New report lays out state budget actions for climate change

It may feel like climate change has taken a back seat in the national political debate, due to the coronavirus pandemic. But the massive fires currently burning on the West Coast illustrate the growing dangers posed by climate change. 

With that threat in mind, the New York League of Conservation Voters and the Citizens Budget Commission have released a new report, exclusively obtained in advance by City & State, with recommendations on how New York can begin hitting its ambitious climate goals through fiscal policies, including repealing or amending certain tax exemptions for fossil fuel purchase and use, and encouraging the use of clean energy sources.

Last year, New York passed the Climate Leadership and Community Protection Act, which set a series of ambitious climate goals, including reducing greenhouse gas emissions by 85% of 1990 levels by 2050 and having carbon-neutral electricity production by 2040. Gov. Andrew Cuomo has so far focused largely on renewable energy development, announcing the nation’s largest combined solicitations for renewable energy over the summer. And while expanding the state’s ability to generate energy from renewable sources is critical for hitting the state’s goals, it’s far from the only thing the state could be doing. “Our main point of this report is to identify those various spending components of the state budget that don’t align with the policies of the Climate Leadership and Community Protection Act, that require revisiting,” Julie Tighe, president of the League of Conservation Voters, said. 

The first recommendation points to $800 million in tax exemptions every year that promote both residential and nonresidential use of fossil fuels. The report suggests a partial repeal of the exemption for the sales tax on residential energy, removing the exemption for fossil fuels but maintaining it for renewables and electricity. Right now, people who purchase propane, natural gas other fossil fuels to heat their homes receive a sales tax exemption. The report recommends the state consider repealing that part of the exemption to incentivize homeowners to switch to a more sustainable heating method, like electricity. Recognizing that this might pose a cost burden for low-income New Yorkers, the report suggests the state offer financial support to switch to a clean heat source.

The report also suggested a full repeal of petroleum business tax exemptions – a tax imposed on petroleum businesses in the state. Right now, those businesses don’t have to pay the tax if the petroleum products are for residential heating use, farming and manufacturing, nor for things like research. In addition, it says the state could look at repealing the sales tax cap on motor fuel. Right now, the state has a sales tax exemption on gas that costs more than $2 a gallon, originally created to address the rising cost of gas. A repeal would raise cost to drivers, raise money for the state, and would help lead to a reduction in consumption.

The report argues that these measures would increase gasoline costs, leading to a reduction in its use, and they would increase state tax revenue. “Elected officials should always be stewards of the public dollar, but it's even more important when the state's finances are such that they're talking about making 20% cuts to many types of local aid,” David Friedfel, director of state studies at the CBC, said of the potential revenue such changes could help raise during the current financial crisis. 

Another major aspect of the report focuses on local aid reimbursement rates, in particular for school building and transportation aid. Currently, the state spends over $5 billion every year partially reimbursing schools for costs related to building improvements and expansions, and transportation expenses such as buying vehicles and fuel. The report suggests restructuring reimbursement rates to incentivize investments in renewable energy sources and zero-emission vehicles. For example, the state could offer a higher rate of reimbursement if a school or district purchases electric buses, or outfits new buildings with renewable energy heating systems.

Friedfel said that some of these issues, in particular the tax exemptions, can “fly under the radar” because once they are passed, they are generally in place until they are actively repealed. This means that outdated tax exemptions or structures of incentive programs may remain in place because they are not thought about every year in the way that direct spending is. Tighe said that’s exactly why they published the report: to bring attention to these actions the state could be taking. “At the end of the day, we're going to need a lot of different policies in order to accomplish these very ambitious goals and requirements that we've set forth,” Tighe said. “Not encouraging the use of fossil fuels seems like low-hanging fruit.”

The report also makes broad recommendations on direct state spending. The first is to redirect the money the state spends on its fleet of 7,000 vehicles to purchase zero-emission cars and trucks, and to support electric-charging station infrastructure throughout the state, since the leading source of greenhouse gas emission in the state is from transportation. Another is to invest money into transitioning state facilities away from fossil fuels, whenever heating systems require replacement. And a third is changing how the state invests economic development grant money by not reimbursing businesses for installing fossil fuel-dependent systems in their buildings. “Now, more than ever, you have to prioritize what you’re spending money on,” Tighe said. “And we hope that the priorities reflect the state goals.”