The bill determines how money generated from the program will be spent but fails to include protective measures for disadvantaged communities, environmentalists warn.

Parts of Cap-and-Invest, a state-wide program that will charge companies for carbon pollution, has made it into New York state’s final budget for the coming year. While the spending bill doesn’t mention it by name, it lays the groundwork for how money generated from the program would be spent going forward.

The language in the bill guarantees that no less than 30 percent of profits will be set aside for a rebate initiative that Gov. Kathy Hochul promised earlier this year would “help cover utility bills, transportation costs, and de-carbonization efforts” for all New Yorkers as the state continues to shift away from the use of fossil fuels to reach its lofty climate goals.

Specifically, 3 percent of the funds will be funneled to reduce “potential increased costs” small businesses face while transitioning to clean energy, while the remaining two-thirds will go to a climate investment fund that would help address climate change mitigation efforts. 

Environmentalists celebrated the move, along with other climate policies that made it into the sprawling $229 billion state budget, including the All Electric Buildings Act, which will ban gas hookups in new building construction (the city passed a similar measure in 2021), and another bill that requires the state’s power authority to greatly expand its use of renewable energy sources, including via publicly-owned projects.

On Cap-and-Invest, supporters were glad to see the budget confirm some components of the proposal, but warned that important measures to protect disadvantaged communities were left out, and that details on how the program will actually be designed are yet to be determined.

“The final budget laid out the general framework for what to do with the revenue [generated from the program],” said Liz Moran, an environmental policy advocate at EarthJustice. “But we still don’t know exactly what this program is going to look like until a rulemaking process begins.”

A Cap-and-Invest program generates revenue by establishing a limit on how much companies can pollute. That limit gets stricter over time until New York’s greenhouse gas emissions are brought down by at least 85 percent by 2050, in accordance with the state’s climate law.

Companies that exceed their carbon emissions limits will have to purchase a permit to keep operating above that threshold. Money earned from that sale will be used by the state to fight climate change. And the budget guarantees that those investments will include “measures which prioritize disadvantaged communities” as they are required to receive at least 35 percent of overall benefit by law.

Still, environmentalists warn that the bill doesn’t do enough to guarantee pollution will be reduced in under-served communities that are historically more susceptible to environmental injustice.

“What the bill left [out], which we think is really important, is the inclusion of strong guardrails to protect disadvantaged communities,” said Alex DeGolia, director of state legislative and regulatory affairs at the non-profit Environmental Defense Fund.

Environmental groups have pushed for one “guardrail” in particular: establishing a limit on how much companies can trade and sell the allowances they acquire from the state.

In most Cap-and-Invest programs, a company that didn’t go above their emissions cap and ended up not using its permit could trade or sell its allowance to a company who did surpass their threshold. Environmentalists argue that companies located inside a disadvantaged community could theoretically just acquire an allowance from another company and avoid curtailing emissions in hot spots where residents are already exposed to increased pollution and its negative health effects.

To guarantee that disadvantaged communities don’t get the short end of the stick, environmental coalitions like New York Renews have been fighting for the the creation of the Climate and Community Protection Fund, which would direct $10 billion proceeds from a variety of sources—including Cap-and-Invest—to communities, workers and small businesses.

In March, Senator Peter Harckham sponsored legislation to put the fund into effect. Harckham’s bill would distribute money earned from state programs into four separate accounts to fund things like grants for grassroots-led initiatives to reduce local emissions, job training for impacted workers and reducing energy costs for small businesses.

While language that directly mentions the fund didn’t make it into Hochul’s budget this year, Harckham told City Limits that it lays the groundwork for the fund to be introduced in the state’s rulemaking and regulatory process going forward.

“We think the legislature still has a voice in this conversation. So we’ll be pursuing it,” Harckham said. “There’s more work to be done here. But it was an important first step.”