Compare ETS

New York’s Cap-and-Invest Program (NYCI) is a comprehensive initiative aimed at reducing GHG emissions across the state’s economy while maintaining economic stability and ensuring equitable investments. The program is anchored in the “Climate Leadership and Community Protection Act” of 2019, which requires a 40% reduction in GHG emissions by 2030, compared with 1990 levels, and at least an 85% reduction by 2050. The NYCI program will cover all emitting sectors under a statewide cap. The cap will decrease over time, with the caps for 2030 and 2050 corresponding to statewide GHG emission limits.

Various state agencies are developing the program rules, including the Department of Environmental Conservation (DEC) and the New York State Energy Research and Development Authority (NYSERDA). The pre-proposal outline, published in December 2023, describes the three main regulatory components:

• The “Mandatory Greenhouse Gas Reporting Program Rule” (GHG Reporting Rule), for the GHG emissions sources that will be required to be reported to DEC as well as the establishment of a GHG registry and reporting system.
• The “Cap-and-invest Rule”, which will establish the program’s compliance periods, and the cap’s trajectory. The anticipated cap will incorporate both obligated and non-obligated GHG emissions sources. The rule will establish allowance budgets, compliance obligations and define stability provisions, including cost-containment mechanisms. The rule is also expected to address the treatment of emissions-intensive and trade-exposed (EITE) industries. 
• The “Auction Rule” will describe the operation of allowance auctions. The rules will seek to maintain the integrity of the allowance market by preventing market manipulation and establishing cost containment and program stability mechanisms.

Each of the GHG Reporting Rule and the Cap-and-Invest Rule require a “Regulatory Flexibility Analysis for Small Business and Local Governments” and a “Rural Area Flexibility Analysis”.

Covered sources under consideration are stationary sources, waste sector sources and fuel suppliers in the energy, industrial and product use sectors. Emission sources not subject to compliance obligations will be those from the agriculture and other land use change sectors, as well as non-stationary sources and fuel combustion from aviation and residential wood burning. The electricity sector obligations have not yet been determined, as sources in this sector in New York are currently subject to the Regional Greenhouse Gas Initiative (RGGI). Source categories not subject to allowance compliance obligations, “non-obligated entities”, would be monitored with the purpose of removing these GHG emissions from the statewide cap through the retirement of allowances. The allowance budget will reflect the statewide cap less adjustments for these non-obligated GHG emissions and other potential factors.

Allowances will mostly be allocated through auctioning. However, a direct allocation mechanism for qualifying sources in EITE industries is under consideration, to mitigate the risk of economic and/or carbon leakage. Allowance banking would be allowed, except for the allowances issued in the first compliance period, and offset credits will have no role in the program. NYCI will be designed for the possibility of linkage with other ETSs.

NYSERDA will design, implement, and administer allowance auctions. Auctions would be held at least quarterly, and proceeds would be used in accordance with the Climate Act and relevant laws, with a focus on addressing affordability and investing in emissions reduction strategies and clean energy. At least 30% of the revenues will be directed to a universal Consumer Climate Action Account to mitigate any increased energy prices for households. At least 35%, with a goal of 40%, of the revenues will be directed to investments that benefit disadvantaged communities. NYSERDA and DEC have developed a Climate Affordability Study to consider the best way to distribute the collected revenues from the Consumer Climate Action Account. 

Throughout 2023 and 2024, DEC and NYSERDA conducted stakeholder information sessions and hosted feedback roundtables aimed at engaging the public and stakeholders in the development process and learning from successful emissions reduction programs implemented in other regions. This included stakeholder feedback roundtables on matters of equity and climate justice and on just transition and labor, to ensure that NYCI is an equitable program that reduces GHG emissions and creates green jobs. In September 2024, DEC announced that the Western Climate Initiative (WCI, Inc.) will serve as the market registry, auction, and financial services platform for NYCI. Considerations are ongoing regarding NYCI’s interaction with RGGI.*

* To follow progress, including the release of draft regulations, go to capandinvest.ny.gov