NYSERDA and DEC propose uses for the NYCI Climate Investment Account

The New York State Energy Research and Development Authority (NYSERDA), along with the Department of Environmental Conservation (DEC), held a webinar on Thursday, 15 August, on the use of proceeds from the climate investment account under the anticipated New York Cap and Invest (NYCI) program, which is set to begin in 2025. The NYCI design includes a plan for investing the proceeds from the program, known as the Climate Action Fund. The Climate Action Fund will be comprised of 3 accounts.

• 67% to the Climate Investment Account, which will use the funds to support the state's broader energy transition.
• 30% to the Consumer Climate Account, designed to deliver proceeds to New Yorkers to mitigate additional consumer costs.
• 3% to the Industrial Small Business Climate Action Account to support small industrial businesses against incurred costs.

The Climate Investment Account, making up the most significant portion of the Climate Action Fund, must ensure that the funding allocation aligns with the requirements set out by the State’s Scoping Plan and has the goal of investing 40% of the proceeds to support Disadvantaged Communities (DACs). The webinar emphasized that the finalization of allocation from this fund is through the State Budget process and not necessarily part of the NYCI program design process.

The webinar introduced a draft framework on the use of proceeds from this Climate Investment Account, and NYSERDA and DEC are soliciting public input on this framework by 30 September 2024. While the final decision rests with the State Budget Process, the framework aligns the use of proceeds with the 5 NYCI objectives, which are funding a sustainable future, investing in DACs, affordability, creating jobs and preserving competitiveness, and climate leadership.

The sectors proposed in the framework are as follows, and not in order of priority:

• Clean Transportation, Transit, and Mobility: This will focus on zero-emission vehicles, non-road equipment, electric vehicle charging, and hydrogen fueling infrastructure. An emphasis will be placed on the medium and heavy-duty sectors and equipment, as these are harder-to-abate sectors and impose disproportionately higher health impacts on DACs.
• Electric Grid Modernization: This will drive innovation and technological developments to maintain grid reliability and resiliency.
• Low-Carbon Buildings: This will consider investments in electrification, weatherization, and building retrofits, specifically considering affordable housing units. They will also look into electrification and thermal efficiency upgrades in commercial and public buildings, with particular attention given to DACs, small businesses, and under-resourced schools.
• Low-Carbon Industry: This will allocate funding for energy efficiency, electrification, alternative fuels, and feedstocks with emphasis on DACs.
• Agriculture and Forestry: This will accelerate developments in carbon sequestration and improved forestry and farmland management, with emphasis given to historically underrepresented farmers.
• Waste: This sector will focus on infrastructure for waste and recycling collection and processing, landfill gas capture, methane reduction, and improved refrigerant disposal.

The final three sectors are cross-functional and focus on societal and community supports:

• Workforce Development and Just Transition
• Economic development in Low-Carbon Industries to identify sites in DACs with strong potential for revitalization
• Community-Directed Projects and Capacity Building in DACs

Slides and recordings from the webinar are available here. Comments can be submitted under the Submit Comments section of the Use of Proceeds webpage.

The presenters stated that all consideration was focused on how this fund can best support DACs, as evident in the details above. Given the recent scrutiny in other North American Cap and Invest programs, the NYCI regulators may be taking significant measures to ensure equity in the program design and avoid unintended costs or health impacts. Washington’s Cap and Invest faces the threat of repeal in November, with affordability to consumers cited as a primary reason.

The panellists stated that they are still accepting comments on the development of the NYCI regulations themselves, highlighting the practicality of a 2025 start date. While the progress and input for the use of proceeds are not necessarily indicative of progress in NYCI’s implementation, the presenters did state that spending on NYCI proceeds is intended to start in 2025. This indicates that while a final draft has not been published for the program, the regulators are still anticipating a 2025 timeline.

As for the next steps regarding the use of proceeds, they will continue assessing the public input received by 30 September and then will develop a formal investment proposal. After this, it will have to be submitted for the fiscal year 2025-2026 state budget process. Regarding the NYCI program itself, NYSERDA and DEC are still assessing input and developing a proposal based on feedback received from the pre-proposals that occurred earlier this year. The next step is for them to issue a formal regulatory proposal, which will then be subject to another round of feedback before the final regulations are issued.

ClearBlue will continue monitoring the implementation of NYCI and update clients as needed. Please contact our Advisory team if you have any questions.