The governor’s ‘cap-and-invest’ proposal is not pro-market and won’t help the state achieve its environmental goals.
The governor’s ‘cap-and-invest’ proposal is not pro-market and won’t help the state achieve its environmental goals.
N ew York State’s long-running war on natural gas is a case study in lazy climate policy, and Governor Hochul’s latest proposal is no exception. The New York Cap and Invest (NYCI) program brands itself as a market-based solution to climate change, but in reality, it is anything but. At a moment when New Yorkers need affordable and reliable energy, NYCI jeopardizes the state’s energy security while delivering minimal climate benefits.
New York State has been leading the charge against natural gas for years. In trying to reach the state’s goal of 70 percent renewable energy by 2030, Governor Hochul championed the state’s ban on fossil-fuel equipment in newly constructed buildings, set to take effect in 2026 for buildings under seven stories and 2029 for larger buildings. Having already made New York the first state to ban gas stoves, Hochul’s administration has also been working with state-senate Democrats on the HEAT Act, legislation that would be repurposed to begin weaning New York off natural gas for good by targeting fossil-fuel infrastructure, making it anywhere from unprofitable to impossible for utilities to service certain homes. If successful, the HEAT Act would also make it possible for the state to forcibly transition neighborhoods off fossil fuels entirely without homeowners’ consent.
For now, the NYCI program plans to take aim at energy customers’ wallets instead. The “cap and invest” plan, it seems, is meant to be misunderstood. Though it claims to be “market-based,” invoking the positive branding of “cap and trade” plans that allow polluters to trade allowances to incentivize efficiency, NYCI is effectively just a cap and fee. The program works by setting a declining cap on emissions, requiring major polluters to purchase allowances to cover each ton of emissions beyond that cap, in effect transferring the cost to consumers in their energy bills each month.
The idea behind the added fees is, its defenders insist, market-based at the end of the day. By making natural gas more expensive, in theory, New York can push companies and consumers toward lower-carbon alternatives. The problem is that in New York, there simply aren’t many other options. Forcing New Yorkers onto the electric grid might be appealing if New York didn’t already have some of the country’s highest energy costs — 36 percent higher and 41 percent higher than the national averages for commercial and residential, respectively. Not to mention that NYCI rests on a false dichotomy between the electric grid and fossil fuels in the first place: The plurality of New York’s electricity comes from natural gas.
Electrification might also sound less hollow if New York were historically more serious about the sustainability of its clean energy. New York has only paid lip service to nuclear energy, tanking more than 1,000 jobs and 25 percent of New York City’s emission-free power by shutting down the state’s most powerful plant a few years back. Despite the hostility, nuclear energy still quietly provides 25 percent of the state’s electricity, the most of any of New York’s clean-energy sources.
Most of all, though, pushing New Yorkers’ heating to the grid — wherever that power comes from — is reckless in a state known for its winter storms and deadly power outages. Eighty-five percent of homes in the state heat with natural gas, propane, or fuel oil and would need to retrofit with options such as heat pumps to change that, while heat pumps cost more to install, and often to operate, than traditional furnaces. While heat pumps are extremely energy-efficient, gaining them favor with climate-focused supporters, they can struggle when they’re needed most in extreme cold, and they don’t work without electricity. During the Christmas 2022 blizzard that left more than 40 people dead, some residents lost power for more than four days due to downed power lines and the failures of two National Grid power substations, a blunder that destroyed many New Yorkers’ confidence in their electric grid.
A truly market-based solution would allow renewables to compete on equal footing with natural gas, not force New Yorkers to a grid that can’t compete with their existing energy sources on price or reliability. Governor Hochul might expect New Yorkers to warm up to pro-climate energy policy, but she won’t achieve it by leaving her constituents out in the cold.