Cap-and-Invest: Penalizing Polluters to Bring Down GHGs
As of 2025, New York’s Cap-and-Invest Program is one of the biggest tools being developed to meet the state’s goals of the Climate Leadership and Community Protection Act (CLCPA).
Cap-and-Invest sets a legal, annual limit (a cap) on total greenhouse gas emissions from major sources in New York, like corporations selling thousands of gallons of fossil fuel. Entities that emit over a certain threshold must buy an “allowance” for every ton of carbon pollution they release. This applies to large polluters — not individual households.
The cap declines each year, forcing emissions downward over time. And the money collected from polluters is reinvested in clean energy, transportation, and community support. At least 35% (ideally 40%) of this revenue must benefit '“disadvantaged communities,” as described by the law.
What’s the Status in 2025?
DEC released draft reporting regulations in March 2025 (public comments due July 1). Cap-and-Invest and auction rules are in pre-proposal stages; final versions expected later this year. The program is expected to launch in 2026.
Three regulations under development will enforce the program:
Mandatory GHG Reporting Rule (6 NYCRR Part 253 – DEC): Requires large emitters to report their emissions starting in 2027 for 2026 emissions.
Cap-and-Invest Rule (6 NYCRR Part 252 – DEC): Establishes the emissions cap, determines which entities must buy allowances, and outlines how compliance will be measured.
Auction Rule (21 NYCRR Part 510 – NYSERDA): Describes how allowances will be sold, who can buy them, how often auctions occur, and how revenue is managed. It allows for auctioning and banking.
Revenue allocation was unspecified.
Advocacy Demands
Climate justice coalitions like NY Renews, ALIGN, and others are calling for no corporate giveaways or free allowances, real emission reductions (not just paper offsets or accounting tricks), and transparent, equitable investment of revenue.
Reporting rule: Ensure thresholds cover all major polluters, including fuel suppliers
Cap rule: Tie cap directly to CLCPA targets and add local caps in overburdened communities
Auction rule: Ban free allowances, prevent market speculation
Revenue allocation: Guarantee 35–40% goes to DACs, including direct utility bill relief
A coalition of advocacy organizations, including the New York City Environmental Justice Alliance, New York Lawyers for the Public Interest (NYLPI), and members of NY Renews, filed suit arguing that the state’s draft Cap-and-Invest regulations fail to meet the mandates of the CLCPA. Click here to learn more.
