Why Carbon Pricing?
1. What is the coalition?
We are a coalition of like-minded organizations who recognize that New York has an opportunity to be the nation’s clean energy leader by decarbonizing our electricity sector with a market-based model that preserves states’ abilities to choose and achieve their own clean energy policy goals. We believe by implementing the NYISO carbon pricing proposal in a timely and efficient manner and incorporating the cost of carbon into the electricity sector, New York will align its wholesale electricity markets with its public policy objectives to decarbonize the electricity sector as set forth in the Climate Leadership Community Protection Act (CLCPA).
2. Why did you form the coalition?
New York has an opportunity to build back better and cleaner and be the nation’s clean energy leader by decarbonizing our electricity sector with a market-based model that preserves our state’s ability to choose and achieve our clean energy policy goals. The NYISO carbon plan would:
Position New York to effectively meet long-term climate goals identified in the CLCPA by leveraging competitive markets to:
- Accelerate decarbonization of New York’s generation fleet and its imported electricity;
- Improve public health, especially downstate, by moving away from the most dangerous carbon-emitting generators;
- Accelerate entry of new renewable projects, particularly in areas currently served by fossil units, including in vulnerable communities downstate;
- Create stronger economic incentives for cost-effective transmission investment, providing downstate market access to cleaner and more efficient resources located upstate and growing the market for renewables upstate;
- Create incentives for energy efficiency;
- Reduce the cost and time to achieve the state’s goal of 100 percent carbon-free emissions.
- Create thousands of highly skilled jobs rebuilding New York’s green economy
- Promote innovation and clean energy businesses in New York by incentivizing carbon-free electricity production;
- Avoid near-term risks associated with future FERC actions to undermine New York’s renewable and zero-emission resources - jeopardizing the state’s clean-energy goals and resulting in significant consumer cost increases.
- Benefit consumers financially. Resources for the Future (RFF), a renowned independent nonprofit organization that conducts research into environmental, energy, and natural resource economics, found that NYISO’s adder proposal could reduce sector emissions by up to 22 percent and would result in economic and climate benefits of up to $691 million annually by 2025.
3. How does carbon pricing work?
- 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 carbon 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
4. What is CFNY's purpose?
CFNY’s purpose is to encourage all necessary agencies and policymakers to work together to implement the NYISO carbon pricing proposal in a timely and efficient manner.
By incorporating the cost of carbon into the electricity sector, New York will align its wholesale electricity markets with its public policy objectives to decarbonize the electricity sector as set forth in the Climate Leadership Community Protection Act (CLCPA).
5. How does this help New Yorkers?
- Reduce the consumer cost of reaching 100% carbon-free emissions, as required by the New York State’s Climate Leadership and Community Protection Act (CLCPA)
- Help grow investment and innovation in clean energy generation
- Promote innovation and energy efficiency in fossil fuel-burning technology
- Improve public health by encouraging the retirement of the highest-emitting generators; particularly downstate
- Affirm the state’s position as a national leader on climate change
6. Why should New York be the leader in this space?
New York State’s economy accounts for one out of every 230 tons of energy-related carbon dioxide (CO2) emitted anywhere in the world, the CLCPA’s mandate to achieve carbon-free electricity by 2040, 70 percent renewable generation by 2030 and a net-zero carbon economy by 2050 will have a significant impact in the global climate crisis.
7. What outcomes can we expect to result from the adoption of a carbon price in NYISO’s wholesale electric markets? What incentives will a carbon price add to New York’s successful Clean Energy Standard (CES) approach?
- Deliver New York’s clean energy transformation while also providing the state with an environmentally friendly tool to build back better
- Reinforcing and enhancing the state’s position as the national leader on climate action.
- Lower-cost achievement of New York’s aggressive climate targets, through market efficiencies in power-sector transactions and investments as a result of a price on carbon.
- Lower risks for consumers through shifting investment risk from ratepayers to investors while providing investors a clear market price signal tied to low-carbon attributes.
- Faster entry of clean energy projects into the market that can be financed through market revenues reflecting carbon costs (without the need for long-term renewable energy credit (REC) contracts).
- Efficient market incentives to site clean energy resources where they are needed most for reliability, for reducing energy prices, for avoiding air pollution, and for local jobs in downstate locations particularly close to disadvantaged communities.
- Provide market incentives for the addition of transmission investments to give downstate New Yorkers better access to valuable low-carbon and renewable resources in upstate regions, consistent with Governor Cuomo’s Making Progress Happen, 2020 State of the State address.
- Better protection against the possibility of federal regulators’ actions to mitigate a broader set of clean energy resources in New York, by establishing an economic basis to avoid mitigation through a carbon pricing mechanism as part of the NYISO wholesale market design.
- Near-term price signals to investors in renewables, storage, combined heat and power, energy efficiency, and demand-side measures.
- Faster and broader access to financing for some renewable projects that are or would be cost-competitive with prices reflecting carbon emissions, even without REC contracts.
- Incentives for entrepreneurs to develop unexpected and innovative solutions to reducing carbon emissions.
- Efficient market incentives for owners to invest in maintaining well-performing existing facilities with zero- and low-carbon output, and in repowering under-performing generating units, while hastening the retirement of less-efficient, higher-emitting, and uneconomic fossil units.
- Further enhancement and harmonization of state policy and competitive markets—addressing the absence of a price on carbon, and more completely incorporating external costs and impacts in market outcomes.
- Prevention of leakage of carbon emissions from New York into other regions.
- A home-grown policy mechanism that could be adopted by other regions looking to control carbon emissions through a market-based mechanism.