Air Quality Impacts of New York State Cap-Trade-and-Invest Design

The New York Department of Environmental Conservation (DEC), the New York State Energy Research and Development Authority (NYSERDA), and the New York Governor are currently finalizing draft regulations that will determine how an economy-wide emissions cap-and-trade system (also referred to as “NYCI” by the State) will work in New York State. The regulations will influence how much and how equitably greenhouse gas (GHG) and copollutant emissions are reduced. Advocates, such as New York City Environmental Justice Alliance and New York Renews, referring to the program as “cap-trade-and-invest,” have been calling for guardrails in the program to make sure the State complies with the Climate Leadership and Community Protection Act (or the “Climate Act”), and that disadvantaged communities (DACs) do not experience more air pollution or slower, lower rates of air quality improvement compared to non-DACs. Advocacy groups have also been calling for regulations that will bolster the amount of program revenue for climate investment and action.Our research to date has analyzed different cap-trade-and-invest policy designs and their corresponding GHG emissions, copollutant emissions, and household cost impacts. Previous work conducted by Resources for the Future (RFF) and New York City Environmental Justice Alliance (NYC-EJA), Krupnick et al. (2024) and Robertson et al. (2024), found that the cap-trade-and-invest program can reduce GHG and copollutant emissions. The research presented in this issue brief shows that guardrails, such as restricted trading, facility-specific caps, and obligating the electricity sector improve air quality for New Yorkers, especially those in DACs. Earlier reports offer more detail on overall emissions changes across the state and generator-level emissions changes in the power sector. Separate air quality modeling from the emissions modeling was needed because the relationship between direct emissions and local air quality is highly affected by complex chemical processes and atmospheric conditions.In this report, we leverage the emissions findings reported in Krupnick et al. (2024) and Robertson et al. (2024) to conduct a robust air quality analysis using a state-of-the-art atmospheric model initially used in Krupnick et al. (2023). Emissions changes in sulfur dioxide, nitrous oxides, and direct PM2.5 are used to estimate local PM2.5 concentrations at a 4km2 grid resolution. We focus on PM2.5 concentrations because this pollutant is tied directly to health and wellness outcomes, and small changes in concentrations can lead to meaningful impacts on mortality and chronic disease (e.g., asthma) rates (Di et al. 2017; Krewski et al. 2009; Lepuele et al. 2012).This analysis compares tract-level air quality estimates for four policy cases:The Business as Usual (BAU) case, which includes the NY Clean Energy Standard, the Regional Greenhouse Gas Initiative (RGGI), Inflation Reduction Act (IRA) policies, renewable generation mandates, zero emissions vehicle mandates, and other existing policies. In this case, there is no cap-trade-and-invest program.The Electricity not Obligated Case (ENOC), where cap-trade-and-invest is implemented in New York State, but the electricity sector is not covered. Power sector facilities in the state are still required to purchase allowances from the RGGI market.The Full Trading Case (FTC), where cap-trade-and-invest is implemented, electricity is covered under cap-trade-and-invest, and there is full trading across sectors.The Restricted Trading Case (RTC), where cap-trade-and-invest is implemented, electricity is covered under cap-trade-and-invest, and there are sector-specific caps and facility-specific caps on power generators that constrain trading.Our air quality analysis reveals:Each modeled cap-trade-and-invest policy design delivers air quality benefits across a variety of community types in New York State. The greatest air quality improvements for disadvantaged communities and all other communities are delivered by the RTC, and the smallest benefits are delivered by the ENOC.The greatest average air quality improvements in all cases are found in disadvantaged communities, particularly those with high historic air pollution, high vulnerability scores, or high environmental burden scores on the state’s disadvantaged community index.The greatest air quality improvements in all cases are in New York City.In each policy case, a small fraction of tracts experience smaller air quality improvements than those expected in the BAU. The ENOC has the greatest number of tracts with these smaller improvements, while the FTC has the least.