6 NYCRR Parts 242 and 200 Job Impact Statement
1. Nature of Impact:
The Regional Greenhouse Gas Initiative (RGGI) is a cooperative, historic effort among New York and eight Participating States1 and is the first mandatory, market-based carbon dioxide (CO2) emissions reduction program in the United States. Since its inception in 2008, RGGI has utilized a market-based mechanism to cap and cost-effectively reduce emissions that cause climate change. Recently, New York along with the Participating States, completed a comprehensive program review and announced a proposal to lower the regional emissions cap established under RGGI to 91 million tons in 2014, declining 2.5 percent a year through 2020.2 Accordingly, New York and the Participating States committed to propose revisions, pursuant to state-specific regulatory processes, to their respective CO2 Budget Trading Programs to further reduce CO2 emissions from power plants in the region. To implement the updated RGGI program in New York State, the Department of Environmental Conservation (Department) proposes to revise 6 NYCRR Part 242, CO2 Budget Trading Program (Part 242 or the Program) and 6 NYCRR Part 200, General Provisions.
The Department, New York State Energy Research Development Authority (NYSERDA) and the New York State Department of Public Service (DPS) analyzed costs, including impacts to jobs, total Gross State Product and total Personal Income, associated with compliance with the proposed revisions to Part 242. As discussed below, this analysis concludes that the proposed revisions to the Program will not have an adverse impact on jobs and employment opportunities in New York. At the direction of New York and Participating States, Northeast States Coordinated Air Use Management (NESCAUM) conducted a macroeconomic impact study called "Regional Economic Models, Inc. Policy InsightTM (REMI)," which estimates the impact of the reduced CO2 emissions cap, budget adjustments and the remainder of the proposed Program revisions3 on jobs in the RGGI region. Utilizing data inputs from extensive Integrated Planning Model (IPM®) modeling conducted by ICF International (ICF), REMI estimates that the cumulative, positive change in employment in New York associated with the proposed Program revisions will be approximately 80,500 additional job-years over the period 2012 to 2040 (a job-year is equivalent to one person employed for one year). Further, the study estimates that the cumulative changes in New York's Gross State Product and Personal Income associated with the proposed Part 242 revisions will increase approximately $5.8 billion and $4.7 billion, respectively4. These cumulative changes, while small, represent positive impacts for total State employment, total Gross State Product and total Personal Income.
The proposed Program revisions, which will cap regional CO2 emissions at 91 million tons annually beginning in 2014, represent a nearly 45 percent reduction from the existing cap currently in place under the Program. After 2020, the cap will remain at 78 million tons annually. Further, to account for the existing private bank of CO2 emissions allowances already acquired at auction, and to help create a binding cap, the proposed Program revisions provide two distinct budget adjustments. The First Control Period Interim Adjustment for Banked Allowances will reduce the budget for 100 percent of the first control period private bank of allowances (vintages 2009, 2010, and 2011) held by market participants after the first control period. The Second Control Period Interim Adjustment for Banked Allowances will reduce the budget for 100 percent of the surplus 2012 and 2013 vintage allowances held by market participants as of the end of 2013.
The proposed revisions to Part 242 also create the Cost Containment Reserve (CCR), which will help provide additional flexibility and cost containment for the Program. The CCR allowances will be triggered and released at auctions at $4/ton in 2014, $6/ton in 2015, $8/ton in 2016, and $10/ton in 2017. Each year after 2017, the CCR trigger price will increase by 2.5 percent. If the trigger price is reached, up to 10 million additional CCR allowances will be available for purchase at auction, except in 2014, when the reserve will be limited to five million allowances. The existing price triggers for expanding use of offsets and the one year compliance period extension will be eliminated in favor of the CCR.
Finally, the proposed Program revisions create an interim compliance obligation in part to align it with the annual compliance obligations under federal programs such as the Clean Air Interstate Rule and the Title IV Acid Rain Program. This program revision also helps 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. In addition to demonstrating full compliance at the end of each three-year compliance period, regulated entities must now demonstrate that they are holding allowances equal to at least 50 percent of their emissions at the end of each of the first two years in each three year compliance period. The proposed Program revisions also include minor revisions such as setting the reserve price at $2.00 in 2014, to rise at 2.5 percent per year in subsequent years, updating all references, and the deleting early reduction allowance provisions. The majority of the proceeds from the sale of New York's allowances will be continue to be dedicated to strategic energy or consumer benefits, such as energy efficiency and clean energy technologies.
The nature of the proposed Program revisions, generally described above and discussed more thoroughly in the accompanying Regulatory Impact Statement, is such that they clearly will not have an adverse impact on jobs and employment opportunities.
2. Categories and Numbers Affected:
As indicated above, the Department, NYSERDA and DPS analyzed costs, including impacts to jobs, total Gross State Product and total Personal Income, associated with compliance with the proposed revisions to Part 242. Modeling analysis and review was coordinated by RGGI Inc. and New York staff, and included input from energy and environmental representatives from the Participating States and each regional Independent Systems Operator.
To evaluate potential cost impacts of the reduced CO2 emissions cap and budget adjustments, IPM®5 was used to compare a future case with the proposed Program revisions (Program Case) to a Reference Case (Business As Usual scenario) to project how the regional electricity system would function if the Program remained unchanged and proposed revisions were not implemented. The modeling assumptions and input data were developed with input from a stakeholder process, including representatives from the electricity generation sector, business and industry, environmental advocates and consumer interest groups. Subsequently, modeling results were presented to stakeholders for review and comment throughout the development of the proposed Program revisions. For a greater explanation of NYSERDA's analysis and a summary of the Integrated Planning Model (IPM®) modeling conducted by ICF International (ICF), see Regulatory Impact Statement pages 45-62.
Utilizing New York's Investments of RGGI Allowance Proceeds and output data from IPM®, the REMI macroeconomic study estimates that the impact of the reduced CO2 emissions cap, budget adjustments and the remainder of the proposed Program revisions6 on jobs, the economy and electricity customer bills7,8 in New York will be very small and generally positive. The REMI study estimates a cumulative, positive change in employment in New York associated with the proposed Program revisions of about 80,500 additional job-years over the period 2012 to 2040. A job-year is equivalent to one person employed for one year. Further, the REMI study estimates that the cumulative changes in New York's Gross State Product and Personal Income associated with the proposed Program revisions will increase approximately $5.8 billion and $4.7 billion, respectively9. Although these cumulative changes are minimal, they represent positive impacts for total State employment, total Gross State Product and total Personal Income.
3. Regions of adverse impact:
A Statewide analysis of the impacts of these revisions on electricity prices in New York State was performed. The analysis predicts that under the Program Case, New York's wholesale electricity prices (including both energy and capacity costs) are projected to be $1.64/MWh higher in 2016 and $2.12/MWh higher in 2020, than the Reference Case. The proposed revisions to the Program are projected to increase wholesale electricity prices in New York State by about 3.0 percent in 2016 and 3.9 percent in 2020.
4. Minimizing Adverse Impact: The Department will implement the proposed Program revisions through a cap-and-trade program because allowance based cap-and-trade systems are the most cost effective means for implementing emission reductions from large stationary sources. The regulatory flexibility inherent in a cap-and-trade program that allows for interstate trading of emission allowances best enables the Department to balance the competing interests of the protection of the public health and welfare with continued industrial development of the State. By revising the Program, the Department is further able to balance these competing interests and minimize any potential adverse employment impacts of the revised Program.
5. Self-Employment Opportunities:
1 In addition to New York, the RGGI Participating States include: Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, Rhode Island, and Vermont.
2 The Participating States released the Updated Model Rule on February 7, 2013.
3 The estimated impact of the RGGI Program is the increment calculated as the difference between the Reference Case and the "91 Cap Bank MR IPM Scenario."
4 This is provided in 2010 dollars, calculated as the present value of estimated annual changes over the period 2012 to 2040, discounted at three percent per year to account for the time-value of money.
5 IPM® is a nationally recognized modeling tool used by the U.S. Environmental Protection Agency (EPA), state energy and environmental agencies, and private sector firms such as utilities and generation companies.
6 The estimated impact of the RGGI Program is the increment calculated as the difference between the Reference Case and the "91 Cap Bank MR IPM Scenario."
7 "REMI Economic Impacts Analysis," by the Northeast States for Coordinated Air Use Management (NESCAUM), dated May 29, 2013. http://www.dec.ny.gov/docs/administration_pdf/remi91cap2013.pdf.
8"IPM Potential Scenario Customer Bill Analysis," by the Analysis Group, dated May 24, 2013. http://www.dec.ny.gov/docs/administration_pdf/custbillanaly2013.pdf
9 See footnote 4.