This story was co-published with New York Focus, an investigative news site covering New York politics.
Two years ago, New York passed a law that committed the state to slashing its net carbon emissions to zero by mid-century. Doing so will require a rapid transition toward renewable energy. But each year, New York taxpayers continue to shower about $1.6 billionnearly as much as New York states entire spending on environmental protection in 2021subsidizing the sale and consumption of fossil fuels.
As policymakers struggle to find the funds to achieve the states lofty clean-energy goals, those dirty-energy subsidies are receiving renewed scrutiny. A bill sponsored by Sen. Liz Krueger (D-Manhattan), the chair of the chambers powerful Finance Committee, and Assemblymember Kevin Cahill (D-Rockland) would repeal or reduce 19 subsidies, saving the state an estimated $336 million each year.
The biggest subsidies targeted by the legislation date back decades. A $119 million credit exempting airline fuel from sales and use taxes has been on the books since 1965. Another $65 million credit exempting liquid gas from the petroleum tax was enacted in 1990.
Krueger says the subsidies have long escaped criticism simply because theyve been around for so long. Nobody used to ever look at the items built into the tax code over 50, 60 years, she told New York Focus and the Prospect. They go in once and they just stay there by default.
A draft scoping plan approved on Monday by the Climate Action Council, a 22-member body charged with charting a course to decarbonize New Yorks economy, gestured at the need to eliminate fossil fuel subsidies by 2050, but otherwise punted on the issue.
If New York does scale back its fossil fuel subsidies even modestly, it will be an outlier nationally.
The federal government provides an estimated $20 billion a year in fossil fuel subsidies, in large part through two tax breaks that have existed for about a century. Several administrations have targeted the breaks, but industry support has kept them alive.
Thanks to the Infrastructure Investment and Jobs Act, federal fossil fuel subsidies are likely to grow, with a potential $25 billion in new fossil fuel subsidies included in the bipartisan bill that was signed into law in November.
Meanwhile, some of New Yorks peersconservative states like Texas, but also Democrat-controlled New Jersey and New Mexicoare considering increasing state funding of natural gas infrastructure and other fossil fuel projects.
The Krueger-Cahill bill is pared back from an earlier version that put all of the states fossil fuel subsidies on the chopping block. That legislation passed the Senate in July 2020, but then stalled in the Assembly, where it never came to a vote in the Governmental Operations committee, let alone on the Assembly floor.
A sticking point for Kenneth Zebrowski, the chair of that committee, was the potential elimination of New Yorks largest fossil fuelrelated tax credit: a roughly $700 million-a-year tax credit on home heating fuel. The assemblyman has said that increasing costs on the consumer is inappropriate, Chris Bresnan, Zebrowskis chief of staff, told New York Focus and the Prospect.
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The new bill doesnt touch the home heating tax credit, instead targeting less politically volatile subsidies. We believe they are the low-hanging fruit. They are the ones that youre not going to get in a huge battle right away over, Krueger said.
The bill would do away with about 20 percent of total fossil fuel subsidies in New York, by value. It is more aggressive than its earlier version in one respect, however: It would eliminate the subsidies it targets immediately, rather than after three years.
Environmental groups throughout the stateincluding Earthjustice, Indivisible NY, Food & Water Watch, the New York Public Interest Research Group, chapters of the Sunrise Movement, 350.org, and the Audubon Societyare planning to make the bill a priority in the coming legislative session.
Industries benefiting from the states largesse are likely to push back. A spokesperson for Airlines for America, a trade and lobbying association, argued that the airline fuel tax break is important for the industrys recovery.
With New Yorks airports experiencing well below pre-pandemic passenger volumeswith passenger volumes down 50 percent from pre-pandemic levels through the first 11 months of 2021, significantly deeper than the 32 percent decline nationwidenow is not the time to increase costs to airlines, the spokesperson said.
If New York does scale back its fossil fuel subsidies even modestly, it will be an outlier nationally.
State disclosure records from 2021 show that the Aviation Management Association of New York, the Independent Power Producers of New York, the New York State Electric and Gas Corporation, and Airlines for America all retained lobbyists on the bill. Airlines for America lobbied Senate Democrats central staff on the bill, and the Aviation Management Association lobbied Krueger and staff at the states Department of Transportation. All except Airlines for America declined to comment or did not respond to requests.
Still, the lobbying effort was relatively tame by Albanys standards. That likely reflected a lack of focus from legislative leaders on passing the bill in the 2021 session, according to Michael Kink, executive director of the Strong Economy for All coalition and a longtime progressive lobbyist and advocate in Albany.
Thats likely to change in 2022. This year, theres going to be a huge, huge fight over all corporate subsidies, including fossil fuel subsidies, Kink said. I think what you were seeing last year was more like spring training. This year youre going to see hand-to-hand combat.
One challenge for the bills proponents will be to sell its urgency. During the 2021 legislative session, as the costs of COVID-19 relief programs and expected lost tax revenue threatened to leave the state with a $15 billion cash shortfall, the bill was framed as a way to help patch the budget hole. But federal aid included in the American Rescue Plan and higher-than-expected tax revenues meant that the budget situation was less dire than predicted.
The key person proponents need to convince is Gov. Kathy Hochul, who occupies the drivers seat in New Yorks executive-dominated budget process.
The fate of it is tied to how the new governor views the issue generally, and certainly also whether she thinks she needs the revenues, said Blair Horner, the executive director of the New York Public Interest Research Group. Next year is not going to be a revenue-tight year, since the federal money is still in play.
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Krueger says she hopes Hochul will include the bill in the executive budget, a first draft of the states budget that is published in January and generally sets the tone for subsequent negotiations.
If that is not successful, well also work to get it passed freestanding after the budget, Krueger said. But theres an obvious reason to think about it in context of the budget. It is a revenue generator.
Shes discussed including the bill in the executive budget with Hochul and her advisers, Krueger said, but hasnt yet gotten a firm answer either way. Were working at it, she said.
Avi Small, a spokesperson for the governor, said that Gov. Hochul is committed to taking bold action to tackle the climate crisis, but declined to comment on the bill or the issue of fossil fuel subsidies.
