Cap-and-Invest Rule

Developing New York State’s Economywide
Cap-and-Invest Regulations


Cap-and-Invest Rulemaking (6 NYCRR Part 252)


Public input will inform development of the regulations to implement New York’s Cap-and-Invest Program, including the mandatory reporting of emissions under that program.  As a starting point, DEC and NYSERDA invite the public to review the regulation governing California’s economywide program [PDF] (opens in new window) as well as those operating in Quebec (opens in new window) and Washington State [PDF] (opens in new window). DEC and NYSERDA are interested in hearing what elements of those regulations would work well and what improvements or changes may best serve New York.

Meeting the Climate Act Limit on Greenhouse Gas Emissions (GHG) with a Cap-and-Invest Solution 

Invitation to Provide Comments on the development of the regulations.

Compilation of questions posed from the First Phase of Pre-Proposal Outreach. [PDF]

DEC and NYSERDA have developed a template document [PDF] to assist commenters in providing feedback on these topics. 

Submit Comments (opens in new window)

DEC and NYSERDA will review comments and further develop materials to define New York’s program. Notices will be sent to the distribution list when the materials are posted.

Applicability and Thresholds - Defines which sources and at what emissions thresholds sources are covered by the regulations: who must report emissions; defines what entities must obtain and surrender allowances equal to their GHG emissions; establishes obligated and non-obligated sources.

  • The concept of obligated and non-obligated sources is being considered for the program. Obligated sources will be identified by regulation and each obligated source will be required to provide allowances equal to its GHG emissions. Non-obligated sources contribute to GHG emissions and must be accounted for in the overall cap, but allowances to cover GHG emissions from non-obligated sources will be retired under the program.
    • Obligated sources could include the electricity sector, industrial sources, other stationary sources such as large refrigerant utilization facilities, waste sector, and transportation and heating fuel suppliers sector
      • What should be considered when establishing which source categories should be obligated?
      • What should be considered when establishing emission factors for upstream out of state fossil fuel emissions?
      • What, if any, special considerations should be given for assigning upstream out of state emissions to obligated sources? Are there any sources of data that New York State should consider in determining obligated sources?
    • Examples of non-obligated sources by category could include aviation and livestock emissions
      • What considerations should be applied to establishing which sectors are non-obligated?
      • How might the regulation clearly represent emissions from non-obligated sources that are difficult to monitor? (e.g., non-fossil fuel agricultural emissions)
    • Compliance thresholds will determine which entities must provide allowances equal to their emissions. Emissions reporting thresholds are covered in the reporting rule.
      • What should be considered when establishing thresholds for obligated emission sources?
      • How significant is consistency of the threshold between emission source categories?

Allowance Allocation - Defines how allowances are made available: auctions, set asides, and free allocations.

  • How should allowances be allocated, including considerations for no-cost or fixed price allowances? 

Program Ambition - Defines the cap and the allowance budget for how many allowances will be available year-by-year to reach the Climate Act GHG limits.

  • Cap includes economywide GHG emissions from obligated sources and non-obligated sources. The cap must set a starting point and downward trajectory to reach the GHG emission limits established in the Climate Act
    • How should the starting point for the cap be set? For example, based on current emissions, or surrogate?
    • How should the cap decline? Should the cap decline at a fixed rate or take steps?
  • Allowance budget - The budget is allowances available for obligated sources. A set-aside account will hold allowances to be retired to account for GHG emissions from non-obligated sources.
    • What should be considered when designing the set-aside account and budget so that the program is consistent with the NYS GHG annual inventory?
    • Are there specific considerations which would allow flexibility in covering the not-obligated emissions and establishing the allowance budget?

Program Stability Mechanisms - Defines the automatic and planned program adjustments to moderate costs and sustain program ambition if emissions are higher or lower than anticipated.

Defines how automatic and planned adjustments to the program will maintain stability in terms of costs and GHG emission reductions. A Cost Containment Reserve (CCR), Emission Containment Reserve (ECR), Auction Reserve Price (RP) and bank adjustments are being considered for this program.

  • Feedback on the use of a CCR, ECR, and RP is requested.
  • What should be considered when establishing thresholds, allowance amounts, and other factors?
  • How should the CCR be designed to respond to higher than anticipated prices? Should allowances be pulled from future budget years? 
  • How should the ECR be designed to respond to opportunities for reducing emissions further due to lower costs than anticipated?
  • What factors should be considered in setting an Auction Reserve Price?
  • What should be considered regarding banking and bank adjustments?

Compliance, Enforcement and Penalties - Defines compliance periods and types of enforcement mechanisms.

  • How often should obligated sources surrender allowances? If multi-year compliance periods are used, what percentage of allowances should be surrendered in an interim year?
  • How many years should a compliance period cover?
  • What amount of time should be given between reporting of emissions and surrender of allowances?
  • What approaches to enforcement and what types of compliance should be considered? How could assignment of multiple types of compliance mechanisms (e.g. surrender additional allowances and monetary penalties) be structured?
  • How should the potential for market manipulation be addressed?
Read the Compilation of questions posed from the First Phase of Pre-Proposal Outreach webinar, held June 2023. [PDF].