The Nickel Report

On May 30, 2020, for the first time in nine years, a manned spacecraft launched from American soil and ultimately docked at the International Space Station, just under a day later.  This launch, which marks a significant step in the development of reusable rocket technology, will undoubtedly inspire a new generation of astronauts, astrophysicists, engineers, and others who are interested in sustainable space exploration.  It has been reported that spacecraft launches of this nature burn approximately 400 metric tons of kerosene and leave behind a trail of carbon dioxide (“CO₂”) exceeding two centuries worth of CO₂ emissions from those of an average car.

Meanwhile, back on Earth, the State of New York proposed revisions to its Regional Greenhouse Gas Initiative (“RGGI”) regulations, as a step in its continuing efforts to achieve legislated clean energy goals.  In general, the proposed changes include the following: (1) a cap for regional CO2 emissions at approximately 75 million tons annually beginning in 2021, and declining thereafter; (2) a third adjustment for banked allowances; (3) creation of an Emissions Containment Reserve; (4) continued use of a Cost Containment Reserve; (5) elimination of two offset categories; and (6) an expansion of the reach of the program to fossil-fuel-fired electricity generation units with a nameplate capacity equal to or greater than 15 megawatts (“MW”).  Public comments on these proposed revisions are due by June 29, 2020, and in light of the ongoing COVID-19 pandemic, there will not be a public hearing.

I. Background

The RGGI is the mandatory, market-based cooperative effort program to reduce greenhouse gases among the states of Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island, and Vermont to cap and reduce CO₂ emissions from the power sector.  Within the RGGI Member States, fossil-fuel-fired electricity generation units with a capacity of 25 megawatts (“MW”) or greater are required to hold allowances equal to their CO₂ emissions over a three-year control period (“CO₂ Budget Source”).  Under each RGGI participating state’s CO2 Budget Trading Program, each regulated CO₂ Budget Source is required to hold one CO₂ allowance for each ton of CO₂ emitted during the preceding three-year control period.  The fourth RGGI control period began on January 1, 2018, and extends through December 31, 2020.

Going back to 2006, each participating RGGI Member State has worked to adopt and periodically revise its individual version of the so-called “RGGI Model Rule,” pursuant to differing state-to-state statutory provisions.  New York’s version of the RGGI Model Rule is codified at New York State CO₂ Budget Trading Program, 6 NYCRR Part 242.  From time-to-time, the RGGI Model Rule has been revised, and each RGGI Member State, in turn, takes steps to revise its individual State RGGI regulations.  The RGGI Model Rule was most recently revised in 2018 with “technical” non-substantive revisions; before that, in late 2017, the RGGI member States finalized more substantive modifications.

The most recent substantive changes to the RGGI Model Rule included changes to incorporate or modify the following provisions:

• Size and Structure of Cap and Allowance Apportionment. In 2021, the regional emissions cap will be equal to 75,147,784 tons and will decline by 2.275 million tons of CO₂ in each subsequent year, resulting in a total 30% reduction in the regional cap from 2020 to 2030.
• Budget Adjustments. A budget adjustment was made to address the private bank of allowances.
• Cost Containment Reserve (“CCR”). The RGGI States will continue to use a CCR, which consist of a fixed quantity of allowances, in addition to the cap, that would be held in reserve, and only made available for sale if allowance prices exceed predefined price levels.
• Emissions Containment Reserve (“ECR”). An ECR is created to respond to supply and demand in the market if emission reduction costs are below those that are projected.  The RGGI Member States will hold back allowances from circulation to secure additional emissions reductions, should prices fall below established trigger prices.
• Offsets. Two offset categories were eliminated, including the “SF6 Offset Category” and the “End-Use Energy Efficiency Offsets Category,” while updates were made to three categories that some States may continue to implement.

II. New York’s Revisions

 New York’s proposed RGGI revisions track the revisions to the RGGI Model Rule outlined above.  Where New York deviates, however, is with an additional change that would drop the RGGI threshold within 6 NYCRR Part 242 to capture electric generation units with a nameplate capacity of greater than or equal to 15 MW.  See proposed, 6 NYCRR § 242-1.4(a)(2)(i).  Further, the changes seek to apply to any unit 15 MW or greater that resides at an existing CO2 budget source, and to any 15 MW unit that resides at a facility where there are two or more units with a nameplate capacity of 15 MW or larger.  See proposed, 6 NYCRR § 242-1.4(a)(2)(ii).  This proposed action by New York follows through on a policy directive telegraphed by Governor Cuomo in his 20^th Proposal of 2018 State of the State: New York’s Clean Energy Jobs and Climate Agenda.

In the proposed rulemaking documents, the NYSDEC explains that “New York stakeholders raised concerns during the extensive outreach efforts that the cost of complying with RGGI might result in increased operation at units not subject to the regulatory provisions of Part 242, particularly at smaller units below the existing 25 megawatt (MW) applicability threshold.”  See, Express Terms Summary.  In an effort to address this concern, the NYSDEC has included the lower 15 MW nameplate generating capacity program expansion.  The NYSDEC proposal provides that these units newly subject to the program “…will be subject to the program for compliance purposes beginning in 2021.  The Program revisions retain the interim compliance obligation.  Units 15 MW and larger that are subject to the Program will be subject to both the interim control period and control period requirements on the later of January 1, 2021, or the date the unit commences operation.”  See, Regulatory Impact Statement Summary.

III. Next Steps

The NYSDEC will be accepting comments on the proposed RGGI Rule changes through June 29, 2020. More information on this rulemaking is available on the NYSDEC website.