Can New York’s Cap and Invest Program Address Environmental Justice?
New York State took a major step towards addressing climate change in 2019 when it adopted the Climate Leadership and Community Protection Act (CLCPA), which set ambitious requirements for greenhouse gas (GHG) emission reductions. Specifically, New York must reduce statewide GHG emissions by 40 percent by 2030 and 85 percent by 2050 (from 1990 levels). According to the CLCPA, the New York State Department of Conservation (DEC), which has been tasked with implementing a program to reach the State’s emission targets, must ensure that the activities it takes to reduce GHG emissions “do not result in a net increase in co-pollutant emissions or otherwise disproportionately burden disadvantaged communities.” In addition, DEC must also “[p]rioritize measures to maximize net reductions of greenhouse gas emissions and co-pollutants in disadvantaged communities.”
To help achieve the state’s ambitious GHG emission reduction targets, New York is preparing to propose its own version of a cap-and-trade program called New York Cap and Invest. But if New York is to successfully comply with the CLCPA, it cannot rely on New York Cap and Invest alone. New York will need a well-designed scheme of programs and regulatory mechanisms to not only reduce GHG emissions but to also ensure that disadvantaged communities see real air quality improvements. As a first step, DEC should ensure that New York Cap and Invest can help disadvantaged communities by paying attention to what actually drives environmental burdens in these communities: co-pollutants.
Environmental Justice Concerns with Cap-and-Trade Programs
A cap-and-trade program is a regulatory mechanism that establishes an industry- or economy-wide emission limit for pollutants like carbon dioxide. Under a cap-and-trade program, the government can give emitters (either through an auction or another mechanism) allowances to release a limited amount of pollution. Then, emitters can either use these allowances for their own emissions, or sell them to other parties that need allowances for their emissions. Overtime, however, the industry- or economy-wide emission caps become more stringent to drive down pollution.
Cap-and-trade programs, if well-designed, could reduce greenhouse gas emissions. Historically, however, many environmental justice advocates from around the country have opposed its use because of their concern that it may exacerbate adverse health risks and economic burdens in low-income communities and communities of color that are already saddled with pollution. The concern is that facilities that expose disadvantaged communities to these pollutants might purchase allowances from distant facilities rather than adopt emission mitigation measures on site, which may create concentrated areas of harmful local pollution known as “hotspots.” This potential to harm disadvantaged communities can arise when cap-and-trade programs pay attention only on GHG emissions and not co-pollutant emissions (e.g., NO2, SO2, PM) that are linked to life-threatening health risks like asthma and other respiratory diseases.
Shouldn’t reducing GHG emissions anywhere in the state also reduce co-pollutant emissions in similar rates across the state, including disadvantaged communities? Not exactly. New York’s disadvantaged communities face a number of different sources, which may emit varying rates of co-pollutants per a ton of carbon dioxide emission. In other words, the amount of co-pollutant reduction depends on where the GHG emission reduction comes from. Furthermore, local pollution in New York’s disadvantaged communities can come from sources both inside and outside of communities depending on New York’s distinct meteorological conditions and topographic features.
All of these factors highlight the same concern: targeting GHG emissions alone might not address the numerous health and economic impacts communities face. Policy Integrity and the Guarini Center on Environmental, Energy, and Land Use Law’s 2021 research on GHG trading for large buildings pursuant to New York City’s Local Law 97 provides some helpful insights that can be applied to GHG trading in other sectors. This research considered the potential impacts of a trading program for large buildings and whether it would be feasible to design a trading program that would also promote environmental justice. The study revealed that emissions trading can lead to localized pollution reductions in disadvantaged communities when it is paired with complementary interventions like an investment program that improves buildings in environmental justice communities or a phase-out of fuel oil.
What Did New York Propose?
In December 2023, DEC and the New York State Research and Development Authority (NYSERDA) requested public comment on a pre-proposal outline detailing what New York Cap and Invest may entail. In an attempt to address environmental justice concerns with a cap-and-trade program, DEC suggested three potential policies:
· Prohibiting obligated entities located in or near disadvantaged communities from buying and trading allowances from entities outside of disadvantaged communities;
· Requiring obligated entities located in or near disadvantaged communities to surrender allowances at some multiple greater than the typical requirement which allows entities to surrender one allowance for one ton of carbon dioxide; and
· Setting facility-specific emission caps for obligated entities in or near disadvantaged communities.
While these policy proposals may be promising, much work is left to be done to ensure that they would actually prevent additional burdens in disadvantaged communities when implemented. In March 2024, Policy Integrity and the Guarini Center on Environmental, Energy, and Land Use Law submitted comments recommending that DEC and NYSERDA implement measures that target the specific harms caused by co-pollutants.
Policy Integrity also identified certain design considerations for each of DEC and NYSERDA’s policy proposals for preventing further harm in disadvantaged communities. First, if the agencies decide to implement an allowance-trading-ratio-based mechanism, they will need to carefully map co-pollutant emissions from sources to disadvantaged communities and further assess the health and economic impacts that these emissions cause.
Second, Policy Integrity cautioned against unrestricted trading within and across disadvantaged communities because this kind of trading may risk exacerbating pollution hotspots. For example, if two sources within a disadvantaged community — Firm A and Firm B — have similar GHG emissions, but Firm A emits more co-pollutants than Firm B, then allowing Firm B to sell allowances to Firm A could increase co-pollutant levels within the community.
Third, Policy Integrity explained that if DEC and NYSERDA decide to use facility-specific caps, it should set co-pollutant emissions caps to mitigate harms in disadvantaged communities because co-pollutants can be emitted and reduced in varying proportions to GHGs. But it is important to acknowledge that these co-pollutant caps should work in tandem with — and not in place of — other programs that directly mitigate harm from co-pollutants.
Although there has been a historical opposition to cap-and-trade programs by environmental justice communities, it appears that New York Cap and Invest may be received differently if it includes certain policies. Some environmental justice advocates who have analyzed New York Cap and Invest have also taken interest in how the trading program can directly target concerns about co-pollutants. For example, the New York City Environmental Justice Alliance partnered with Resources for the Future and various scholars to publish a report that studies the different ways New York Cap and Invest could be designed and those effects on co-pollutant emissions (NOx and SO2).
While New York Cap and Invest cannot singlehandedly rectify the multigenerational harms polluters have caused in New York’s low-income communities and communities of color, DEC and NYSERDA can still design an emissions mitigation program that does not further intensify risks to disadvantaged communities. And given that this program has not yet reached the final proposal stage, there is still time to strengthen it and ensure that communities see real improvements.
