Establishes the Leakage Prevention Clean Energy Act

Justification

Some projections indicate that the Clean Energy Standard (CES) will result in only a minor increase in the cost of electricity while other projections predict that the CES may have a significant impact on the cost of electricity. What is clear is that the CES and the current New York State energy assessments lead to an increase in the cost of energy, which hurts New York State's economy.

When the price of electricity in New York goes up relative to other locations (states or countries), jobs, investments & businesses either leave or the businesses become uncompetitive. The State must ensure that when New York adopts policies to address GHG locally, they must not lead to carbon leakage, this defeats the GHG reductions and hurts our economy. It should be noted that New York's energy related per capita emissions of 8.8 tons are the lowest of the 50 States and New York leads the nation in having the lowest GHG emissions per unit of economic output, averaging .19 kg per CO2E of emissions per GSP.

The European experience can demonstrate that well-intentioned environmental policies have resulted in higher energy costs, driving carbon leakage and output leakage. The New York Times reported: "The expansion in renewables will probably ensure that Europe will meet its target of reducing greenhouse gases 20 percent from their 1990 levels by 2020. But it has been a disappointment on other levels. For one thing, emissions continue to rise globally. In a sense, Europe is likely to have exported its emissions to places like China, where polluting economic activity continues to increase while the European economy stagnates. "NY Times Dec 26, 2012

Germany and other European nations seeing the issue of carbon leakage have adopted policies to exclude businesses from the costs of their renewable programs. Germany understands that the costs of regulations affect the competitiveness of companies and the overall economic growth in Germany, and that "Energy prices are a key factor for the competiveness of many German companies". Ecofys Group Report July 25th 2015 for the German Ministry of Economic Affairs and Energy

A report analyzing the effect of power prices on German industry competitiveness issued by the Fraunhofer Institute for Systems and Innovation Research, under contract with the German Ministry of Economic Affairs and Energy, found that exemptions from levies and taxes on electricity prices for energy intensive manufacturers were critical to "support the competitiveness of the industry and have positive macroeconomic effects." Put another way, if energy intensive industries had to pay the full levies to fund renewable technologies in Germany via electricity prices, it would have a devastating effect on the German economy. In fact, Germany provides a number of exemptions or other mechanisms to mitigate energy cost for energy.

If New York does not adopt a measure to address carbon leakage, the proposed CES will result in the exportation of New York's CO2 emissions. The Leakage Prevention Clean Energy Act will not reduce the State's commitment to renewable energy, however it will insulate New York State from economic harm.

Prior legislative history

This is a new bill.

Fiscal implications

The bill would have no impact on the State budget.

Effective date

The bill would be effective immediately.