State releases initial rules for cap-and-invest program

Gov. Kathy Hochul’s administration has finally taken the first step towards establishing the regulations for New York’s cap-and-invest program, which is meant to decrease greenhouse gas emissions and raise money for climate resiliency projects. Environmental advocates were heartened to see the introduction of draft greenhouse gas reporting rules – especially after Hochul seemed to punt the issue during her State of the State address in January – but they are still pushing for the Department of Environmental Conservation to release the two other sets of rules needed to get the program underway.

On Wednesday, the department released long-awaited draft rules for how and when major companies would need to report their greenhouse gas emissions under the proposed cap-and-invest program. While the reporting rules aren’t enough to get the program actually up and running, and don’t set any standards for the emission caps that companies can hit before they must start buying carbon credits, environmental activists consider the release of the draft reporting rules a meaningful step forward in the process. “This is an important and significant step, and if we can move forward quickly and expeditiously with that full, robust capital investment program, then this lays a strong foundation,” said Justin Balick, states vice president at Evergreen Action. 

The state’s proposed cap-and-invest program is a key initiative for the state to meet the climate goals laid out in the Climate Leadership and Community Protection Act. Once the state finalizes regulations, it will enact limits on the amount of greenhouse gas emissions that major companies and other big polluters can release. If companies exceed those limits, they will need to purchase carbon credits, and money from the sale of those credits would go towards climate resiliency and environmental projects. The goal is to gradually reduce the number of available credits each year to bring down total greenhouse gas emissions. Other states have enacted “cap-and-trade” systems that permit companies to trade carbon credits among themselves, but it’s currently unclear whether New York will allow that. 

The new draft reporting rules from the Department of Environmental Conservation would require companies to begin keeping track of their emissions in 2026, with the first reporting deadline coming in June 2027 for the previous year. “This data is critical to inform the State’s sustained efforts to protect our environment and improve the health and quality of life of all New Yorkers, and DEC is prepared to fill the data gaps left behind by proposed federal rollbacks,” Acting Commissioner Amanda Lefton said in a statement. She was referring to the federal government’s recent cuts to various climate and green energy initiatives and rollbacks to environmental reporting requirements.

The draft rules lay out which companies would be required to report emissions under the program. Those include facilities that produce at least 10,000 metric tons of carbon dioxide equivalent, such as landfills and natural gas compression stations, suppliers of natural gas in the state, waste haulers and electric power plants.

Hochul concerned advocates at the start of the year when she indicated an apparent delay on releasing draft rules despite expectations that they would be part of the State of the State or executive budget. In her agenda book for the year, Hochul said that the DEC would “take steps forward” to advance rules “over the coming months.” It was a change from the original wording that her office released early to reporters that said the DEC would enact reporting rules “by the end of this year.” The wording was seen by many as a delay, an interpretation that Lefton disputed while testifying before lawmakers in a budget hearing.

The governor nominated Lefton to lead the Department of Environmental Conservation last month, and she took over as acting commissioner shortly after. Advocates welcomed the pick, especially since she had said that advancing the cap-and-invest program would be a major priority for her.

Now, activists are hoping that momentum will continue so that the rest of the draft regulations can come out soon. “To hold polluters accountable, create jobs, clean our air, and deliver investments in transportation and other needed infrastructure, we need the Administration to advance the next two rules required for implementing New York’s cap-and-invest program,” the New Yorkers for Clean Air coalition said in a statement. 

The public will have the opportunity to comment on the  draft reporting rules between April 2 and July 1, and advocates plan to actively engage during the open comment period.