Senate Bill S3747

                                 BILL NUMBER:  S3747

 TITLE OF BILL :  An act to amend the public service law, in relation
to establishment of a carbon leakage prevention program

 PURPOSE OF THE BILL :

The purpose of this bill is to direct the public service commission to
establish a measure to reduce carbon leakage associated with the Clean
Energy Standard mandate.

 SUMMARY OF PROVISIONS :

Section 2 of the legislation provides that electric load serving
entities can offer to business customers' generation supply that is
exempt from their obligation under the Clean Energy Standard.

 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 :

2016 - S. 7886 - Rules Committee.

 FISCAL IMPLICATIONS :

The bill would have no impact on the State budget.

 EFFECTIVE DATE :
The bill would be effective immediately.