Before budget negotiations, Gov. Hochul warned that unless New York changes its climate plans, New Yorkers could face a $2.26-per-gallon increase in gasoline prices. The reason is the so-called “cap-and-invest” scheme, under which energy companies would have to buy greenhouse gas allowances — “permission slips” — for every gallon of gasoline or cubic foot of natural gas they sell.

Companies, of course, would pass those costs on to customers. You might pay $4.50 for gasoline and another $2.26 for the permission slip, bringing the total to $6.76 per gallon. The actual numbers may vary, but that is the basic idea.

That “cap-and-invest” scheme is not yet operating. But since 2009, New York’s electricity generators have already been participating in a similar program: the Regional Greenhouse Gas Initiative (RGGI).

Under RGGI, New York and neighboring states require electricity generators to buy and trade permission slips for emitting greenhouse gases — chiefly CO2. The theory is that if those permission slips become expensive enough, companies will shift from coal, which emits a lot of CO2, to natural gas, which emits less, or to solar power, which emits none while operating. The result, in theory, is lower CO2 emissions and less climate change.

In 2025, New York RGGI-covered sources emitted 32 million tons of CO2. At an average auction price of $22.09 per ton — the price of a “permission slip” — that amounted to about $708 million. More recently, the price has reached $35 per ton, which translates into a $1.1 billion annual cost.

That $708 million — or potentially $1.1 billion — paid by companies and consumers is supposed to finance clean-energy projects. RGGI proponents often point to the region’s 40 percent drop in CO2 emissions since the program began as evidence of success.

But the data suggest those reductions came mainly from switching from coal and oil to natural gas, not from RGGI-funded projects. A review of recent investment reports indicates that only about 7.6 percent of observed emissions reductions can be attributed to projects funded with more than $7 billion in auction proceeds since 2021. That raises the first big question: could energy companies have switched from coal to natural gas without spending hundreds of millions of dollars trading permission slips?

A related question follows: did New York spend this money to make energy cleaner, or was it absorbed by the climate-change apparatus? Put another way, if companies were making energy cleaner even without RGGI, what is the point of the program?

The second big question is how much extra RGGI adds to electricity prices in New York. The direct cost of permission slips is only part of the story. When generators bid into wholesale markets, they embed the replacement cost of RGGI allowances in their offers. If a RGGI-affected unit sets the clearing price, all generators — including those with no compliance obligation — are paid as if they had to buy allowances. Preliminary analysis suggests this “market adder” could total $1 billion to $3 billion annually. This burden has never been acknowledged by RGGI or transparently quantified by the New York Independent System Operator (NYISO). New Yorkers already pay very high electricity prices — 60 percent more than the national average — so every penny matters.

Third, part of Gov. Hochul’s budget was dedicated to ensuring New York’s climate plans do not wreck the state’s economy. That is why certain CO2 emissions-reduction deadlines were delayed. Yet RGGI is still scheduled to force steep CO2 reductions beginning in 2027: 10 percent each year through 2033. Modeling indicates New York could even “run out” of “permission slips” by 2032, which means some power plants would have to shut down or ignore RGGI’s rules.

Those RGGI emissions-reduction targets were set before recent increases in electricity demand from data centers and electrification mandates — such as restrictions on fossil-fuel heating and requirements for electric school buses — and they do not reflect realistic timelines for permitting and building new power plants. If left uncorrected, RGGI could create an artificial energy shortage, pushing energy-intensive businesses to move to other states — or never come to New York in the first place.

Pennsylvania recently decided to leave RGGI, with Gov. Shapiro announcing the state’s own “Lightning Plan.” With electricity prices soaring, New York legislators should examine whether continued participation in RGGI is worth the cost. At a minimum, policymakers should push for less aggressive CO2-reduction timelines and direct the New York Independent System Operator (NYISO) to quantify and publish the full cost of New York’s participation in RGGI.