New York’s Climate Goals Were in Tatters. Then Came the Trade War

(Bloomberg) -- New York City’s access to clean electricity — already under strain — took another blow as a key Canadian province moved to respond to US tariffs with a 25% surcharge on power exports across the border.

As tempers flared in response to US President Donald Trump’s decision to raise trade barriers, Ontario Premier Doug Ford told reporters on Tuesday he’s prepared to go even further: “We will not hesitate to shut off their power as well.” Three US states receive electricity from Ontario. A visibly furious Canadian Prime Minister Justin Trudeau said in a separate news conference that Trump’s objective is to destroy Canada’s economy in order to annex the country, and both nations will suffer as a result.

Late on Tuesday, the Trump administration said it was considering tariff relief for Canada and Mexico. That raised the possibility that Ford would pause retaliation in what has already become a see-saw of threats and reversals.

The sudden focus on power supplies highlights New York’s particular dependence on Canada. The state imports 1.8% of its electricity from Canada — more than 8 million megawatt-hours in 2023 — mostly from Ontario and Quebec. That number is set to rise to 6% by 2030 in what may be New York’s most realistic path towards reaching its lofty climate goals. A $6 billion transmission line, the Champlain Hudson Power Express, is scheduled to come online next year and provide New York City with roughly a fifth of its power.

Almost all of the electricity sent from Canada to New York comes from non-emitting sources, including hydroelectric, nuclear, wind and solar. The flow goes both ways, and there are periods when the US produces excess electricity at a low enough price that Ontario will import it. But the surplus is on the Canada side. While those numbers can fluctuate widely, especially under the influence of recent droughts, both countries have until now sought to increase the electricity flowing south.

That points to a particular vulnerability for people in the biggest US city. A recent report by New York’s Independent System Operator, which runs the state’s power grid, warns New York City will face a power shortfall by 2033. Should the Champlain Hudson line fail to go into service in 2026, the deficiency would start right away.

Quebec Premier Francois Legault said on Tuesday that he’s looking into the legal feasibility of using export contracts, such as the Champlain Hudson deal with New York, to apply pressure to the US.

A trade war between the two countries could make the transmission project unviable. If Canada opted to impose export levies, electricity from the project might no longer be affordable to Americans. In an extreme scenario in which Canada restricted electricity exports, there might no longer be a market for it, said Jesse Goldman, a competition, trade and foreign investment partner at Osler, Hoskin & Harcourt LLP in Toronto.

From a climate perspective, anything that threatens to reduce the amount of clean power coming into New York is significant because the state is already going to miss its targets for greenhouse gas emissions by a significant margin. In an assessment made before the prospect of a trade war with Canada, the New York Power Authority projected that by 2030 only 44% of the state’s power will come from renewable sources — far below the 70% that’s required by law.

“We’re clearly going to miss our goals,” said Patrick Robbins, co-chair of the Public Power New York Coalition. Even if Canada had maintained the status quo, he estimates that New York would need to build about 15 gigawatts of renewable energy to get back on track. “I am not confident we’re going to get as ambitious a buildout as science demands.”

It all started off with such promise. “In a few moments, I will sign the most aggressive climate law in the United States of America,” New York's then-Governor Andrew Cuomo proclaimed at a rousing event in Manhattan in July 2019. “Our green new deal is the real deal."

He did, and it was. The state committed to getting 70% of its energy from renewables by 2030 and becoming carbon-free by 2040, surpassing California and other climate-focused states for the most ambitious green goals in the country. A beaming Cuomo received a standing ovation led by climate leader and former Vice President Al Gore.

Almost six years later, as Cuomo returns to public life to campaign for New York City mayor, the state’s climate goals have fallen off track. By some measures, the state is at least three years behind. A trade war with Canada, with the prospect of higher costs or supply cuts, will only make the problem worse.

The first setback came in 2021 when New York, under Cuomo’s leadership, closed Indian Point Energy Center, a nuclear power plant located near New York City. Natural gas replaced most of the lost 2.1 gigawatts of clean power, and greenhouse gas emissions ticked up in the process.

By the following year, the state was still on track to supply 66% of its power through renewable energy by 2030, according to Marguerite Wells, executive director of the Alliance for Clean Energy New York. Good enough for a narrow miss on its decarbonization target.

But first dozens of projects would actually have to get built, and reversals started piling up. Supply-chain snags and inflation upended the economics of building new renewable sources of electricity. Prices for equipment soared, in some cases by more than 50%, and developers that hadn’t locked in supply deals were suddenly unable to complete their projects.

A group of developers, along with the Alliance for Clean Energy, petitioned the state’s energy regulator for permission to revise their contracts with higher rates. The answer was a resounding “no.” At least 90 projects canceled contracts to deliver power in a major blow to the state’s plans. Some developers have since managed to line up new power deals, Wells noted, bringing their projects back on track.

“It was a watershed moment for all large-scale renewables in New York,” said Wells. “Those contracts were all signed before inflation, and they were all underwater.”

The offshore wind market, which had been a key part of New York’s goal to add clean energy to the grid, was the hardest hit. It still hasn’t recovered.

New York had planned to add 9 gigawatts of turbines in the Atlantic to feed its grid. Now it looks like that will be closer to 6.9 gigawatts, according to BloombergNEF, and that forecast doesn’t take into account Trump, who is famously hostile to offshore wind and who controls permitting for offshore projects.  

“Some of the investment rationale is being questioned by developers,” said Atin Jain, BNEF’s senior wind analyst. “It’s definitely in trouble.” 

With so many projects scrapped, including large offshore wind farms such as Attentive Energy and Empire Wind 2, a planned transmission line ended up cancelled in November. The transmission project, known as Clean Path, was supposed to carry 5 gigawatts of power to New York City, but without the planned wind and solar farms, the state reasoned that there was no point in building it.

Still, there are some aspects of New York’s energy transition that could mitigate all the bad news. While renewable power development has retreated, Wells points to progress streamlining the process of getting connected to the grid and winning state environmental permits. The New York State Energy Research and Development Authority (NYSERDA) concluded in a July report that the state could meet the 70% clean-energy goal by 2033.

For Doreen Harris, NYSERDA’s chief executive officer, that’s a step forward even if it’s behind schedule. “We’ve made progress that we wouldn’t have made” without the 2019 climate law, she said.

But hitting the state’s energy goal depends on Canada continuing to send power across the border, as well as the completion of the transmission project for New York City. And that ultimately means New York’s green future could hinge on how long the trade war lasts with its northern neighbor.

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