New York — The New York State Department of Environmental Conservation has finalized guidance to reduce greenhouse gas emissions, placing a central value of carbon dioxide emissions at $125/mt, the agency said, a move that could impact the state's power markets.
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The state's environmental regulator had until Jan. 1 2021, to establish a value of carbon for use by state agencies, as per the Climate Leadership and Community Protection Act, which mandates a carbon-free power system by 2040, among multiple other requirements. It announced the finalized guidance on Dec. 30.
Previous guidance by the New York Public Service Commission set the 2020 gross social cost of carbon at nominal $47.30/st.
The DEC guidance value of $125/mt constitutes an approximate 164% increase from the value used by the PSC to date.
Importantly, the guidance differs from a regulation and "does not propose a carbon price, fee, or compliance obligation," according to a statement from the DEC.
It is a metric that will be "broadly applicable" to all state agencies and authorities to demonstrate the global societal value of actions to reduce GHG emissions, the DEC said.
The DEC specifically recommends that state entities provide an assessment using a central value that is estimated at a 2% discount rate as the primary value for decision making, while also reporting the impacts at 1% and 3% to provide a comprehensive analysis.
This range translates into a 2020 value of carbon dioxide of $53-$421/mt, with a central value of $125/mt, according to the DEC.
Additionally, the DEC provided guidance on other greenhouse gases, specifically placing a 2020 value of methane at $1,527/mt to $6,578/mt, with a central value of $2,782/mt and a value of nitrous oxide at $19,084/mt to $140,766/mt, with a central value of $44,727/mt.
"As part of Governor Cuomo's commitment to implementing the nation-leading Climate Leadership and Community Protection Act, DEC developed the 'value of carbon' metric for State agencies to help reduce climate-altering emissions," DEC Commissioner Basil Seggos said in the statement.
"This important guidance continues to advance Governor Cuomo's nation-leading climate goals and will help inform state agencies' day-to-day decision-making – putting the impacts of climate change front and center and encouraging cost-effective, strategic action to reduce greenhouse gas emissions," Doreen Harris, New York State Energy Research and Development Authority acting president and CEO, said.
The New York Independent System Operator has said it would use the state's social cost of carbon in its plan to price carbon dioxide emissions into the wholesale power price.
The majority of internal power suppliers participating in the wholesale electricity markets would be subject to carbon charges in the wholesale energy market "equal to the product of the applicable carbon price and their point-of-production carbon emissions," according to the NYISO's carbon pricing proposal.
State agencies have yet to indicate whether they support the NYISO's carbon pricing plan.