A Mid-Atlantic Update: New Jersey and New York Move Ahead on Aggressive Carbon Reduction Programs

Written on: February 20, 2024

Author: Joe Uglietto
As Massachusetts and Vermont get ever closer to the launch of their Clean Heat Standards, it’s easy to forget that other states are working on programs that aim to accomplish the same goals. What we’ve said all along is coming to pass, that as one state adopts a program, the likelihood that other states will follow only increases. This is an industry-wide issue that all dealers will eventually be required to be prepared for. In this article of Renewable Energy Insights, we’ll take a look at what’s happening in the Mid-Atlantic States, specifically in New Jersey and New York.

The Garden State

Since the start of New Jersey’s most recent legislative session, two “copycat” bills were introduced that closely mirror similar legislation in other states. On January 29th, S2425 was introduced. This Low-Carbon Transportation Fuel Standard Bill is based heavily on California, Oregon, and Washington State legislation, and regulates the carbon intensity of transportation fuels (both diesel fuel and gasoline). New Jersey’s proposed legislation sets an emissions reduction target for the transportation sector of 10% below 1990 levels by 2030.

Just a few days later, A3374 was introduced in the State Assembly. This piece of legislation would establish a Clean Heat Standard similar to the early drafts of the Vermont and Massachusetts Clean Heat Standards. It places a compliance obligation on heating oil and propane retailers, natural gas utilities, and electric utilities, requiring the obligated parties to reduce the carbon intensity of the heating fuel that they sell or sell less of it. If they do not, they will be required to purchase credits in an open market.

The significant concern in New Jersey – as it has been in states with similar programs – is these bills will substantially increase the cost of energy and transportation for consumers in New Jersey.

The Empire State

New York’s Cap-and-Invest Program is in the rulemaking process and the program details are still being developed, but new design aspects could hurt businesses and obstruct legitimate carbon reduction.

The “Cap-and-Invest” program is an economy wide cap on emissions, with the goal of reducing emissions across all sectors in New York. This type of program holds auctions, where companies must purchase allowances –where an allowance is measured in metric tons of carbon dioxide – to continue their business operations. Recently, NYSERDA introduced an additional auction to be held towards the end of each compliance year. This auction will allow obligated parties to purchase additional allowances if necessary to meet compliance. As of now, there will not be a set number of allowances that will be auctioned off and all allowances that are demanded will be supplied. Conceivably, a company could decide not to reduce emissions at all and simply continue to buy allowances to remain in compliance. If this change is included in the final regulation, it would essentially turn what was ostensibly a program to reduce emissions into a program that would serve as a cost increase on businesses with no certainty regarding the emissions reductions it would achieve.

We can expect 2024 to be an extremely active year in terms of new legislation, new rules to developing programs and the movement towards the implementation dates on Vermont and Massachusetts’ Clean Heat Standards. Diversified Energy Specialists will continue to keep retailers, wholesalers, and industry stakeholders abreast of the various regulatory programs and their rule-making processes in the weeks and months ahead. If you’d like to join our email list to receive our updates, email me at joe@diversifiedenergyspecialists.com.

Renewable Energy Insights is a regular column by Joe Uglietto, president of Diversified Energy Specialists, a leader in the renewable energy markets and consultant to the industry with a focus around emissions reductions and renewable energy innovation.