Governor goes for the green

By STEVE BREYMAN

Gov. David Paterson has now alienated every major constituency in New York politics. Given his low public approval rate, the latest misstep—angering environmentalists — is especially notable.

The New York Times reported on March 5 that the governor cut a secret deal with dirty electricity producers last autumn. The governor reportedly agreed to increase the number of free global warming pollution allowances granted power generators under the terms of the Regional Greenhouse Gas Initiative, known as RGGI.

This 10-state compact is designed to moderately lower emissions over time from fossil fuel-fired power plants through a cap-and-trade arrangement. The ceiling on emissions is translated into a fixed number of permits to pollute (the cap), known as allowances. Each allowance authorizes a dirty power plant to emit one ton of carbon dioxide (CO2), the most common greenhouse gas. The invention and auctioning of these allowances created a market, where allowances are bought and sold (the trade).

RGGI is seen by many as a precursor to a national, comprehensive cap and trade system. It took years of delicate negotiations, compromises and much hard work for the 10 states to bring RGGI into being on Jan. 1. Paterson's apparent decision invites similar tinkering from the other states, thus endangering the overall program.

The theory behind the scheme is that dirty power producers will move to generate clean energy — solar, wind, geothermal, etc. — so as to avoid paying for allowances. Those firms that make the transition quickly, and pollute less, will have extra allowances to sell to those that pollute more. The auctions for the allowances have already generated tens of millions of dollars for the RGGI states. RGGI rules require the states to plow the receipts back into conservation, energy efficiency and green power programs. To give allowances away for free is to undermine the essence of the program.

The power producers' lobby in Albany claims that generators with long-term utility contracts are hurt by RGGI as they were unable to factor the cost of the pollution allowances into the contracts.

This seems an uncompelling argument as long-term contracts generally protect generators from price volatility, and because the New York State Public Service Commission generally rubber stamps requests for rate hikes to protect companies' bottom lines. But the argument apparently carried the day with a governor stumbling from one unpopular move to another.

There is some irony here. First, RGGI was the brain child of Republican Gov. George Pataki. Environmentalists are perplexed that a Democratic administration appears incapable of implementing the decidedly non-radical policy of a conservative predecessor. Second, RGGI is but a very mild step in the right direction to mitigate climate instability. It only directly affects dirty power producers, not the rest of us businesses and individuals who also emit global warming pollution, and it takes several years to lower the cap.

Even before RGGI went into effect, some environmentalists complained that it was far too timid a step to confront the potentially catastrophic effects on New York of a steadily warming climate. They prefer carbon taxes and other more economically efficient tools. Yet, given its failure thus far to enact a climate action plan of any sort — good action plans can be found in a number of other states — RGGI remains the Paterson administration's main climate change mitigation policy.

Now, what critical environmentalists considered an inadequate program before the governor's meeting with the lobbyists may be even less up to the task of protecting New Yorkers from the growing threat of climate chaos.

According to the Times, the dirty power producers have donated tens of thousands of dollars to Paterson's 2010 election campaign. The generators stand to save as much as $17 million dollars from the governor's decision. Surely Paterson is not simply rewarding an important campaign contributor?

Either way, the governor will need the money more than ever as environmentalists across the state reconsider their support for him.

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ENVIRONMENTAL ADVOCATES OF NEW YORK * NATURAL RESOURCES DEFENSE COUNCIL * PACE ENERGY & CLIMATE CENTER * THE COMMONS

March 13, 2009
PATERSON ADMINISTRATION TELLS ENVIRONMENTAL & ENERGY GROUPS THERE IS NO AGREEMENT TO RE-OPEN CLIMATE PLAN REGULATIONS

(ALBANY, NY)—At a meeting with New York Governor David Paterson’s top staff on Thursday, environmental and energy groups were told the administration has not made a deal with power producers to re-open regulations designed to guide the state’s participation in the Regional Greenhouse Gas Initiative (RGGI), a 10-state plan to reduce global warming pollution. In the meeting with Larry Schwartz, Secretary to the Governor, and Dennis Whalen, the Director of State Operations, the groups were told the Governor has made no commitment to reopen the RGGI rule at this time.

“We respect Governor Paterson and his staff. The Governor has generally been a strong supporter of environmental and consumer issues—and we want him to remain that way,” said James Van Nostrand, Pace Energy and Climate Center. “We hope that upon further review the Governor and his staff will see that New York jobs and the New York economy will suffer if he requires consumers to subsidize more free allowances for electric generators.”

“Those who stand to lose and possibly pack their bags and move their jobs outside of the region are more likely the electricity consumers in New York who will be losing the value of the allowances, not the electric generating companies who can move neither their generating plants nor their New York customers,” said Larry DeWitt, The Commons. “Simply stated, the issue is whether these valuable allowances will be invested to reduce the long-term cost of energy for New York businesses and individuals or, instead be given away free to largely out-of-state shareholders of the electric generators to increase their net income.”

“This is the Governor’s choice and we trust he will make a wise one. Were he to look for ways to improve the rule, he should recognize that there are likely a variety of ways that different parties might want to do so,” said Luis Martinez, Natural Resources Defense Council. “The four-year, hotly contested rule making was brought to a close just months ago, and New York only recently participated in its first auction. It seems advisable to let this arduously constructed regulation run for a few years, not a few months, and gain some real experience before opening the whole thing up to the many contesting parties all over again. Such a ‘revisit and review,’ after a suitable period of time, is built in to the current rule and should stand.”

“At the center of this controversy is whether power companies should receive carbon dioxide pollution permits for free and if so, how many,” said Rob Moore, Environmental Advocates of New York. “By auctioning nearly 100 percent of carbon dioxide pollution permits, the Regional Greenhouse Gas Initiative raises funds that can be re-invested in efforts that create jobs and further reduce global warming pollution, rather than lining the pockets of power producers.”

The RGGI is the nation’s first enforceable plan to reduce global warming emissions from power plants. The initiative is a critical piece of the Northeast’s overall strategy to address climate change, which includes energy conservation and generating a greater portion of energy from clean, renewable sources. Late last year, final rules issued by New York’s Department of Environmental Conservation and New York Energy Research & Development Authority cleared the way to participate in a December auction of carbon dioxide (CO2) pollution permits. The RGGI regulatory framework will hold CO2 emissions constant through 2014, and then gradually reduce those levels.
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GOING, GOING, GONE. NEW YORK'S ENVIRONMENTAL TRUST FUND

According to our review of documents obtained through Freedom of Information Law (FOIL) requests, New York’s Environmental Protection Fund is going broke. Current funding requests will zero out the Fund before the end of the State Fiscal Year on March 31st. Now Governor Paterson and Budget Director Laura Anglin must decide if they will ”sweep” additional monies from the Fund by the end of March. Environmental Advocates of New York has sent a letter to the Governor and Budget Director asking them to keep the broom in the closet.

As things stand, the state has written checks that New York’s air, water and land cannot cash. Our review of state agency documents shows that approved—and those pending approval—contract extensions, new contracts, or contract modifications submitted by state agencies to the Division of the Budget total nearly $40 million for the current state fiscal year. The combination of recent authorization to sweep $50 million from the Environmental Protection Fund and anticipated disbursements will leave it insolvent.

You do the math:

Fund Actual Closing Balance as of January 2009 $24,358,000

Estimated Additional Deposits to the Fund in February & March $48,000,000

Total Projects -$39,300,996

Latest Sweep -$50,000,000

Estimated Closing Balance for State Fiscal Year 2009-10 -$16,942,996

Delayed state payments or failure to honor New York State’s commitments will force municipalities, nonprofit organizations and others to fire employees, thus exacerbating our economic woes. But a lot of groups are reluctant to talk about their money woes—for fear they won’t see a check at all.

The Environmental Protection Fund was created in 1993 as a dedicated trust fund to preserve New York’s natural and historic heritage. Currently, the Fund is supported by revenue from the state’s Real Estate Transfer Tax, which has been tested in previous economic downturns and remains a source of increased investment in environmental programs and protection.

What happens now? Clearly, these sweeps need to stop. And there’s another one planned in next year’s budget ($45 million). This week we expect to have a better idea of how the State Legislature will modify the Governor’s budget plans. We’ll be the first to let you know where things shake out.

It’s not too late to act. Click here to tell Governor Paterson and Budget Director Anglin to protect New York’s environmental trust fund.

BACKROOM DEAL JEOPARDIZES NY ACTION ON CLIMATE

In a move that has environmental and energy groups up in arms, Governor Paterson has made some promises to polluters that we don’t want him to keep—promises to weaken New York’s program related to the nation’s first real plan to cut global warming pollution, the Regional Greenhouse Gas Initiative, or “RGGI.”

According to the New York Times, the Governor made a deal with the Independent Power Producers of New York to rewrite the rule to meet power producers’ demands. Apparently, these polluters didn’t feel like they had enough opportunities to contribute to the rule-making during the three+ years of public debate and discussion that preceded its adoption.

Lots of questions now need to be answered and this deal smells worse than the stuff that comes out of a smokestack. We’re doing everything in our power to keep the RGGI on track and we’ll be in touch soon with an update.