Pennsylvania’s plans to cut carbon pollution from fossil fuel power plants took a big step forward on April 23. After many delays, the Legislative Reference Bureau published the final CO2 Budget Trading Program, also known as the “Regional Greenhouse Gas Initiative (RGGI) Rule.” 

This means that, after years of work – with considerable input from the public – the program Governor Tom Wolf announced with Executive Order 2019-07 back in October 2019 will finally go into effect. Pennsylvania will start to limit the carbon pollution from fossil fuel electric generation. 

How RGGI Will Work for Pennsylvania 

Under RGGI, each participating state decides how much carbon pollution they will allow, otherwise known as a “cap.” For each ton of carbon emissions allowed under that cap, the states create an “allowance.”  Operators of large electric generators — like a coal or fracked gas power plant — must obtain one allowance for each ton of carbon dioxide (CO2) they emit, most of which will likely be purchased at quarterly RGGI auctions.   

Each state will get a share of auction proceeds commensurate with their auction allowances. States can choose how they want to invest the money.  The first auction that Pennsylvania power plants will participate in is scheduled for September 7, 2022. 

Under existing Pennsylvania law, namely the Air Pollution Control Act, proceeds will be deposited in the Department of Environmental Protection (DEP)’s Clean Air Fund for use in programs or initiatives that further reduce air pollution.  

Pennsylvania Power Plants Won’t Have to Pay for All Their Pollution Right Away 

The RGGI program runs on a three-calendar-year “control period” with each of the first two years serving as “interim control periods.” Power plants eventually need to obtain allowances for each ton of CO2 they emit during the entire control period. But they don’t need them all right away. For each of the interim control periods, they only need allowances for half of their emissions. 

Because of the delay in starting the program, Pennsylvania will start participating in the RGGI auctions in the middle of 2022, part way through one of the three-year control periods. What this means is, for 2022, Pennsylvania’s electric generators will only need to obtain credits for carbon pollution they emit between July 1 and the end of the year. Also, since 2022 is the second interim control period, companies only need allowances for half of their 2022 emissions by midnight March 1, 2023. Then, by March 1, 2024, they will need allowances for all their 2023 emissions plus any remaining 2022 emissions. 

Power Plant Companies Have Many Options to Reduce Carbon Pollution 

While most companies that own power plants are expected to bid for the credits they need during the quarterly auctions, they have other options: 

• A company could invest in process improvements or otherwise reduce the amount of fossil fuels they burn and the pollution they emit; 
• Companies could invest in eligible CO2 emissions offset projects. Examples include verified projects that sequester carbon through reforestation initiatives, avoid emissions through improved forest management practices, or reduce pollution from other sources such as landfill gas or agricultural methane;  
• Companies could participate in the “secondary market” where they can trade not only allowances with other companies, but also financial derivatives such as futures, forwards, and options; or 
• Some companies may even be able to structure their operations to qualify for allowances from other set-aside programs like those for combined heat and power units. 

The Fight Over Pennsylvania and RGGI Isn’t Over Yet 

Of course, many polluting companies prefer the status quo where they can dump their carbon emissions into the air for free. Their friends in the legislature did everything they could to stop the program from going forward. Having failed to secure the votes to overturn Governor Wolf’s veto, opponents are turning to the courts. They are not only asking the Commonwealth Court to invalidate the program, they are also seeking an injunction to prevent the rule from going into effect while the Court decides. 

It's too early to predict what the court might do, but PennFuture agrees with the DEP, the Attorney General’s office, and the Independent Regulatory Review Commission. All found that the CO2 Budget Trading Program is authorized by the Air Pollution Control Act.  We’ve also joined with other groups seeking the opportunity to speak for our membership and to make our case before the Court.

Ultimately, we believe this program is the right choice for Pennsylvania.  We are facing a growing climate crisis. Ignoring our climate obligation is a recipe for failure.  

Rather than Fight, the Legislature Has An Opportunity to Be Part of the Solution 

Under the Air Pollution Control Act, the Department of Environmental Protection (DEP) can only spend auction proceeds on measures that reduce air pollution. This could include projects that address legacy pollution sources, investments in new clean energy, and many other needed programs.   

If the Legislature were to approve a spending plan, the DEP could make even more targeted investments, bringing added benefits to frontline workers and impacted communities as well as our shared environment.    

The RGGI Investments Act — SB15 (Comitta) in the Senate and HB 1565 (Herrin) in the House — proposes just that sort of program. The legislation would support workers and communities affected by the clean energy transition, investing specifically in frontline and environmental justice communities. 

Good Climate Policy in Pennsylvania Has Been a Long Time Coming 

Pennsylvania was once considered a leader in climate policy. In 2004, Pennsylvania passed the Alternative Energy Portfolio Act which required, for the first time, electricity distribution companies to supply a certain percentage of alternative energy, including wind and solar power. In 2008, Pennsylvania passed Act 129, which required electricity distribution companies to reduce energy consumption through investments in energy efficiency in their geographic regions. Again in 2008, the legislature enacted a grant and loan program through DEP and the Department of Community and Economic Development (DCED) to support the installation of renewable energy projects.  

But over the ensuing 14 years, Pennsylvania not only failed to update any of its climate legislation or re-invest in its renewable energy programs, it has actively tried to stop any efforts to cut carbon emissions. Those policies have effectively died on the proverbial vine.  

Instead, Pennsylvania has reverted to its historic roots as a fossil fuel zealot, showering the fracked gas industry with subsidies and weak regulations, ignoring the plight of communities beset by pollution or the Commonwealth’s role as one of the major climate contributors in the United States. 

This is what makes the RGGI rule so important. It’s the first time in 14 years Pennsylvania has taken climate action. Certainly, the fight for the RGGI rule’s long-term survival isn’t over yet. The adherents to the philosophy of free pollution and an economy dominated by fossil fuels are still loud and active. But we hope that this is a turning point where we can put the doldrums of Pennsylvania’s climate history behind us and begin building a clean, more prosperous future.