In a little-noticed vote late last Friday, the New York Senate passed a groundbreaking measure that will leverage $112 million of proceeds from carbon auctions to kick-start a state-wide $5 billion energy efficiency effort that will pay for itself.
Called the Green Job/Green New York Act, the measure will finance upfront costs for one million homeowners to weatherize their houses, and let them repay the loans from the energy savings realized over time. The act, which makes funding available for job training, is also expected to create up to 16,000 new jobs.
What makes the green victory especially unusual and significant is that it was made possible by state Sen. Thomas Morahan (photo at right), a Republican who bucked his party to support the bill, opening the gates for a flood of bipartisan votes for passage.
"We needed a Republican vote to get it passed, and Morahan was the first to announce his support," said Dan Cantor, the executive director of the Working Families Party, which spearheaded the legislative effort. "He showed that he was going to make his decision on the merits of the bill, not party politics."
While the bill is a triple victory that simultaneously combats climate change, lowers energy costs for homeowners, and creates thousands of new jobs, it also provides a model for other states to emulate, and has larger national implications.
The policy design provides an alternative mechanism for providing consumer benefit from carbon revenues that federal lawmakers, wrestling with climate legislation, must now consider.
In addition, the almost unanimous support the bill received from New York’s Republican lawmakers undermines the wisdom and validity of a ferocious national campaign being mounted by their right-wing brethren to halt the progress of green jobs legislation everywhere.
Free Market Formula
Observers say the new law will create the largest state-based program of its kind, with government forming a partnership with the private sector to jump-start economic activity that will be self-sustaining.
It is that free-market formula which in the end attracted Republican lawmakers to make common cause with the left-wing Working Families Party, which spearheaded the legislative effort, supported by a broad coalition of labor, community and environmental groups.
"And it wasn’t just a traditional labor, community and environmental coalition, but the business community was solidly behind this, too," Cantor said. "We had the building contractors at the table supporting it, and the Wall Street guys saying they were willing to invest in this."
The plan envisions retrofitting one million New York homes over the next five years in urban, rural and suburban neighborhoods across the state. The price tag for the project is estimated at $5 billion, most of which will be borrowed by property owners from private lenders. The state will use public money in part to fund a "loan loss reserve." The reserve would underwrite losses, providing security to lenders that participate and assuring a reasonable interest rate for property owners.
The plan is a welcome innovation in the aftermath of the mortgage meltdown and the credit crisis that has followed. It brings the promise of new jobs and economic activity to many areas of the state that were already suffering from joblessness and stagnation even before the financial collapse.
With just a small amount of public money raised from carbon auctions, the plan mobilizes 50 times more private capital. It also provides a bridge to continued future employment for workers now on the job thanks to federal stimulus money, which will run out after the coming year ends.
All a homeowner will need to do to save on energy costs and increase property values is to call a state certified contractor to perform a free or low-cost energy audit. The audit would identify the repairs and upgrades (like air sealing, insulation, new boilers) that can pay for themselves through the energy savings they create. The program’s Residential Retrofit Investment Fund would pay the full upfront costs, with consumers required to pay back the retrofit through future savings on their electricity bill. If the home is sold before the loan is paid off, the new homeowner takes over the loan agreement.
Currently, homeowners must expend a lot of time and money to accomplish energy retrofits. They have to proactively find contractors they can trust to perform the audits and recommend a plan, then pay the full upfront costs of the work which could easily total tens of thousands of dollars. Few homeowners bother. Most cannot afford to.
"It’s a great example of how market failure can be solved through progressive policy," Cantor said.
Political Opponents Lose Twice
In addition to the giving the thumbs up to the ambitious program, lawmakers were also careful to fix a potential glitch in another state law to protect the auction of carbon credits through the Northeast’s Regional Greenhouse Gas Initiative. (New York’s weatherization and jobs program would tap $112 million from the state’s share of RGGI auctions proceeds as seed money.)
A member of the Independent Power Producers of New York (IPPNY) sued the state this year to halt the auctions, arguing that state officials had no legislative authority to implement RGGI. In recent months, insiders say, the group was also behind a whisper campaign to smear the Green Jobs Act as a left-wing conspiracy and scare Republicans away from voting for it. Publicly, IPPNY argued against the weatherization program, claiming it would keep auction funds from otherwise flowing to utilities for R&D on carbon capture and sequestration technology.
Lawmakers denied IPPNY on both counts. The bill clarifies state law so carbon auctions can proceed unhindered by court challenges, and the 52-8 Senate passage of the bill mirrored the overwhelming bipartisan unity of the Assembly, which passed the measure unanimously, 147-0, earlier in the summer. The bill now heads to Gov. David Patterson, who is expected to sign it into law.
Auction proceeds first began flowing to state coffers this year after RGGI officially began operating in January. It is the first functional cap-and-trade system in the nation. Ten northeastern states are participating in the scheme that caps emissions from electric power generators.
A Model for Federal Lawmakers
The U.S. Senate is set this month to write its own version of the House-passed American Clean Energy and Security Act (ACES) — an economy-wide federal climate bill which includes a cap-and-trade mechanism. Unlike RGGI, in which most states have opted for a 100% auction of carbon credits, the federal bill would instead give credits to power generators for free, with a vague proviso attached that the windfall value be used "for the benefit of consumers." It would be left to each state’s utility commission to decide how to comply.
It is a policy design that has been criticized for catering to special interests in the utility industry, and now New York’s action puts pressure on federal lawmakers to consider the wisdom of this alternative.
Instead of leaving it up to insiders in the power sector to decide how to deploy the immense value of carbon credits "for the benefit of consumers," elected leaders in New York’s legislature have designed public policy to leverage the enormous value directly on behalf of their constituents. Other states could follow suit.
In its current form, ACES would not only send carbon credits for free to utilities, precluding states from leveraging carbon revenues for public benefit, but it also would suspend RGGI from operating from 2012 to 2017 to give the proposed federal cap-and-trade system priority. The passage of the New York bill gives Washington lawmakers a raft of reasons to reconsider crucial aspects of pending legislation.
For now, Sen. Morahan has emerged as an unlikely hero. In a poisonous political environment, Morahan chose to stand tall. Since June, bipartisan rancor within the state Senate was particularly ferocious, following a Republican "coup" that brought legislative business to an embarassing standstill. The Green Jobs bill had been teed up for a vote the very day the coup happened, and the ensuing months of delay allowed the opposition to gather steam and almost derail the bill.
"He deserves enormous credit," Cantor said, acknowledging the unique alignment of interests that occurred under the leadership of his actively progressive Working Families Party. "This is the way it’s supposed to work in a democracy."
Morahan, a six-term lawmaker from Rockland County, resisted attempts by Republican leadership to impose discipline and oppose the measure strictly on party lines. Once it became clear that the measure would pass, few Republicans wanted to be on record voting "no" to a bill that was going to deliver a win-win-win.
"About 40 percent of Rockland County’s owner-occupied units were built before 1970, making them big energy users," Morahan said.
"This program would serve ‘the missing middle’ — owners who surpass the income ceiling for the Weatherization Assistance Program but cannot afford retrofits on their own."
Cantor said the program still faces a good six months of development before it will be ready for launch. It will be supported by an active social mobilization effort to educate and motivate homeowners to take advantage of the retrofit fund, put local contractors to work, save themselves energy expenditures, increase property values, and reduce global warming pollution.