COVID-19 Highlights Carbon Pricing Benefits to New York's Economy and Health
New York State, the world’s 11th-largest economy, recently enacted the Climate Leadership and Community Protection Act (CLCPA), mandating 70% of our energy to come from renewable resources by 2030, and zero-emission energy by 2040.
Since then, COVID-19 has created economic uncertainty in New York State. We believe our carbon pricing proposal, in which a “social cost” of carbon dioxide emissions is incorporated into the wholesale cost of electricity, will help the state meet renewable mandates faster and at a lower cost at this time of uncertainty.
The benefits of carbon pricing have been well documented: shifting risk away from consumers and onto developers and the financial community; incentivizing technological innovation; lower costs while meeting carbon emission reductions on a faster schedule. In this COVID-19 world, two major benefits of carbon pricing rise to the top: supporting the state’s economic rebound while benefiting urban areas most harmed by poor air quality in “environmental justice” communities.
Cleaner Air and Lower Cost
Carbon pricing could offer financial benefits to the state by reducing the need for incentives such as RECs and ZECs (funding that compensates renewable and nuclear power resources for their environmental attributes). This money could be freed up for other environmental programs or related work to benefit the state at a time when funding is scarce. It will also advance the development of green technologies and sustainable practices, helping to create jobs and increase both state and federal tax revenues.
Studies by the Analysis Group show carbon pricing will also help residents living in environmental justice communities. Supporting that study, a recent Harvard University study found that communities facing long-term exposure to fine particulate matter also see higher incidents of respiratory ailments, COVID-19 infections, and fatalities. Improving air quality through closing or upgrading fossil fuel generation plants would have a direct impact on improving the health of New York’s most vulnerable citizens.
Over the longer term, carbon pricing will also help reduce consumer energy costs.
How Carbon Pricing Works
Here's how carbon pricing works:
- New York State sets a social cost of carbon as a price per ton of emitted CO2 based on the impact to the environment.
- Power plants pay for the CO2 they release into the atmosphere.
- Generation owners receive economic incentive to invest in low-carbon or carbon-free resources like wind, solar and hydro.
- Consumers benefit from payments made by polluting power producers.
Valued by Experts
Leading economists recognize a cost on carbon emissions as the fastest path to reduce CO2 emissions. A carbon price would “encourage technological innovation and large-scale infrastructure development” while accelerating the diffusion of carbon-efficient goods and services, according to a Statement on Carbon Dividends by the Climate Leadership Council, 3,554 U.S. economists, 27 Nobel Laureate recipients and other high-profile experts.
If the state and NYISO stakeholders support moving forward with carbon pricing, stakeholders vote whether to approve carbon pricing wholesale market rules. The proposal would eventually need to be reviewed and accepted by the Federal Energy Regulatory Commission.
To learn more and stay informed about this ground-breaking proposal, visit www.nyiso.com/carbonpricing.