requires allowances for the generation of heat at CHP facilities, despite the program's focus on electricity generation. A stand-alone steam-only facility has no compliance obligation under the Proposed Rule. To mitigate the inherent disincentive for CHP facilities, we recommend that the NYS DEC only require allowances for those emissions attributable to electricity generation or establish a set-aside account for CHP facilities. (Commenter 15)
Response to Comment 130: See response to Comment 129.
Eligible Offset Types
Comment 131: 'An expansion of the eligible offset project types will' make the DEC's RGGI program more appealing to project developers and investors. The current list of project types falls short of the breadth of proven projects that can achieve real, quantifiable, measurable, and additional GHG reductions. In the case of waste management, only landfill methane capture and destruction is included under the program. More eligible project types should be added to DEC's RGGI regulation, such as projects that avoid outright the production of methane including recycling, anaerobic digestion, composting, and energy-from-waste technologies. Furthermore, methane avoidance projects are in line with New York's waste management hierarchy. (Commenter 6)
Response to Comment 131: The Department disagrees that an expansion of the eligible offset project categories under the Program is necessary or appropriate at this time. While offset allowances may continue to be utilized for up to 3.3 percent of a source's compliance obligation under the Program, the Department does not anticipate any significant development of an offsets allowance market under RGGI, unless and until CO2 allowance prices increase.
In fact, as stated in the RIS, the electricity sector modeling conducted by the participating states as part of RGGI Program Review assumed that it is not economically attractive for offset suppliers to sell their products in the RGGI market until prices reach $10 per allowance. This value is based on the reserve price under the California cap-and trade program, which allows for the use of offset credits. As long as offset suppliers are able to sell similar products in the California market for prices higher than those in the RGGI market, offset suppliers would not be expected to sell into the RGGI market.
Therefore, even if the Department were to expand the eligible offset project types under the Program, the Department would not anticipate any significant implementation of such projects or award of CO2 offset allowances. Thus, especially given the complexity of offset provisions and the inability of offsets to provide immediate cost containment for the Program, the Department does not believe additional offset project categories are necessary at this time. The Department will continue to monitor the CO2 allowance market, offset allowance market, and interaction with other programs, and may expand the eligible offset project types pursuant to future revisions to the Program.
Comment 132: We recommend that NYS DEC reassess the current list of allowable offset projects. A limited scope of permissible offset types and low pricing relative to other markets have led us to turn to other locales and programs, including the Verified Carbon Standard ("VCS") and the Climate Action Registry ("CAR"). An expansion of the eligible project types will make the CO2 Budget Trading Program more appealing to project developers and investors.
We applaud NYS DEC's decision to expand the scope of eligible forestry projects; however, the current list of project types remains limited, and falls far short of the breadth of proven projects that can achieve real, quantifiable, measureable, and additional GHG reductions. (Commenter 15)
Response to Comment 132: The Department recognizes that, at current CO2 allowance price levels, markets created by other voluntary and mandatory programs may be more desirable for offset project developers. Until CO2 allowance prices reach certain levels under the Program, this is likely to remain true. As indicated above in response to Comment 131, if and when CO2 allowance prices reach such levels, the Department will consider expanding the eligible offset project categories under the Program pursuant to future rulemaking.
The Department also notes that the revisions to the Program do not expand the scope of eligible forestry offset projects. While some RGGI participating states are proposing the addition of a new U.S. Forestry offset category to replace the existing afforestation category, the Department is not proposing this new category and is instead maintaining the existing afforestation category under the Program. As described above in response to Comment 131, given administrative complexities, the lack of any significant interest anticipated in the offset allowance market, and the inability of offsets to provide immediate cost containment, the Department does not believe it is necessary or appropriate to include the U.S. Forestry offset category at this time.
Comment 133: The Department should consider landfill avoidance/methane avoidance as an allowable offset project. In the case of waste management, only landfill gas collection and destruction is currently recognized under the program. While important, landfill gas collection and destruction is a partial end-of-pipe solution that addresses only the fraction of gas collected and fails to capitalize on greater GHG reductions attainable through the outright avoidance of methane generation through recycling, anaerobic digestion, composting, and Energy from Waste facilities (EfW).
A keen focus on avoiding methane is also compelling given recent research showing methane as a much more potent GHG than previously estimated. A team of Columbia and NASA scientists has found that, when indirect aerosol effects are included, the 100 year GWP for methane is 34, 48 percent higher than the value used in the RGGI program. (Commenter 15)
Response to Comment 133: The Department agrees that avoiding methane emissions is critical in addressing the risks of climate change. The Department also agrees that landfill avoidance has other benefits and is consistent with the State's solid waste management hierarchy that places waste prevention, reuse and recycling ahead of disposal.
But as described in response to Comments 131 and 132, the Department does not believe that expanding the number of eligible offset project categories under the Program is necessary or appropriate at this time.
The Department understands the effect that aerosols have on the global warming potential for methane. The values used in the offset categories are those provided by the IPCC and are used to enable a comparison between all the GHGs (even those not affected by aerosols) and to be consistent with other offset programs such as California's Cap and Trade, the Climate Action Reserve and the Clean Development Mechanism.
Comment 134: The Alliance recommends that the phrase "interim control period" be deleted from proposed 242-1.4(c)(7). The Alliance reminds the Department that the original intent of the three-year compliance period was to offer generators the maximum amount of flexibility in their auction and compliance strategies. The mere existence of an interim compliance requirement restricts that flexibility, and further limiting the use of allowances for compliance purposes through this paragraph does not appear to serve any valid purpose. Generators should be allowed to use a future year allowance for the interim control period true-up as long as it is from the same three year compliance period. (Commenter 16)
Response to Comment 134: As noted in the RIS, the interim compliance obligation was created in part to align it with the annual compliance obligations under existing federal programs, and to help to address the potential for a budget source to avoid its compliance obligation as a result of the business closing or falling into bankruptcy prior to the third year compliance obligation. The Department does not believe that the addition of the interim control period restricts the flexibility afforded to sources under the existing three-year control period.
First, the compliance obligation requires CO2 budget sources to cover 50 percent of their emissions in each of the first two years of the three year control period. This translates into only one-third of their total compliance obligation in advance of what was previously required under the Program. Second, compliance entities under the Program have purchased, on average, 10 percent more allowances than they have emitted for each calendar year under the Program. In other words, although there has not been an annual compliance obligation, CO2 budget sources have generally been purchasing as if there was a full 100 percent annual compliance obligation. This practice aligns well with the revisions to the Program, which merely requires sources to cover 50 percent of their emissions for each of the first two years of a control period.
Finally, altering the language as suggested by the commenter would be equivalent to allowing future borrowing under the Program. While CO2 allowances may be used for compliance indefinitely into the future, the Program and the Participating States have never allowed for this type of borrowing of future allowances. Regardless, although the Department and the Participating States have previously offered future control period allowances for sale at auction, this has not occurred since 2011, and there are no current plans to resume this practice. In other words, there is not likely to be any future allowances available in the market anyway for the foreseeable future, meaning that the change suggested by the commenter would have no impact.
Comment 135: The Alliance strongly recommends that the analysis of costs and impacts in the Department's SGEIS should be on a New York specific basis and not for the RGGI region as a whole. Because New York is adjacent to non-RGGI states it is possible that the State could be disproportionately affected. The SGEIS relies on RGGI-wide analyses to generate the New York State impacts. However, it is not clear whether that incorporates all the New York State-specific factors. (Commenter 16)
Response to Comment 135: IPM modeling, macroeconomic modeling and retail rate impacts all were conducted in a manner that provided information at the regional and state levels.
Comment 136: The estimates of cost on a typical New York residential customer include an adjustment to customer average usage due to investments in energy efficiency. Because the RGGI funding in New York has not been equitably distributed among ratepayers to date, and because every customer is not going to be able to invest in energy efficiency programs at the same rate, the average cost per residential customer is a misleading parameter. In a simple hypothetical example, if half the customers invest in energy efficiency projects that cut their bill by 20 percent, the other half that does not invest will pay 20 percent more. Furthermore, ratepayers in metered multi-family dwellings will not have the same opportunities to apply energy efficiency programs to reduce their electrical use, so that using the nondescript "average residential customer" as a barometer for price increases in 2020 is almost without value in predicting actual impacts to ratepayers. (Commenter 16)
Response to Comment 136: The estimates of cost to a typical New York residential customer are based on analysis of projected changes (due to proposed changes in RGGI) in the factors that affect the average wholesale price of electricity (including both energy and capacity costs) which is paid by all customers (i.e. residential, commercial, and industrial). The primary factors in the analysis include change in the generation mix, change in price of RGGI CO2 allowances, and change in demand for electricity. Change in the generation mix and change in the price of RGGI CO2 allowances result in higher wholesale prices paid by all customers, while change in demand for electricity results in lower wholesale prices paid by all customers; the net impact of all these factors is to increase the wholesale price of electricity (i.e. cents per kWh) to all customers.
While the analysis includes a reduction in electricity demand across the electricity system due to increased energy efficiency, the estimate of cost to a typical residential customer is based on usage of 750 kWh per month. In this way, the estimate of increased cost to a typical residential customer is based on the average changes in wholesale price per kWh experienced by all customers, and is not dependent on whether a particular customer participates in energy efficiency programs. It is further expected that if a particular customer does reduce electricity use due to installation of energy efficiency technologies, that customer would be likely to experience a reduction in their total electricity bill.
Comment 137: One of the chronic lung diseases negatively impacted by carbon pollution is asthma. Ozone pollution in particular is a widespread pollutant that affects people with asthma and is a significant risk for others; especially children. If left unchecked, climate change may increase the likelihood of ozone formation and make it harder to reduce through conventional measures aimed at reducing a smokestack and tailpipe pollutants.
The full impact of climate on ozone and other air pollutants is complicated. However, the best understanding shows that carbon pollution-aided climate change will increase the challenge to meeting future national air quality standards for ozone. The "climate change penalty" will add complications going forward. (Commenter 14)
Response to Comment 137: Thank you for the comment. The Department agrees with your assessment.
Allowance Retirement/Flow Back
Comment 138: We do not believe that it is appropriate to change the number of allowances available without a transparent and inclusive stakeholder and regulatory process. The phrase "the Department may..." must be eliminated from revised Part 242 for the RGGI allowance market to function as intended. (Commenter 16)
Response to Comment 138: See response to Comments 67 and 68.
Comment 139: Regarding proposed 242-5.3(a)(3)(ii), the Alliance requests that the DEC clarify now - that is, during this rulemaking process -- that any unsold allowances will be offered for sale in future auctions within the same control period. Otherwise, the cap is being reduced beyond the scope of the program established during the program review.
Additionally, the lack of clarity, the additional uncertainty, and the lack of transparent decision-making will only serve to confound compliance entities as they try to develop a strategy for RGGI allowance acquisition. At this point, the RGGI states, and the Department in particular, should step back from the marketplace and not try to hold onto a "lever" that could be used to manipulate the number of allowances in the marketplace. Such decision-making should be either clearly defined now, or withheld to the next program review process. (Commenter 16)
Response to Comment 139: The Department believes that the revisions at 242-5.3(a)(3)(ii) clarify what was already allowed for prior to the revisions to the Program. The revisions retain the Department's ability to retire unsold allowances at the end of the control period. The revisions also retain the ability to reoffer unsold allowances in any subsequent allowance auction. Further, the Department does believe that retaining the ability to retire unsold allowances at the end of the control period serves as a cap reduction mechanism that is beyond the scope of the program revisions. Every year, the Department will make all allowances under the cap available to the market pursuant to the Program, whether via auction or set-aside. Therefore, the market, not the Department, will determine whether allowances remain unsold at the end of the control period.
Comment 140: Regarding proposed 242-5.3(a)(3)(iii), The Alliance believes that undistributed allowances (in this case, allowances originally allocated to a set aside account that were not distributed) should be offered for sale in subsequent auction at the end of the control period. If not, the cap is being reduced beyond the scope of the program established during the program review. The Department should not reserve to itself the ability to unilaterally control the number of allowances in the marketplace. There should be a strong and predictable market for allowances. Failing to clearly state what will become of "loose allowances" will only serve to weaken the market and undermine the program goals. (Commenter 16)
Response to Comment 140: The Department respectfully disagrees that the retirement of undistributed allowances, originally allocated to a set-aside account, serves as a cap reduction beyond the scope of the program. The Program provides for two specific set-asides, and so any undistributed allowances would only be from these two set-asides.
First, the voluntary renewable energy market and eligible biomass set-aside allocation of 700,000 tons was established to retire allowances on behalf of voluntary renewable energy purchases and CO2 budget sources that co-fire eligible biomass as a compliance mechanism. As a set-aside, designed for the potential retirement allowances, there was never any indication from the Department that these allowances would necessarily be available to the market. Finally, the revisions to the Program provide that, after retiring allowances pursuant to this set-aside for an allocation year, any remaining CO2 allowances will either remain in the set-aside account for future retirement, or be auctioned.
Second, the LTC set-aside allocates up to 1.5 million tons to CO2 budget sources that demonstrate, to the Department's satisfaction, that they have met the application requirements under the Program. The award of allowances under the set-aside puts allowances into the compliance accounts of CO2 budget sources. While these allowances can only be used for compliance, they are in essence recorded on the supply side of the market. Since this set-aside is currently over-subscribed and the longest contract eligible under this provision runs through 2036, the Department anticipates that there will be few if any undistributed allowances from the LTCt set-aside for the foreseeable future.
It should also be noted that the Department has also eliminated the requirements under the Program to reduce the quantity of allowances available for auction pursuant to the Reduction in the CO2 Budget Trading Program base budget required under the "Behind-the Meter" provisions. This limited exemption required the Department to reduce the CO2 Budget Trading Program base budget to remove the tons equal to the exempt unit's average annual emissions from the previous three calendar years. While this limited exemption remains unchanged, this revision adds between 1.4 and 1.6 million allowances back into the market that were previously unavailable.
See also response to Comment 139.
Comment 141: Regarding proposed 242-5.3(c)(8), the Alliance recommends that any unused allowances from the voluntary renewable energy and eligible biomass set-aside should flow back to the energy efficiency and clean technology account and be offered in future auctions within the control period. Otherwise, Part 242 RGGI is lowering the cap beyond what was intended during the recent program review. And, once again, the proposal creates uncertainty in the market place and usurps the role of market participants in determining the price of allowances through legitimate trades and bidding strategies. It's time for the Department to decide exactly how it intends to treat every allowance in the program. (Commenter 16)
Response to Comment 141: The Department respectfully disagrees that not offering undistributed voluntary renewable energy and eligible biomass set-aside allowances serves as a cap reduction beyond the scope of the program. As noted above, the voluntary renewable energy market and eligible biomass set-aside allocation of 700,000 tons was established to retire allowances on behalf of voluntary renewable energy purchases and CO2 budget sources that co-fire eligible biomass as a compliance mechanism. As a set-aside, designed to retire allowances, there was never any indication from the Department that these allowances would necessarily be available to the market. Finally, as described in response to Comment 140, the revisions to the Program allow for any undistributed allowances from this set-aside to remain in the set-aside account for future retirement.
Comment 142: The EIS does not actually address potential disproportionate impacts of this rulemaking on over-burdened communities. The real concern should be the economic impact on those least able to pay the additional costs incurred. (Commenter 16)
Response to Comment 142: Both the SGEIS and the RIS address the costs of the Program, including projected costs on regulated entities and projected costs for electricity ratepayers.
In particular, for a typical New York residential customer (using 750 kWh per month), the revisions to the Program are projected to increase a monthly retail bill by about 1.0 percent, or $0.86, in 2016. In 2020, the projected increase in a monthly residential retail bill is about 0.8 percent, or $0.71. Therefore, the economic impact of the revisions to the Program on individual electricity ratepayers, including those least able to pay any additional costs incurred is projected to be minimal.
Moreover, the revisions to the Program will have positive environmental benefits, including reductions in air emissions from power plants. Many existing power plants are located in or near environmental justice (EJ) communities. Therefore, as discussed in the initial EIS as referenced in the SGEIS, EJ communities are not anticipated to be disproportionately impacted by the revisions to the Program. In fact, to the extent the Program leads to co-benefits at existing plants in the form of air pollutant emission reductions, the revisions to the Program will be a benefit to EJ communities.
Comment 143: The DEC promulgated 6 NYCRR Part 487, "Analyzing Environmental Justice Issues in Siting Major Electric Generating Facilities Pursuant to Public Service Law Article 10." Equity considerations suggest that if generators are required to follow Part 487, the Department should likewise apply the important aspects of Part 487 and complete a thorough EJ analysis that includes specific and focused EJ outreach. Specifically, the concept of disproportionate impacts included in Part 487 should be applied to the revisions of Part 242. The economic impacts cited do not show the distribution of household impacts necessary to determine if those least able to pay will be disproportionately impacted by the rule. (Commenter 16)
Response to Comment 143: The Department promulgated 6 NYCRR Part 487 (Part 487) pursuant to the Power NY Act of 2011 and Public Service Law Article 10 (Article 10). Part 487 creates a regulatory framework for analyzing EJ issues in the siting of new and expanding power plants. The regulations in Part 487 are the first in the country to require an EJ analysis for the siting of major electric generating facilities, and require certain new or expanding sources to evaluate the potential disproportionate impacts on nearby EJ communities.
The procedures in Part 487 for analyzing environmental justice issues are only applicable to the siting of major electric generating facilities pursuant to Article 10. The siting of major electric generating facilities entails unique and potentially significant issues, particularly given the fact that many EJ communities are already disproportionately burdened by the environmental impacts of existing power plants and other large industrial facilities.
Therefore, the procedures in Part 487 are not intended to be applied to the promulgation of revisions to the Program, or to any other Departmental rulemaking activities. Moreover, the Department's Commissioner Policy 29, Environmental Justice and Permitting, provides guidance for incorporating EJ concerns into the Department's environmental permit review process and the application of SEQRA.
In any case, as described above in response to Comment 142, the economic impacts of the revisions to the Program are projected to be minimal. The Department does not believe the revisions to the Program will have disproportionate impacts on any EJ communities. Instead, the revisions to the Program will have positive impacts, including on EJ communities where many of the sources subject to the Program are already located, through beneficial reductions in CO2 emissions and other air pollutants.
Comment 144: It is not clear if RGGI disproportionately disadvantages EJ households because there is no quantitative parameter being used or proposed to track the potential impact of presumed cost increases. The additional costs associated with Part 242 compliance are expected to primarily affect electricity use so the Alliance proposes that the Department specify a parameter called "energy poverty" defined as those households who pay a certain percentage or more of their total income for heat and electricity. The Alliance recommends that the Department reach out to EJ groups, as envisioned by Part 487, to develop an appropriate threshold for the amount that causes disproportionate harm. (Commenter 16)
Response to Comment 144: The Department does not believe that RGGI or the revisions to the Program disproportionately disadvantage EJ communities. Moreover, the Department does not believe a specific threshold or parameter to determine disproportionate impact is appropriate.
Disproportionate impacts necessarily cannot be precisely defined through an explicit quantitative measure, because of the variety of factors that may contribute to potential disproportionate environmental impact. This is part of the reason why Part 487 does not establish any specific numerical threshold for significant and adverse disproportionate environmental impacts. The Department adopted Part 487 after an extensive outreach process with EJ groups and other stakeholders. The Department reaches out to EJ groups on an ongoing basis, and will continue to do so, regarding potential disproportionate impacts and other issues. In addition, EJ representatives participate in the RGGI Advisory Council.
In any case, regardless of whether a specific parameter or "energy poverty" measure is utilized, the Department does not believe that the revisions to the Program cause any disproportionate harm on EJ communities. Instead, as described above in response to Comment 142, the revisions to the Program are projected to have only a minimal impact on the retail price of electricity, and will have environmental co-benefits in addition to achieving CO2 emission reductions.
Program Changes and Transparency
Comment 145: There are two minor changes that Con Edison suggests to improve covered entities' interactions with the program. First, offering a data warehouse with information on number of allowances sold, annual emissions cap information, etc., would make it easier for users to conduct financial analysis. As an example, to know how many allowances were sold at multiple auctions one must review detailed data for each individual auction result. Posting an excel document at with consolidated auction data would give participants access to such information in a more useful format. (19)
Response to Comment 145: The Department believes the current allowance tracking information posted at http://rggi.org/market/tracking/allowance-allocation addresses most if not all of the items being requested here. This document, in PDF and Excel is now being updated on a quarterly basis and includes such information as: the CO2 base budget for each state; allowances offered at auction; allowances sold at auction; allowances sold at fixed price; unsold allowances, amount transferred from state set-aside accounts; remaining set-aside allowances; set-aside allowances retired; and unsold allowances retired. The Department will continue to work with stakeholders to determine if additional information is needed and can be made available in a timely manner.
Comment 146: RGGI currently allows for one primary auction representative and one secondary auction representative. However, only the primary representative has bidding rights unless an Auction Notice Appendix G is submitted in advance of the auction date. If the primary was unexpectedly unavailable on the day of the auction, the secondary representative cannot represent the company to bid. Con Edison suggests that the primary and secondary representatives have equal bidding rights. (Commenter 19)
Response to Comment 146: Secondary Authorized Auction Representatives (SAARs) have the ability to bid in the auction, based on a rule change in 2010, prior to Auction 7. The use of Appendix G is only needed for applicants who were qualified prior to Auction 7. The Auction Notice has since been updated to reflect the SAAR's bidding rights. Section 2.5 of the current Notice reads: The SAAR will be authorized to (1) submit bids on behalf of the Applicant in any CO2 Allowance Auction; (2) submit an Intent to Bid on behalf of the Applicant for any CO2 Allowance Auction; and (3) act on behalf of the Applicant in the remediation of the Qualification Application and/or any Intent to Bid. Applicants qualified prior to Auction 7 who wish to authorize the SAAR to act on behalf of the Applicant as described above must submit the "SAAR Authorization Form" contained in Appendix G, which will become effective for all subsequent auctions.
|Number||First Name||Last Name||Number||First Name||Last Name|
|54||Brenda||Best||1182||Harry & Virginia||Pence|
|55||Elizabeth||Lascoutx||1183||William E .||Sarovec|
|62||Pamela||Curtis||1190||Mr. & Mrs. James||Papandrea|
|176||Karyl and David||Lipson||1304||Marina||Adams|
|207||Lynn||Bowdery||1335||Noah and Natasha||Brenner|
|374||Carolyn||Barrett||1502||Phil and Betty||Pearle|
|387||Sonia and Soninha||Mafalda Boliani||1515||Katherine||Jankowski|
|390||Jonathon||Singleton||1518||George & Lydia||Saderman|
|421||Karen||McKeon||1549||Robert J.||Fletcher IV|
|427||Judith A.||Gustafson||1555||David H.||Bullard|
|505||Sarita||Eisenstark||1633||Raymond & Susan||Buhner|
|528||Ken Ward||Ward Jr.||1656||Herbert||Stein|
|539||Frederick S.||Lockwood IV||1667||Gil||Kulick|
|561||Janet||Allen||1689||Leo & Doris C.||Hoenig|
|787||John M D||Carey||1915||George||Kormendi|
|822||John||Catherine||1950||Susan & Michael||Stinson|
|866||Cassandra||Treppeda||1994||Sister Mary Ann||Schimscheiner|
|872||Michael V L||Bennett||2000||Edith||Simpson|
|1073||Robert & Edith||Oliver||2201||Patricia||Smith|
|1075||Eric||Weissberg||2203||Jo Ellen||del Campo|
|1119||Dorothy & Harvey||Pat||2247||Paul||Murphy|
1 CO2e stands for carbon dioxide equivalent and describes the amount of CO2 that would have the same global warming potential as a given mixture of gases based on factors published by the Intergovernmental Panel on Climate Change.
3 The Eastern Interconnection (EI) includes the eastern two-thirds of the continental United States (excluding most of Texas and Florida). The Canadian portion includes Ontario east to the Maritime Provinces.
4 Hansen, J., Sato, M., Russell, G. Kharecha, P. Climate sensitivity, sea level and atmospheric carbon dioxide. Phil Trans R Soc A 371: 20120294. http://dx.doi.org/10.1098/rsta.2012.0294 Foster, G. and Rahmstorf. S. 2011. Global temperature evolution 1979-2010. Environ. Res. Lett. 6 (2011) 044022 (8pp).
5 No best estimate for equilibrium climate sensitivity can now be given because of a lack of agreement on values across assessed lines of evidence and studies.
6 The Climate Group. July 2013. Climate Science Part II: Observed Climatic Impacts. Insight Briefing. Analyzing the issues that matter to the Clean Revolution.
7 Foster, G. and Rahmstorf. S. 2011. Global temperature evolution 1979-2010. Environ. Res. Lett. 6 (2011) 044022 (8pp).
8 Balmaseda, M., Trenberth, K., and Kallen, E. 2013. 'Distinctive Climate Signals in Reanalysis of Global Ocean Heat Content'. Geophysical Research Letters, Vol. 40, 1754-1759. Over the past 50 years, the ocean surface has absorbed about 90 percent of the total heat added to the climate system; recent evidence suggests that part of this heat has moved into the ocean depths, which removes it from global average temperature measurements in the short term but in the longer term increases the time that would be needed to return the earth's heat balance to normal.
9 Climate indicators include greenhouse gas levels, lower stratospheric temperatures, ocean heat content, sea level rise, late spring Northern Hemisphere snow cover extent, arctic minimum sea ice extent, and permafrost temperature. Blunden, J. and D.S. Arndt, Eds. 2013: 'State of the Climate in 2012. Bull. Amer. Meteor. Soc.,' 94(8), S1-S238.