Subject: NY Action to Reduce CO2 Emissions
From: [email-masked]
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Date: Tue, 28 Aug 2001 15:19:49 -0700 (PDT)

FYI only -  

Please see some preliminary information on proposals in New York State to reduce carbon dioxide emissions.

I am awaiting more information from Suffolk County and more information on which entities this would impact as well as the scale of the reductions.  

Please let me know if you have any questions.

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Analysis of New York Legislation and Action on Carbon Regulation

Background

Government interest in addressing local air pollution and global warming has led to several initiatives in New York to reduce carbon dioxide emissions (CO2).  CO2 is a greenhouse gas that contributes to global climate change.  In the absence of a national U.S. approach to reduce greenhouse gas emissions, several states and municipalities, mostly in the Northeast, have passed legislation or initiated programs aimed at reducing greenhouse gas emissions.  Currently, the U.S. Congress and the Bush Administration are considering domestic plans to address climate change.  However, in contrast to statements made during the presidential campaign, President Bush has said that he would not support mandatory regulation of CO2 at power plants under federal programs to regulate multiple pollutants (NOx, SO2 and mercury) or to combat climate change.  Several moderate and Northeastern Republicans as well as many Democrats support inclusion of CO2 in multipollutant plans.  The U.S. Senate will likely consider climate change legislation and could consider multipollutant legislation before the end of the year.  Hearings are underway, and several bills have been introduced, but the timing on Senate floor consideration is uncertain.  The U.S. House of Representatives is not moving as fast on either issue, making the adoption of a national climate change plan or new federal regulations related to greenhouse gas emissions at least a year or, more likely, several years away. 

Suffolk County Legislation to Reduce CO2 Emissions from Power Plants

In late July, Suffolk County Executive Robert Gaffney signed legislation to regulate CO2 emissions from electric generating units and steam generating units in Suffolk County with a capacity of more than 25 megawatts.  This is the first of such measures adopted in NY state and will go into effect in March 2002.  Quarterly reporting is required, and Suffolk's Division of the Environment will issue rules by October 1, 2001.

The initial allowable emission rate would be 1,800 pounds of CO2 per MWh. In each subsequent year, the rate would be reduced by 1% for each 100 MW of new generating capacity added in the county, until a 20% reduction has been achieved. Power plant owners could comply by upgrading equipment, switching from oil to gas, purchasing CO2 credits, or investing in energy efficiency or renewables. If they failed to comply, plant owners would be fined $ 2 per ton of CO2 above the limits in the first year, and $ 3/ton in following years. 

Most of the plants on Long Island were built by Long Island Lighting and acquired in 1998 by KeySpan Energy when LILCO merged the generation and gas portions of its business with Brooklyn Union Gas to form KeySpan.  KeySpan has about 2,880 MW in Suffolk County, including two big steam stations and some combustion turbines.  Some say that KeySpan could meet the target by re-powering its steam plants to combined cycle.  However, according to KeySpan that could require coming off line for up to a year, which in Suffolk's tight energy market would be disrupting.  According to the County, there are several new natural gas merchant plants under development that would also be required to meet the standard.  Industry met with the County officials and substantial revisions to the legislation were made.  

Emissions trading is permitted, and press reports indicate that credits can be generated inside or outside of Suffolk County.  I am looking to confirm this, as initial drafts of the bill stated that credits must be generated in Suffolk County.  Rules for quantifying emissions credits have not yet been set.

Issues for Enron:  

Will this have an impact on long term power contracts in Suffolk County?
Does EES have customers in Suffolk County that could generate credits under the program?
If credits can be generated by uncapped sources or sources outside of Suffolk County, does Enron have credits to sell?

New York State Assembly Multipollutant Bill

In late June, the New York Assembly passed a bill that would regulate emissions of NOx, SO2, and CO2 from electric generators of 15 MW capacity or larger. The bill requires the Department of Environmental Conservation (DEC) to adopt regulations implementing reductions in emissions of CO2 by January 1, 2002 and requires the DEC to establish a cap on total emissions of CO2, equivalent to 1990 emission levels, by January 1, 2007. 

The State Senate is also considering multipollutant legislation, but is not expected to pass companion legislation.  Consensus does not exist in the Senate on regulation of CO2.

Further, observers feel that the crafters are not fully aware of the implications of these bills, increasing the likelihood that they will not move further anytime soon.

Governor's Climate Change Task Force

In early June, NY Governor George Pataki today announced the formation of a Greenhouse Gas Task Force to develop policy recommendations for greenhouse gas emissions and global warming. The Task Force is comprised of representatives from the business community, environmental organizations, state agencies, and universities. 

Pataki has been outspoken on calling on the federal government to take action on multipollutant plans, and has encouraged the inclusion of CO2.   

The Task Force will report back to Governor Pataki with specific policy recommendations on or before November 15, 2001.  The recommendation will be considered for inclusion in a draft state energy plan to be completed in December 2001. A final report from the Task Force is due by March 2002, and the final energy plan will be released in the Spring of 2002.

The Task Force is just getting underway, and its members have divergent views on whether to regulate CO2.  Two subgroups exist, one that deals with registries and trading (brokers, marketers, some NGOS and industry) and the other deals with power plants (mostly power generators).  

At this time, the power plant group tends to oppose mandatory CO2 regulation, while the registry and trading subgroup is more supportive of it.
 
NYC Council Proposal to Reduce CO2 Emissions

The NY City Council is considering legislation to regulate CO2 as well.  Similar in some fashion to the Suffolk County bill, it would require power generators greater than 25 MW to reduce CO2, eventually leading to a 20% reduction from 1999 levels.  

The regulation would apply to units operating in 1997-1999.  Newer units will not be part of the overall reduction, but must meet emission rates. A trading program would be possible and there is a fine of $3 for every ton above the allowed emission rates. 

Trading is permitted, and credits could be generated from energy efficiency, renewables, fuel switching, etc. from other entities in the City.  

There is fairly wide support for this legislation and despite an election this fall that will result is significant turn-over in Council members, observers feel that the legislation will pass in the next year (if not this fall).

Please see the following attachments:

Copy of the NY Council draft bill:

Governor Pataki Press Release on Task Force

Lisa Jacobson
Enron
Manager, Environmental Strategies
1775 Eye Street, NW
Suite 800
Washington, DC 20006

Phone: +(202) 466-9176
Fax: +(202) 331-4717