Cap-and-Invest On the Horizon? What it Means for Western New York Businesses

Key details of cap-and-invest have yet to be worked out.

The Climate Leadership and Community Protection Act (CLCPA), enacted in 2019, set New York State on an ambitious track to increase renewable energy generation, reduce greenhouse gas emissions and avoid disproportionate pollution burdens on disadvantaged communities. The climate law caused the State to accelerate its decarbonization of the electric grid and the economy more broadly. Specifically, the CLCPA committed NYS to achieving a 40% reduction in greenhouse gas emissions by 2030 and an 85% reduction by 2050. An unresolved question is who will foot the bill for this decarbonization: taxpayers, utility ratepayers or businesses?

Governor Kathy Hochul has previously proposed the cap-and-invest program, which would effectively charge businesses that emit greenhouse gases to raise funds for other climate-related programs. Cap-and-invest, run by the NYS Department of Environmental Conservation (DEC) and NYS Energy Research and Development Authority (NYSERDA), would set a declining upper limit on the total amount of greenhouse gases that businesses in NYS could emit. Businesses would either reduce their emissions or pay for allowances—or permissions—to emit.

But key details of cap-and-invest have yet to be worked out, and Governor Hochul has delayed DEC and NYSERDA’s issuance of proposed regulations to implement the program. One major question is which businesses will be obligated to pay for the privilege to emit. An early “pre-proposal outline” of cap-and-invest, released by DEC in December 2023, suggested that obligated businesses would only include large-scale emitters and fuel suppliers. Regardless of which businesses will pay directly into cap-and-invest, businesses across New York should prepare to experience indirect costs in the form of higher fuel prices and more expensive products made in New York by large-scale emitters.

There are other outstanding questions for NYS businesses, which include:

1. What guardrails will be put in place to limit the impact on energy-intensive yet hard-to-decarbonize businesses to maintain fair competition with out-of-state businesses?
2. How will DEC justify the upper limits for each greenhouse gas?
3. Will the electric sector (e.g., power plants) be exempted and instead regulated only under the Regional Greenhouse Gas Initiative (an existing regional cap-and-trade program created specifically for the electric sector)?

As stated above, Governor Hochul has delayed the rollout of cap-and-invest, but perhaps not for much longer as the result of a recent state court decision. On October 24, 2025, a state court found that DEC has unlawfully delayed the implementation of the greenhouse gas emissions reduction program (i.e., cap-and-invest), which the NYS legislature mandated in its passing of the CLCPA. Accordingly, the court set a deadline for DEC to promulgate its cap-and-invest program regulations by February 6, 2026.

There are three potential next steps, which may vary the timeline for cap-and-invest’s impact on NYS businesses. First, the Hochul Administration is likely to appeal. In this scenario, it is possible that the appeals court puts a hold on the February 6, 2026, deadline to accommodate further court proceedings. Second, the court hinted that DEC could still approach the state legislature, which begins its next legislative session in January 2026, to amend its obligations under the CLCPA with respect to this program. And third, DEC could simply release the draft regulations by the court’s deadline. If this occurs, the public would have the opportunity to weigh in by attending public hearings and submitting public comments. No matter what happens next, NYS business would be smart to learn more now about how cap-and-invest might impact their bottom lines and prepare to express their opinions.