New York state's nascent economy-wide carbon market continues to face delays as concerns over affordability as well as potential federal legal threats dampen enthusiasm for enacting climate policies.
The idea of a state-specific "cap-and-invest" program began with a scoping plan created in 2022 that recommended an economy-wide carbon market to help New York meet the climate goals outlined in its 2019 climate law. Those goals include achieving a 40pc reduction of economy-wide greenhouse gas (GHG) emissions below 1990 levels by 2030 and an 85pc reduction by 2050.
In 2023, the New York Department of Environmental Conservation (DEC) released a draft outline of the program, which would cover fuel suppliers, industrial facilities and some waste sources and would have started earlier this year.
But since then, the program has been plagued with delays. While regulators late last year punted the program's start to January 2026, governor Kathy Hochul (D) said in January 2025 that the draft rules to implement the carbon market would be ready in "coming months", sparking criticism from environmental groups. In September, DEC deputy commissioner Sanjay Seth said the development of the program is still in the works but offered no other details.
As a result, environmental groups in March sued the Hochul administration for failing to release the draft carbon market rules and violating the state's climate law, which mandated the promulgation of new climate regulations byJanuary 2024.
This culminated in a state court ordering DEC to release the carbon market rules by February 2026. But that ruling has since been paused after the Hochul administration appealed it in November, effectively further delaying the rollout of the program until the case is resolved.
Rising energy costs have resulted in Hochul taking a more pragmatic, "all-of-the-above" approach in carrying out the state's energy and climate policy. This included the revival of a natural gas pipeline in the state earlier this year after negotiations between President Donald Trump and Hochul, which was soon followed by the US lifting a stop work order for the Empire Wind offshore project. Hochul also carved out $1bn in climate funding for renewable energy and energy efficiency projects this year, while keeping "cap-and-invest" on the backburner.
DEC declined to comment on the latest timeline for implementing the state's carbon market.
Slow it down
While it appears affordability has taken center stage in New York at the expense of enacting key climate policy, the delays in implementing the state's carbon market might be more emblematic of a slowdown rather than a retreat.
"Observing from afar, it seems like it's not that they're stepping back, they may just be taking things more slowly than they would otherwise because of all these issues," said Gautam Jain, a senior research scholar at the Center on Global Energy Policy at Columbia University.
Those include a number of things in addition to affordability: concerns over federal legal threats, political considerations ahead of the 2026 midterm elections, as well as figuring out the complex mechanics that involve designing a robust cap-and-invest program.
The timing of rolling out such a program is also important to ensure there is no political backlash, Jain said, pointing towards Canada's rollback of its consumer carbon price as an example.
In addition, New York is already facing the federal government's ire for its climate superfund law, which the state finalized last year. It requires oil, natural gas and coal companies to pay for the climate-related harms resulting from their greenhouse gas (GHG) emissions. As a result, the Hochul administration could be weary of rolling out any policy that could elicit further legal challenges from the Trump administration, which has already singled out California's cap-and-trade program as a potential target, Jain said.
Still, New York has made some progress on climate policy this year, including finalizing a GHG emissions reporting program as well as kickstarting the process to implement a more-stringent CO2 emissions cap for power plants in the state covered under the Regional Greenhouse Gas Initiative — of which New York is the largest emitter. The state's GHG reporting program, which will start collecting data from large emitters in 2027 for the previous year, is the first step in implementing New York's carbon market.
But the timeline remains murky. New York's appeal of the court order mandating the release of the cap-and-invest draft rules must still play out over the coming year. In addition, the political environment during the 2026 midterms could determine the state's timeline to move forward with its carbon market, Jain said.
