New York State Value of Carbon Guidance

Guest post by Roger Caiazza

On October 29, 2020 the New York State Department of Environmental Conservation (DEC) released “Establishing a Value of Carbon, Guidelines for Use by State Agencies, Guidelines for State Agencies” for public review and comment.  This post summarizes this latest chapter in New York’s entry in the race to be the most virtuous climate action government in the United States, if not the world.

According to the DEC’s website:

“The Climate Leadership and Community Protection Act of 2019 requires that the Department, in consultation with the New York State Energy Research and Development Authority, establish a value of carbon for use by State agencies. The Draft Value of Carbon Guidance provides values for carbon dioxide, methane, and nitrous oxide for use by State agencies along with recommended guidelines for the use of these and other values by State entities.”

Three documents are available: Draft Value of Carbon Guidance [PDF], Appendix: Social Cost Values [PDF], and Supporting Memo from New York State Energy Research and Development Authority (NYSERDA) and Resources for the Future (RFF) [PDF].

Background

On July 18, 2019 New York Governor Andrew Cuomo signed the Climate Leadership and Community Protection Act (CLCPA), which establishes targets for decreasing greenhouse gas emissions, increasing renewable electricity production, and improving energy efficiency.  It was described as the most ambitious and comprehensive climate and clean energy legislation in the country when Cuomo signed the legislation.  I have summarized the schedule, implementation components, and provide links to the legislation itself at CLCPA Summary Implementation Requirements.

In section §75-0113, Value of Carbon the law states that the “social cost of carbon shall serve as a monetary estimate of the value of not emitting a ton of greenhouse gas emissions” and that “As determined by the department, the social cost of carbon may be based on marginal greenhouse gas abatement costs or on the global economic, environmental, and social impacts of emitting a marginal ton of greenhouse gas emissions into the atmosphere, utilizing a range of appropriate discount rates, including a rate of zero.”  The law states that DEC “shall consider prior or existing estimates of the social cost of carbon issued or adopted by the federal government, appropriate international bodies, or other appropriate and reputable scientific organizations.”

This guidance document establishes the value as required by the law.  It started with a stakeholder process where the DEC went through the motion of asking for public input.  On July 24, 2020 the Value of Carbon webinar outlined several approaches for establishing a value on carbon.  They explained (recording here) that the guidance will “provide background on the value of carbon and specific considerations for State agencies; serve as an additional tool to aid decision-making; consider a range of discount rates, including zero; and discuss how to value non-CO2 greenhouse gases.”  They also noted that they did not intend that this would be used as a carbon price to impose fees.

New York Value of Carbon

The guidance document recommends a procedure for using a damages-based value of carbon along with a general review of the marginal abatement cost approach. According to the Executive Summary “The current guidance is focused on the damages-based value as a tool to aid state agencies as they begin to regularly consider greenhouse gas emissions and climate change in their decision-making. In some decision-making contexts, particularly those that have a history of valuing carbon, alternative approaches may be more appropriate.”

Two approaches are discussed in detail in the supporting memo and the guidance document.  The first approach is the damages approach exemplified by the Social Cost of Carbon (SCC) which is the present-day value of projected future net damages from emitting a ton of CO2 today.  The supporting memo gives an overview of the methodology and the specifics of the New York application.  I am not going to discuss details of the methodology.  In brief the SCC has been calculated using models that follow four steps.  In all cases the projections are made out to 2300.  Future emissions are predicted using factors such as economic growth and population.  Responses to climate change, such as temperature increase and sea level rise, are modeled.  The economic impact on aspects of the economy, such as energy use, health, and agriculture, are projected from these climatic changes.  Finally, the future damages are converted into their present-day value using discounting and add them up to determine total damages.  I am not a fan of this approach but I am not going to discuss the inherent problems of the SCC either.  See the posts by Willis Eschenbach for that here, here and here or my own work here and here.

The second approach is “based on marginal GHG abatement costs”. In this approach, the marginal cost measures the cost to reduce a ton of greenhouse gas and is used to develop a Marginal Abatement Cost Curve which is “a succinct and straightforward tool for presenting carbon emissions abatement options relative to a baseline (typically a business-as-usual pathway)”. This curve “permits an easy to read visualization of various mitigation options or measures organized by a single, understandable metric: economic cost of emissions abatement”.  For each control option, a block with width equal to the amount of potential reductions and height equal to marginal cost of the option is prepared.  In its recent review of the federal IWG social cost of carbon, the U.S. Government Accountability Office referred to the marginal abatement cost as a type of “target-consistent approach” to valuing emissions, which reflects the fact that this approach establishes a value that depends in part on the relevant emission reduction target.

The guidance document has chosen to apply the damages-based value of carbon approach to “provide accessible and practical assistance to State agencies and authorities where it is useful and appropriate”.  I don’t think this is surprising given the wider use of the approach but I think it would be a mistake to neglect the other one.  I think that the emphasis on the value of carbon for use by the agencies and authorities is a mistake.  Instead the value of carbon in the decision making of the Climate Action Council should be the priority.  The 22-member Council, supported by seven advisory panels and two working groups with over 120 people, is required to develop a “scoping plan outlining the recommendations for attaining the statewide greenhouse gas emissions limits” necessary to meet the law’s schedule to meet its targets.  Given that the CLCPA has specific reduction targets relative to a 1990 baseline, then the marginal abatement cost method should be an integral part of the scoping plan.  This guidance should provide the basis for that approach.

There is another aspect of the guidance document that is discomforting.  The guidance explicitly says that “It is not the intention of the Department that this guidance be interpreted as establishing a requirement on any public or private entity”.  The New York Independent System Operator (NYISO) has been lobbying for its carbon pricing initiative for a couple of years and that initiative explicitly proposes to use the New York Value of Carbon value to set its price.  No matter how many disclaimers DEC includes in the guidance, the fact is that it will likely be used to set a carbon price.

DEC’s draft guidance recommends the use of the U.S. Interagency Working Group’s (IWG) damages-based value of carbon, also referred to as the social cost of carbon dioxide, methane, and nitrous oxide. The available materials includes an appendix with different social cost values in 2020 dollars per metric ton of emissions (adjusted for inflation) based on different discount rates from 2020 to 2050. The DEC “specifically recommends that State entities provide an assessment based on a range of discount rates from 1 to 3 percent to represent the range of potential impacts to society or alternatively, using only a central value that is estimated at the 2 or 2.5 percent discount rate”.  In the supporting memo NYSERDA suggests that DEC “treat the current IWG “central” SCC estimate (at $53 per metric ton of CO2 in 2020) as a lower bound for damages, consider adopting a higher central SCC value for use by NYS agencies, and develop guidance on when to use a range of SCC values in analysis”. 

The discount rate is defined in the guidance as “a reduction (or “discount”) in value each year as a future cost or benefit is adjusted for comparison with a current cost or benefit; a higher rate places a higher value on the present”.   The supporting memo definition states:

“The choice of the discount rate used to calculate the value of carbon has a large influence on the estimate, with a higher discount rate resulting in a lower value. The CLCPA directs consideration of a range of appropriate discount rates, including a rate of zero. Though no consensus exists on what approach or rate to use for discounting uncertain climate impacts over long time horizons, multiple lines of research as well as large-scale surveys of economists suggest support for using long-run discount rates below 3 percent, likely closer to 2 percent. In NYSERDA’s view, it is appropriate that the discount rate used in estimating value of GHG reductions using the marginal damages approach ultimately incorporate both empirical data and public interest value judgments.”

In my opinion there are two discount rate issues. NYSERDA and DEC on one hand argue that the IWG work represents the “science” but when they want to justify the CLCPA target costs then they ignore the IWG work and choose a value that supports higher impact costs.  In this case the IWG central estimate that is supposed to represent a single value did not give the answer they wanted so they suggest the 2 or 2.5 percent discount rate rather than IWG 3% recommended rate. 

There is an even more egregious issue associated with the choice of the discount rate.  All the supporting arguments focus on the appropriate discount rate from the standpoint of developed countries.  On one hand, the higher damages that justify the lower discount rates are primarily driven by the impacts to the world’s poor who cannot develop resilient adaptation measures.  On the other hand, the best way to mitigate those impacts is for the economies of the poor countries to develop the wealth needed for resiliency measures which results in a higher discount rate. NYSERDA’s recommendation for a lower discount rate cavalierly dismisses their aspirations for a better future.

The guidance document specifically seeks public input on “whether the central value should be set at the 2 or 2.5 discount rate”. They note that “this range translates into a 2020 value of carbon dioxide of $53-421 per ton, with a central value of $79-125 per ton; a 2020 value of methane of $1,527-6,578 per ton, with a central value of $2,036-2,782 per ton; and a value of nitrous oxide of $19,084-140,766 per ton, with a central value of $27,989-44,727 per ton”. The full set of values for 2020-2050 is provided in the separate Appendix tables.  Note that for CO2 the recommendation raises the 2020 value from $53 per ton to $79-125 per ton.

The guidance also includes recommendations for assessing other greenhouse gases and public health impacts.  DEC recently closed its comment period for the 1990 greenhouse gas inventory which has to be completed per the CLCPA schedule this year.  The guidance document recommends social costs for methane and nitrous oxides rather than using a global warming potential approach.  I agree that it is the appropriate approach but it also means that the DEC proposed inventory has to be modified to provide the methane and nitrous oxides tons not the global warming potential equivalent tons. 

Conclusion

The premise of New York’s Climate Leadership and Community Protection Act (CLCPA) is that “Climate change is adversely affecting economic well-being, public health, natural resources, and the environment of New York” and that is only a matter of political will to implement “a goal of the state of New York to reduce greenhouse gas emissions from all anthropogenic sources 100% over 1990 levels by the year 2050”.  The State’s utilities have allowed themselves to get sucked down into this drain on the economy for this futile virtue-signaling disaster simply because they depend on a rate-making process that is entirely co-opted by the Cuomo Administration.  Frankly the threat of recrimination from the Administration is so palpable that I doubt that anyone with career ambitions in any state agency dares say anything suggesting that the CLCPA goals and schedule are unrealistic lest they be accused of CLCPA defeatism.

Against that backdrop the only thing left is to comment and hope that someone, somewhere realizes the inherent problems of not only this guidance but the legislation itself .   If you have any interest in carbon pricing and, especially if you are from New York, I encourage you to comment.  Comments can be submitted until 5 p.m. Friday, November 27, 2020 to Jason Pandich, NYSDEC Office of Climate Change, 625 Broadway, Albany, NY 12233-1030, (518) 402-8448, E-mail:   climateact@dec.ny.gov. Include “Comments on the Value of Carbon” in the subject line of the email.

Roger Caiazza blogs on New York energy and environmental issues at Pragmatic Environmentalist of New York.  This represents his opinion and not the opinion of any of his previous employers or any other company with which he has been associated.

26 thoughts on “New York State Value of Carbon Guidance

  1. “Utilities” are often allowed a fixed percentage of their costs as “profit” in exchange for a supply monopoly. Many of them would love “Carbon levies” to double their costs so that they can double the amount of “profit” they make with only a few keyboard clicks instead of hiring construction crews and buying generation equipment. The public needs to be really careful about the wording of their supply contract with the local government.

    • Utilities are allowed (though not guaranteed) to earn a return on their net investment in used and useful physical plant, after recovering costs of operation approved by their regulators. Utilities do not earn a return (profit) on their operating costs and would not be permitted to earn a return on a “carbon levy”.

  2. “A goal of the state of New York to reduce greenhouse gas emissions from all anthropogenic sources 100% over 1990 levels by the year 2050”

    They only can achieve this goal if the kill all of New Yorkers by 2050. Humans emit CO2 by breathing, and this is included in “all anthropogenic sources” that they’ve written. I wonder if Cuomo started working on this mandate when he sent Covid-19 infected patients into nursing homes?

    • Yes, we talking apes are in fact internal combustion engines! We “burn” hydrocarbons to produce the energy needed for life, we intake O2 to facilitate that burning and exhaust CO2 and water vapor too.

      Every one of us talking apes on the planet, on average exhausts about 250 kg or 1/4 tonne of CO2 per year at rest (more if exerting self). (6 LPM breathing volume, 40,000 ppm CO2).

      Are we going to have a carbon tax for living/breathing? This leads to taxing “life”! So do we decide so and so species is a burden and must be terminated? This line of thought is based on or serves pure evil!

      This lunacy has to stop! (if you think I’m a nutbar for suggesting this serves pure evil, see the following essay)

      https://wattsupwiththat.com/2019/04/14/hypothesis-radical-greens-are-the-great-killers-of-our-age/

  3. Wait, so CO2 has a value of between $53-421 per ton? Cool! I’m-a gonna be rich! I knew it was valuable, especially to plants, but didn’t know it was that valuable.

  4. Manufacturing companies are relocating out of New York, just like they have done in California.
    Kimber, a high-end firearms company, just announced 2 weeks ago it is moving lock, stock and barrel from upstate NY to Troy, Alabama and are hiring aggressively in that area.

    Companies won’t be able to move fast enough once Cuomo gets going on his tax increases retroactive to the start of 2020.

    • First, Planned Parent, and now Planned Product. Businesses and people are not so green to recognize a play that electively, proactively sabotages viability.

  5. As far as I know carbon is not a gas, and only has to do with temperature when used as fuel in a coal-burning stove or furnace…

    • The Alarmists love to mix up terms. When they say “Carbon”, they mean C02. However, it helps make the unwitting think of dirty carbon particulate exhaust. It helps them with optics.

  6. So, New York is in the lead of the “Who can butt-smooch the Enviro-Kooks the most” contest. Good for them, I guess, but I imagine it leaves a nasty taste….

  7. Do we mean carbon dioxide? Infinitely valuable. Somebody point out to NY State that whatever they do will have no effect on 2100AD temps nor on the gentle atmospheric increase of CO2 to be expected and welcomed. Nor is anyone listening.

  8. Give me money or I will burn this pile of coal!

    Those prices are a level of insane that can only exist in a vacuum.

  9. “Climate change is adversely affecting economic well-being, public health, natural resources, and the environment of New York”

    Crazy!

  10. The primary greenhouse gas being emitted into the atmosphere in New York State is H2O and not CO2. Molecule per molecule H2O is a stronger absorber of IR than is CO2 and on average there is 50 times more H2O molecules in the atmosphere than is CO2. CO2 contribution to the overall radiant greenhouse effect is trivial when compared to H2O. So H2O should be the primary concern here and not CO2. The vast majority of greenhouse gas molecules in the atmosphere above New York State come from out of state across state lines so much so that greenhouse gas emissions taking place in the state are trivial and are quickly carried out of state by winds Currently nothing is being done to stop greenhouse gasses from crossing state lines and coming into New York State from out of state.. So greenhouse gases including liquified greenhouse gas coming into the state across state lines should be the primary concern here and should be stopped.

    It is very questionable as to whether CO2 has any effect on climate in New York State. Look at the chart that Al Gore presented in his first movie showing temperature and CO2 vs time for the past 650,000 years. Al Gore claimed the this data shows that CO2 regulates temperature but if one looks at the data in higher temporal resolution one will find that CO2 level follows temperature and not the other way around. This happens because warmer oceans cannot hold as much CO2 as cooler oceans. Al Gore also included in his plot today’s CO2 level which over the past 650,000 years seems to be abnormally high The proximate cause of this is mankind’s burning of fossil fuels. But according to Al Gore’s chart this great increase in CO2 has not affected global temperatures. So what Al Gore’s chart really shows is that CO2 seems to have no effect on global temperature.

    Over many hundreds of millions of years atmospheric CO2 has been decreasing as it is being stored in the form of carbonate rocks and fossil fuels. During the last ice age CO2 levels became dangerously low in terms of what plant life requires. Mankind’s burning of fossil fuels is returning CO2 to a much safer level for plant life. We should be thankful that we do not need to start freeing CO2 from carbonate rock in order to preserve life on this planet. Both CO2 and H2O are essential to life in New York State and as such are not pollutants.

    AGW is a conjecture that depends upon the existence of a radiant greenhouse effect provided for by trace gases in the Earth’s atmosphere with LWIR absorption bands. Such a radiant greenhouse is not what keeps a real greenhouse warm. A real greenhouse stays warm because the glass limits cooling by convection. It is entirely a convective greenhouse effect that keeps a real greenhouse warm. So too on Earth where instead of glass there is gravity and the heat capacity of the atmosphere. As derived from first principals, the Earth’s convective greenhouse effect keeps the surface of the Earth on average 33 degrees C warmer than it would otherwise be. 33 degrees C is what has been derived from first principals and 33 degrees C is what has been measured. Additional warming caused by a radiant greenhouse effect has not been observed on Earth or any where else in the solar system for that matter. The radiant greenhouse effect is nothing but science fiction so hence the AGW conjecture is nothing but science fiction as well.

    But for those that still believe in a radiant greenhouse effect, initial radiametric calculations came up with a value of the climate sensitivity of CO2 not counting feedback effects of 1.2 degrees C for a doubling of CO2. A research group from England examined temperature and CO2 data from 1850 to today and determined that if all the warming were caused by an increase in CO2 that the the climate sensitivity of CO2 including feedbacks could not possible be more than 1.2 degrees C. A researcher from Japan pointed out that the initial radiametric calculations failed to include the fact that a doubling of CO2 would cause a slight decrease in the dry lapse rate in the troposphere which is a cooling effect and decreases the climate sensitivity of CO2 by more than a factor of 20. So we end up with a climate sensitivity of CO2 of less than .06 degrees C which is trivial and too small to measure.

    Then there is the issue of H2O feedback. According to the AGW conjecture, CO2 warming causes more H2O to enter the atmosphere which causes even more warming because H2O is, molecule per molecule, a stronger IR absorber than is CO2. This additional warming causes still more H2O to enter the atmosphere which causes even more warming and so forth. But what this H2O feedback fails to include is the fact that besides being the primary so called greenhouse gas, H2O is a primary coolant in the Earth’s atmosphere, by the heat of vaporization, moving heat energy from the earth’s surface to where clouds form and radiate the heat energy to space The overall cooling effect of CO2 is evidenced by the fact that the wet lapse rate is significantly lower than the dry lapse rate in the troposphere. The net cooling effect of H2O hence must act as a negative, stabilizing feedback that reduces and warming that the CO2 might provide. So instead of amplifying CO2 warming by a nominal factor of 3. H2O feedback reduces CO2 warming by a nominal factor of 3, reducing the climate sensitivity of CO2 from .06 to .02 degrees C which is trivial and too small to measure so it is effectively zero. Negative feedback systems are inherently stable as has been the Earth’s climate system for at least the last past 500k years, enough for life to evolve because we are here.

    If CO2 really effected climate then the increase in CO2 over the past 30 years should have caused at least a measurable increase in the dry lapse rate in the troposphere but that has not happened. The IPCC does not really know what the climate sensitivity of CO2 rally is and they have been unable to measure it. It is as if the climate sensitivity of CO2 was zero and hence there is nothing to measure. Apparently the IPCC continues to maintain without evidence that CO2 creates a climate problem so as to justify their funding. It is all politics and not science.

  11. If you take a reasonable worst case scenario of total global damage, then divide it by the tons of CO2 emissions required to get there, each ton would account for $0.001 of damage. Maybe we should just all put in that tenth of a cent each into a climate mitigation fund. That would be about $0.17 per year for me (based on the average per capita emissions in Alberta). I could get behind that.

  12. NY State was 3.2 % of US CO2 emissions (2016). It probably hasn’t changed much in the last  3 years due to economic exodus and COVID 19 in 2020. The global  CO2 emissions in 2019 was 33 GTons. The US emitted 15% of 33Gt or about 5 Gt of CO2. So NY State emitted about 3.2% of 5 Gt or 0.16 Gt. This is 0.16/33 or 0.0048 Gt of global emissions.
    China and India and many of the other developing countries are going to continue using cheaper coal for electric production. The US will continue to produce less and less global emissions because of the abundance of natural gas.
    The bottom line is, New York State, get over yourself. You are not that important to the global picture. Get your state economics back to reality so you can again attract businesses.  

  13. I think most people miss the point of these taxes. Implementing them presupposes CO2 is harmful. Whether it is or not. Once you swallow the assumption of harm – by government fiat – you must be punished by higher prices. By writing a statute that defines CO2 as harmful, then putting a price on it, it becomes a self licking ice cream cone. Politicians bask in the warm glow of virtue signalling about reducing “our” carbon footprint, while simultaneously making money off the evil CO2. You, the hapless citizen, are forced to accept that CO2 is bad (the law says so), and you are therefore rightfully to be punished for its generation. Politicians will quickly become accustomed to this new stream of revenue, and ironically be faced with the dilemma of pushing for the elimination of it. What a perverse incentive that will be! Hardly a recipe for “success”. Carbon pricing is a scheme that would make the typical grifter green with envy. Make people feel guilty, punish them by taking their money, and then proclaim your virtue for stealing. It’s amazing that this is really being considered as an actual program. And there are ignorant citizens asking for it to be done to them! Truth really is stranger than fiction.

  14. All of this is basically immaterial. Besides the fact, as noted above, that NYS is miniscule on the global scale, by the time Cuomo and the clown show gets done they won’t have enough industry left to worry about a CO2 tax.

  15. New York, understandably, doesn’t want to be excluded from the carbon indulgence trading markets, and redistributive change capital models.

  16. Like many who frequent this Blog, I have actively hated the concept of Carbon Quotas or taxes, selling Carbon Credits. All because most of us do not believe that CO2 is as big a problem (or any problem at all) as suggested by climate alarmists.

    Since I became convinced that we are less than a year from seeing a viable source of energy based on breaking down electron clusters to form electricity and heat… say, E-Cat, BrilliantLightPower or some other manifestation of low energy nuclear transformations
    (see http://www.researchgate.net/publication/330601653_E-Cat_SK_and_long_range_particle_interactions for references), the ramifications of breaking hydrocarbon’s hold on our energy economy have become more clear.
    Whether petroleum is all that bad or not (I’d like to see more like 750-850 ppm CO2 in the atmosphere -for plant growth), the reality is that the Greens are unlikely to accept a 10 or 12 year pattern of replacing petroleum-powered transport if an alternative exists. Therefore, I see plainly that “they” will force carbon taxes on all owners of ICE vehicles, trains, ships and eventually planes to force transition to a non-CO2 emitting technology.

  17. I doubt that any of the New York politicians involved in their anti-CO2 actions know the percentage of CO2 in the atmosphere.

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