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November 2, 2020

NYSDEC Releases Proposed Guidance Establishing Social Value of Greenhouse Gas Emissions

On October 28, 2020, the New York State Department of Environmental Conservation (NYSDEC) released a proposed guidance document titled “Establishing a Value of Carbon—Guidelines for Use by State Agencies.” In its guidance, NYSDEC addresses not only carbon dioxide but five other greenhouse gases, including methane and nitrous oxide. This guidance document comes as one of many requirements set forth in the Climate Leadership and Community Protection Act (CLCPA) for the state to reach its goal of net zero greenhouse emissions by 2050.

As part of CLCPA §75-0113, NYSDEC is required to establish a value of greenhouse gas emissions for use by state agencies by January 1, 2021. The purpose of this is to aid state entities in decision making by establishing a monetary value of greenhouse gas emission reductions or increases that reflects global societal impacts, not just impacts within the state. It is important to note the guidance does not establish a requirement for an economic cost, compliance cost, or fee on any entity; to do so would require a separate state action.  

Under the CLCPA, NYSDEC was directed to consider two approaches for a state agency to establish a value of carbon: a damages-based approach based on the monetary cost of damages that would result from an incremental increase in emissions, known as the social cost of carbon, and the marginal abatement cost, which establishes a value of carbon in relation to a specific emissions reduction goal. In the guidance, NYSDEC recommends the use of the damage-based approach for several reasons, one of which is that it’s the method established in 2016 and previously used in the cost-benefit analyses required as part of regulatory actions by the federal government.. However, state entities are authorized to use alternative methods for establishing the value of emissions.

Based on illustrations of the damages-based approach set forth in the guidance, in 2020, the social cost of emitting a ton of carbon dioxide is between $53 and $421, a ton of methane is between $1,527 and $6,578, and a ton of nitrous oxide is between $19,084 and $140,766. These estimates depend on the discount rate utilized. NYSDEC specifically recommends that state entities provide an assessment based on a range of discount rates from 1 to 3 percent to represent the range of potential impacts to society or, alternatively, using only a central value that is estimated at the 2 or 2.5 percent discount rate. NYSDEC is specifically seeking public input on whether the central value should be set at the 2 or 2.5 percent discount rate.

NYSDEC further recommends that:

  1. The full scope of the emission sources that are subject to the CLCPA should be considered whenever possible.
  2. Although the value of carbon is most frequently applied only to carbon dioxide, all relevant greenhouse gases should be assessed.
  3. The value of carbon should be considered as part of a full assessment of the impacts described within the CLCPA, including to disadvantaged communities as well as to public health and the environment, per the State Environmental Quality Review Act.
  4. Careful consideration should be applied when combining different values of carbon and applying the net total to the same marginal ton of emissions, as they may represent contradictory or redundant valuations, such as a global damages estimate versus a market-based allowance price.

This guidance document, as an agency rulemaking action, is subject to public comment. Comments are requested by November 27, 2020, via email at climateact@dec.ny.gov. Our team at Barclay Damon will continue to monitor these and other developments regarding the CLCPA.

If you have any questions regarding the content of this alert, please contact Brenda Colella, Regulatory Practice Group leader, at bcolella@barclaydamon.com; Yvonne Hennessey, Environmental Practice Area chair, at yhennessey@barclaydamon.com; Ekin Senlet, Regulatory Practice Area co-chair, at esenlet@barclaydamon.com; Danielle Mettler-LaFeir, partner, at dmettler@barclaydamon.com; Angela Sicker, associate, at asicker@barclaydamon.com; or Emma Marshall, law clerk, at emarshall@barclaydamon.com.

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