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Governor Kathy Hochul’s proposal to weaken the state’s emissions targets reflects a fundamental tension in the process of decarbonization.

New York Governor Kathy Hochul has been signaling her intent to rewrite the state’s climate law for months, arguing that achieving the existing emissions targets it lays out would impose “enormous” costs on New Yorkers. She finally revealed her proposal to do so on Friday, requesting new targets and more time to meet them. If she gets her way, New York would be the first state to renege on its climate goals.
More specifically, Hochul pitched moving the law’s deadline for enacting climate regulations from 2024 to 2030. She wants to establish a new emissions target for 2040 to replace one for 2030 that will now be all but impossible to meet, and to revise the existing 2050 target. She also wants to change the official accounting method the state uses to calculate emissions from shorter-lived greenhouse gases like methane — an idea she first floated during a budget fight in 2023. That would ease pressure to cut natural gas use and make the state look further along on its climate goals than it currently does. It would also align New York’s approach with the way the rest of the U.S. accounts for methane.
The governor can’t do any of this without the legislature, though. She’s pushing for the changes as part of closed-door budget negotiations with a March 31 deadline. Discussions did not get off on a promising foot: More than half the state Senate has rebuked her plan, with 29 Democrats penning a letter to say they “categorically oppose any effort to roll back New York’s nation-leading climate law.” It is the “fossil fuel status quo that has created the affordability crisis,” the senators wrote.
Environmental groups also reject the governor’s version of events, arguing that her proposal would threaten affordability rather than address it, and accusing her of giving in to fossil fuel interests.
Neither side is presenting a complete picture of the trade-offs, however. To back up Hochul’s assertion that the law as written would impose prohibitive costs on New Yorkers, her administration has relied on overly aggressive analyses that misleadingly frame climate action as a pure expense. At the same time, it's true that the regulations Hochul wants to delay would raise costs for many New Yorkers in the near term, with savings materializing later.
The dispute is emblematic of the way the cost of living crisis is deepening a tension at the heart of climate politics: Decarbonization often imposes real costs now in exchange for diffuse benefits later, which is a tough sell to voters who are finding it increasingly difficult simply to keep themselves afloat.
Hochul arguably got herself into this mess. The clash in New York dates back to 2024, when her administration missed the deadline to issue regulations that would ensure the state achieved its emissions targets.
At first it seemed like the regulations would simply come late. The state was developing a Cap and Invest program — essentially a carbon price that charges polluters for every ton they emit and delivers the proceeds back to consumers as rebates, incentives, and public benefit programs. State officials released a pre-proposal for the program in January 2024 that included a price ceiling to minimize cost impacts. It was expected to generate $3 billion to $5 billion in its first year.
At the time, Hochul’s administration painted a rosy picture of the program, arguing that it would accelerate emission reductions, especially as the state reinvested revenue into incentives for New Yorkers to switch to heat pumps and electric vehicles. While the cost for consumers of driving gas-powered cars and using oil and gas-burning heating systems would go up, “millions of households would break even,” officials said, after proceeds from the program were returned via direct payments and incentives. By 2030, they said, many would come out ahead.
Cap and Invest was never envisioned as New York’s only tool to ratchet down emissions. The state’s own modeling indicated that the proposal — even when implemented alongside other policies — would fall short of the state’s target of cutting emissions to 40% below 1990 levels by 2030 by at least 15%.
Then, after holding a series of public workshops on the pre-proposal, the administration went silent. In early 2025, Hochul shocked the climate community when she decided to delay the program indefinitely, citing affordability concerns. Environmental groups accused her of breaking the law, sued the state, and won. Last October, the New York State Supreme Court ordered Hochul to “promulgate rules and regulations to ensure compliance with the statewide emissions reductions limits.”
Hochul had two options. She could impose a tax on carbon in an election year when affordability had become the defining issue. Or she could ask the legislature to change the law’s deadlines.
That brings us to February, when a conveniently-timed memo leaked from the state energy office with the subject, “Likely Costs of CLCPA Compliance.” (CLCPA stands for Climate Leadership and Community Protection Act — the name of New York’s climate law.)
In order to “fully comply” with the law’s emissions limits, the memo says, the Cap and Invest program cannot have a price ceiling. The energy office estimated the carbon price would start at $120 per metric ton, although the memo says this is likely an underestimate because it was calculated before Trump revoked clean energy tax credits, rolled back vehicle emissions rules, and imposed costly tariffs that also raise the cost of clean energy projects. By comparison, the 2024 pre-proposal would have capped the carbon price at between $14 and $23 in the first year.
“Absent changes” to the climate law, the memo goes on to say, New Yorkers would be paying more than $2 more at the pump and an extra $17 per month on their heating bills by 2031 under Cap and Invest.
The environmental community was flabbergasted. The memo “represents modeling of a program that has not been on the table,” Kate Courtin, a senior manager on the state climate policy team at the Environmental Defense Fund, told me. The numbers “do not reflect any of the scenarios the state was looking at.”
The document appears to reflect a Cap and Invest program that would singlehandedly achieve the statutory targets, which other climate advocates I talked to framed as an absurdly literal reading of the court’s order.
“It feels very disingenuous, because no one is asking for that,” Liz Moran, a New York policy advocate at Earthjustice, told me. Earthjustice represented the environmental groups who sued the administration to compel Hochul to release a climate plan. “Our litigation is not about what is in the regulations,” she said. “It is about the fact that she did not issue regulations. No one was anticipating one set of regulations alone to achieve the targets.”
Vanessa Fajans-Turner, the executive director for Environmental Advocates NY, issued a statement calling the memo “a political tactic meant to scare legislators into giving her a way out of obeying the law.”
That may be so, but the memo also raises uncomfortable questions about New York’s climate strategy in a political environment dominated by affordability concerns.
Environmental Advocates NY argues that extending the law’s deadlines would “increase costs for households and the state,” citing the hazards of a warming world. The state’s earlier analysis also found that the financial benefits to New Yorkers would outweigh the costs. But in both examples, there is a lag between when the costs and benefits hit.
New Yorkers will experience Cap and Invest as a cost first. While the costs may not be as high as the memo envisions, it still literally puts a price on carbon. The pre-proposal also estimated that fuel costs would increase by as much as $9 to $15 per month in the first year for some families. Enacting a carbon tax just as energy prices are going up due to rising demand, the costs of caring for our increasingly fragile grid, and war with Iran could come off as tone deaf at best, political suicide at worst.
“It’s impossible to have a coherent debate about this if we’re not all first on the same page that a carbon price is designed to add costs to carbon-intensive energy uses, and that will add costs to consumers,” Noah Kaufman, a senior research scholar at Columbia University’s Center on Global Energy Policy, told me.
While Moran emphasized that the Cap and Invest program did not have to be the only tool the state uses to reach its emissions targets, the memo underscores how much the state’s toolbox has changed since the targets were enacted. Trump’s slashing clean energy tax cuts and enacting tariffs have increased the cost of clean energy. New York’s strategy also relied on clean car rules that would require all vehicle sales to be zero-emissions by 2035 — but Trump has stripped the state’s ability to enact such a policy. He also, of course, put an effective ban on new offshore wind development. New York was planning to have at least 9 gigawatts of offshore wind by 2035, but it got just 1.8 gigawatts into the pipeline before the moratorium came down.
The most recent data shows that as of 2023, New York had cut emissions by only about 14% relative to 1990 levels. “You look at where New York is on emissions or renewables or electric vehicle penetration, and it doesn’t look plausible at all,” Kaufman said. “It’s analogous to the 1.5-degree [Celsius temperature rise] target. People have a hard time letting go of it, even though when you map out the pathway that it would take to get from here to there, it looks entirely implausible.”
When I asked climate advocates about the emission targets, they didn’t deny that the numbers were unrealistic, but they also saw no need to update them. “There’s an understanding that the targets will be hard to meet,” Moran said. “But why change them if we haven’t even started to try?”
“I think any conversation about the targets and the law should focus on what the state can be doing right now and in the immediate future to implement the law and accelerate clean energy progress,” Courtin said.
At the same time, environmental groups are right that reliance on fossil fuels is a big part of why energy costs are increasing for New Yorkers. The state’s grid operator published a report in January that highlighted how the rising cost of natural gas was a leading factor driving up electricity bills. Some of Hochul’s recent decisions, including walking back a ban on gas hookups in new buildings and approving a new natural gas pipeline, will further entrench New York’s reliance on the fuel.
Advocates told me they were most angry that the Hochul administration was portraying climate action and clean energy as an impediment rather than a solution to the affordability crisis, which could do long-term damage to the case for decarbonization. Already, the New York Post editorial board has claimed victory, writing that Hochul is “finally admitting that the ‘climate’ law she’s long supported is toxic to New York’s economy and to ’affordability.’”
“The troubling thing is that they’re presenting this false narrative that these two things are at odds with each other,” Justin Balik, the state program director for the nonprofit Evergreen Action, told me. He pointed out that other governors — Mikie Sherrill in New Jersey, Abigail Spanberger in Virginia — have found winning political messages that champion both affordability and climate action.
“Let’s have a conversation about New York doing every single thing that is within the state’s control to both cut people’s costs and cut pollution at the same time,” Balik said. Evergreen recently commissioned a report outlining a range of clean energy-friendly strategies that could help New York reduce energy costs, like requiring data centers to build new clean power plants and lowering utilities’ rate of return. Those strategies would not get Hochul out of the deadline to impose a carbon tax, however.
There will never be a good time to price carbon; it could feel as politically painful, or more so, in 2030 as it did in 2024, 2025, and 2026. It will be up to the legislature to decide whether New York will take the leap now and recommit to the ambition it had during an earlier, more auspicious moment for decarbonization, or to wait. If there’s a third option, it hasn’t been articulated yet.
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Everything is getting more expensive — except for government debt.
Across the developed world, yields on government debt are rising, driving up the cost of borrowing with potentially particularly dire effects for renewable and clean energy.
“Nearly every issue of government bonds at every maturity for all G7 countries is trading at a higher rate today than it was in February, pushing up the amount that governments must pay to sell new debt,” the Financial Times reported on Sunday.
These government bonds — especially U.S. government bonds — serve as benchmarks for lending across the economy. The 10-year Treasury is currently trading at a yield of 4.8%, up from 4% in February before the war in Iran began.
The rising yields are due in part to the ongoing war being waged by the United States and Israel, which has driven up the prices of core commodities and touched off inflation across the globe. A number of wealthy countries, including the United States, are also running large budget deficits, which means there’s lots of government debt floating around. Inflation erodes the value of that debt, however, driving up the returns investors demand for government bonds and driving down what they’re willing to pay.
I have written extensively about how high borrowing costs exact an especially steep toll from renewable energy development. That’s because the bulk of spending on a renewable project — say a solar farm — comes up front as capital expenditure that often has to be financed through borrowing. For a gas-fired power plant, on the other hand, the spending is split more evenly between upfront costs and operational costs (namely fuel), which can be paid for out of cash flow from operating the plant. Where the cost of operating a gas plant is at the mercy of natural gas prices, for a renewables project, interest rates can dominate the economics.
Sure enough, that inflationary pressure showed up in the second-quarter results of America’s renewables companies. Solar installer Sunrun, for instance, has seen declining sales growth. In an August earnings call, Sunrun CEO Mary Powell said the company’s results were “reflecting a higher capital cost as interest rates have inched up.” Wind developer Orsted, meanwhile, told investors that it had incurred a nearly $200 million loss on its U.S. offshore wind business “as a result of an increase in the long-dated U.S. interest rates.”
But macroeconomic indicators like deficits, inflation, and interest rates show just one side of the picture. After all, it’s not just governments that borrow, and it’s not just money that’s necessary for any sort of big project, including renewable and clean energy.
At the same time governments are borrowing more, bond market investors are also being offered hundreds of billions of dollars of debt from hyperscalers and other technology companies looking to build out data centers to power artificial intelligence. Bond markets will have to ingest over $500 billion of AI-related debt issuance this year, according to Morgan Stanley, and they’ll be called upon again to help fund an estimated $1.2 trillion in capital expenditures in 2027. Across the economy as a whole, “more than half of the capex growth this year can likely be ascribed to the buildout related to AI,” Federal Reserve Chair Kevin Warsh said in a speech last week.
That boom is driving economic activity — and high prices — throughout a number of sectors, including materials and labor.
Cleveland Fed President Beth Hammack told CNBC in June that inflation was “too high,” citing “insatiable” demand from data center developers for inputs such as electric switchgears. (Hammack was a dissenting voice at the July meeting of the Federal Open Markets Committee, voting for a higher interest rate against the Fed majority who decided to keep rates unchanged.)
And it’s not just software engineers who are seeing high salaries as a result of the AI boom. The technology buildout has also raised the wages of laborers and tradespeople essential to both data center and energy projects, especially for specialized trades like electricians.
“Skilled workers were difficult to find in a range of fields, notably technicians and tradespeople,” the Federal Reserve reported in its July report on economic conditions.
While this is great news for electricians and their families, it’s also the type of thing that can make central bankers nervous.
The “AI investment surge could trigger nonlinear price increases,” Dallas Fed President Lorie Logan said in July. “The risk is that the pressures broaden as AI demand touches construction, power generation, and other sectors.”
That’s the silver lining for renewable energy — and all energy developers. While the costs of capital, materials, and labor are going up, electricity itself has never been in greater demand.
The energy developer and utility NextEra told investors on its July earnings call that it’s been able to sign new contracts on existing assets at a $20 per megawatt-hour premium over recent prices, a process known as “recontracting,” indicating solid demand for power.
Overall, NextEra chief executive John Ketchum said, “Hyperscalers and other large load customers are increasingly focused on speed, certainty, and scalability. That plays directly to our strengths.”
Chirag Lala, vice president of research at the Center for Public Enterprise, explained to me that it’s this demand that’s balancing out the higher financial and material costs renewable developers face. “That’s why we are still getting solar and battery builds. There’s demand on the system,” he told me.
The industry is in a kind of tug of war between financial and structural factors pulling it back, and demand factors pushing it forward. “That buildout could absolutely be faster and bigger if a variety of structural and financial variables were mitigated,” Lala said.
The Supreme Court will decide once and for all.
Good evening from New York, where a district court judge struck down a law the state passed in 2024 to extract $75 billion from fossil fuel companies to fund its response to climate change. The ruling is a sign that so-called “superfund”-style laws may not be the winning strategy many climate advocates had hoped.
You may know the New York law as the Climate Change Superfund Act, and it mirrors similarly-named legislation passed in Vermont and introduced in about a dozen other states. The law’s backers — environmental groups, consumer advocates — pitched it as a new approach after earlier attempts to sue energy companies directly for damages had either failed or were stuck in procedural arguments over whether the cases belonged in state or federal court.
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Unlike those lawsuits, the climate superfund laws don’t accuse the companies of doing anything wrong. They are modeled on the federal Superfund program, which allows the Environmental Protection Agency to request funding from companies to clean up industrial waste years after the contamination occurred, and despite the fact that the pollution was lawful at the time. The theory was that this federal precedent might give the states a leg up when energy companies inevitably fought the policy.
That comparison does not seem to have meant much to Judge Brenda Sannes. Instead, her decision focused on the similarities between the climate superfund law and a lawsuit New York City brought against Chevron and other oil companies that federal courts dismissed several years ago. Sannes concluded that just like the city’s lawsuit, the superfund law would in effect regulate interstate greenhouse gas emissions, which is a federal responsibility under the Clean Air Act.
Notably, Sannes also disregarded the Trump administration decision to rescind the 2009 endangerment finding for greenhouse gases, which underpinned the federal government’s responsibility to regulate carbon under the Clean Air Act, writing that it had “no impact” on her analysis.
To me, the idea that these climate lawsuits and superfund laws are akin to emissions regulation has been one of the more confounding aspects of covering these court fights. None of the suits concern greenhouse gas regulations in any traditional sense — they are about oil companies’ deception and responsibility for climate change-related damages. Still, several courts have agreed with oil companies that the financial penalty levied on them amounts to a form of oversight of emissions.
Climate advocates are not giving up just yet, and are urging New York Attorney General Letitia James to appeal. A press release from the group Fossil Free Media argued the ruling was “based on a deeply flawed analysis” and was “an early, appealable decision in a developing legal fight.” James has not yet issued a response.
Regardless, the superfund concept will get another test in the federal court for the district of Vermont, where the same groups challenging New York’s law — the American Petroleum Institute, the Chamber of Commerce, Republican states, and the Trump administration — are also challenging Vermont’s version.
Much more rides on an upcoming Supreme Court case, however. The high court has agreed to hear oral arguments in a lawsuit brought by Boulder County, Colorado against Exxon and a Canadian oil sands company, Suncor. The county originally filed the case in 2018, and it’s one of the ones that’s been held up for years in procedural arguments. Last year, the Colorado Supreme Court decided it could finally advance toward a trial, leading the oil companies to appeal to the federal Supreme Court. They are asking the justices to decide once and for all whether federal law preempts states from seeking relief for climate damages.
Oral arguments begin on October 5.
On Palisades’ progress, Taliban minerals, and New York’s climate superfund
Current conditions: Tropical Depression Five is barreling northwest from the Caribbean to Houston • In the Pacific, Hurricane Karina has strengthened into a Category 4 storm, but it’s unlikely to make landfall anywhere • The surface temperature of the Yellow Sea is nearly 85 degrees Fahrenheit, fueling storms across South Korea.
President Donald Trump is among the few politicians in America willing to stand 10-toes-down in defense of the need to build out more data centers. In a post Monday on Truth Social, the president admonished communities that reject data centers as misguided and foolish. “The only reason that communities throughout the U.S.A. should not want data centers is if they want to end up being backwards and poor,” Trump wrote. “If they want to be successful and rich, with far lower taxes and jobs all over the place, let data reign.” Still, he said “plenty of other places” want them. “If we kill the Golden Goose, you will only have yourselves to blame,” he wrote. “China could not be happier with this anti data center movement.” It’s not a popular stance. Heatmap Pro’s latest polling shows that three-quarters of Americans now oppose data centers built in their backyards.
The U.S. District Court for the Northern District of New York struck down the state’s Climate Change Superfund Act on Monday, ruling that the 2024 law is invalid under the federal Clean Air Act. The law set up a cost recovery scheme whereby fossil fuel companies would pay into a fund used to finance climate change adaptation-related infrastructure projects. The state’s argument rested in part on the Trump administration’s decision earlier this year to rescind the Environmental Protection Agency’s endangerment finding on greenhouse gases, which gave the agency authority to regulate climate pollution. That move “cannot be reconciled” with the administration’s argument that the CAA preempts New York’s law, the state said. Judge Brenda K. Sannes dismissed that reasoning in her decision, citing the Supreme Court’s ruling in American Electric Power v. Connecticut from 2011, which, as my colleague Emily Pontecorvo put it, “established companies’ protection from federal public nuisance claims over greenhouse gas emissions. That decision sprang from the Court’s earlier 2007 decision that the Clean Air Act covers greenhouse gas emissions — which the EPA is now contesting.”
The case was one of at least four the Trump administration has pursued against states attempting to make fossil fuel companies cover the costs of adapting to climate change. Judges have already ruled against its attempts to prevent Hawaii and Michigan from suing fossil fuel companies, however a case against a similar superfund law in Vermont is still pending. “New York’s law would have expropriated $75 billion from energy companies around the world during an energy emergency and in direct defiance of American foreign policy and federal law,” Adam Gustafson, principal deputy assistant attorney general of the Justice Department’s Energy and Natural Resources Division and the administration’s lead attorney in this case, said in a statement. “We will continue to fight for affordable, reliable energy for all Americans.”
A sign of how much an industry is really booming is whether startups begin popping up to provide ancillary services. Here’s a prime example of the artificial intelligence buildout’s energy boom: The AI energy software provider Verse told Heatmap exclusively for this newsletter that it now has 30 gigawatts of power under its platform’s management. The company’s flagship product, Aria, is an intelligence platform for data center companies that brings utility bills, contracts, power purchase agreements, and live power usage data under one dashboard. The company also helps manage on-site assets such as batteries. “You can't solve for speed, cost, risk, and carbon while your supply contracts, your load, and your flexible assets sit in separate silos,” Seyed Madaeni, Verse’s chief executive and co-founder, said in a statement.
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When Holtec International starts the Palisades nuclear plant back up, the facility in western Michigan will be the first in the nation to return to life after a permanent shutdown. Once complete, the Palisades restart will set off a series of other projects, including some to repower defunct nuclear plants in Pennsylvania and Iowa. That makes each milestone in the Palisades project notable — but the one it reached Monday is particularly promising. Holtec started loading fuel into the reactor, setting the stage for it to return to service potentially before the end of the year, months before the official March 2027 start date. “Loading fuel into the Palisades reactor is an important milestone and a reflection of the tremendous effort of the men and women who have brought this plant to this point,” Fadi Diya, Holtec’s chief nuclear officer, said in a statement. Palisades’ completion won’t just kick off more restarts. Holtec also plans to build its first two 300-megawatt small modular reactors at the site. Based on the industry’s standard pressurized water technology, the company has received hundreds of millions from the Department of Energy to support its construction.

Commerce can, at times, be the ultimate salve. Raw materials flowed from the U.S. to British factories even after the American Revolution and the War of 1812. Japanese and German automobiles dominate American roads decades after those nations’ defeats in World War II. As memories of war fade, Americans buy nearly $200 billion in Vietnamese goods each year, helping to transform the Southeast Asian country into a top manufacturing hub. Now the Taliban is making its pitch to Washington’s wallet. The Islamist group now leading Afghanistan said it would “absolutely” welcome U.S. investments in the rural, mountainous, and underdeveloped Central Asian country’s mining, infrastructure, or agriculture industries. “Relations between Afghanistan and the United States should not be assessed through the lens of the past 20 years of war, but rather on the basis of future co-operation,” Taliban foreign minister Amir Khan Muttaqi told the Financial Times at his office in Kabul. “Our economic policy is open.”
Meanwhile, from China to the U.S., lithium producers are posting what Bloomberg called “bumper profits.” Demand for energy storage is soaring, especially as countries seek to insulate themselves from the effects of the Iran War energy shock. As a result, Chinese companies such as Tianqi Lithium and Ganfeng Lithium Group reported their strongest net income in three years during the first six months of 2026. North Carolina-based Albemarle said global lithium demand had grown 45% compared to a year earlier. Australia’s PLS Group, meanwhile, “swung a $377 million profit in the 12 months to June 30 from a loss the year before,” the newswire reported.
You don’t need to be an expert in emerging markets to recognize the potential for solar. Countries that haven’t yet extended grid networks into rural areas can electrify villages using panels that are increasingly cheap and flooding into places such as sub-Saharan Africa, as I told you last week. You won’t need deep connections in those countries to start investing in that renewable energy potential, either. The startup Odyssey Energy Solutions, as my colleague Katie Brigham put it, “acts as a middleman between local installers and global capital providers that want exposure to developing markets but typically wouldn’t take the risk of financing small companies in unfamiliar environments.” This morning, the company told Katie exclusively, it’s announcing that it has raised another $74 million to fund its buildout.