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December 2, 2020

NYSDEC Modifies Regional Greenhouse Gas Initiative Regulations, Reducing the Emissions Cap and Expanding Applicability

On December 1, 2020, the NYS Department of Environmental Conservation (NYSDEC) adopted modifications to its Regional Greenhouse Gas Initiative (RGGI) regulations. RGGI is a multi-state effort that implements a regional cap-and-trade program for power plant emissions. The revised rules continue to reduce the New York State CO2 emission cap through 2030, expand the applicability of RGGI, create a mechanism to address low prices for CO2 emission allowances, and create an adjustment for banked allowances.

RGGI requires fossil-fuel-fired electric generating units to hold allowances equal to their CO2 emissions. NYSDEC is responsible for the implementation of RGGI, and NYS Energy Research and Development Authority (NYSERDA) is responsible for administering periodic auctions for the sale of RGGI allowances. The regulations recently promulgated by NYSDEC implemented the changes to the RGGI model rule and also included additional requirements beyond the model rule. These changes include the incorporation of the following provisions into NYSDEC’s rules:

  • Changes to the CO2 emission cap. In 2021, the regional emissions cap will be 75,147,784 tons, and New York’s budget will be 29,056,270 tons. The regional emission cap will continue to decline by 3 percent per year through 2030. New York’s cap will also continue to decline through 2030, when the state cap will be 21,131,833 tons.
  • Cost containment reserve (CCR) maintained. New York will continue to use a CCR, which is a fixed quantity of allowances (in addition to the cap) that are held in reserve and only made available for sale if the auction price for an allowance exceeds a set price. However, the revised rule modified the CCR trigger price to $13.00, which increases by $1.07 each year.
  • Emissions containment reserve (ECR) established. The ECR represses the sale of allowances if the price drops below a set price. The ECR price for 2021 is $6.00, which increases by $1.07 each year.
  • Offsets categories eliminated. The only offset provisions retained are for avoided methane emissions from manure management operations.
  • Expanded applicability of RGGI. Unlike the revised model rule, which provides that RGGI continues to apply to electric generators with a nameplate capacity of 25 megawatts or greater, NYSDEC’s revised rule expands applicability to include electric generating units with a nameplate capacity of 15 megawatts or greater if the unit resides at a facility that is already subject to RGGI or if the unit resides at a facility where there are two or more units with a nameplate capacity of 15 megawatts or greater.  

NYSERDA, which is responsible for administering periodic auctions for the sale of the emissions allowances and the investment of RGGI auction proceeds, also made complementary changes to its rules. NYSERDA’s modified rules also include a requirement that the investment of RGGI auction proceeds controlled by NYSERDA will comply with the state's Climate Leadership and Community Protection Act by requiring a percentage of clean energy funds to benefit disadvantaged communities or innovative carbon abatement programs.

The RGGI regulations will again be reviewed by NYSDEC in 2021. NYSDEC is considering expanding the applicability of RGGI at that time to include additional emissions sources, including sources that are not electric generators.

If you have any questions regarding the content of this alert, please contact Danielle Mettler-LaFeir, partner, at dmettler@barclaydamon.com; Emma Marshall, law clerk, at emarshall@barclaydamon.com; or another member of the Environmental Practice Area.

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