Key Takeaways
The Regional Greenhouse Gas Initiative (RGGI) is dead in Pennsylvania, with a $50 billion budget deal signed by Governor Shapiro.
Pennsylvania ranks as the second-largest producer of natural gas and the third-largest producer of coal among U.S. states.
Pennsylvania Governor Shapiro wants to replace the RGGI with an energy-related plan that includes a “cap and invest” provision for reducing greenhouse gas emissions and other incentives for non-fossil technologies, including renewable energy, battery storage, nuclear, hydrogen, and sustainable aviation fuel.
The budget deal is a blow to the RGGI because Pennsylvania is the first state legislature to pull out of the program, which should help keep retail energy costs affordable and improve reliability within the state.
Pennsylvania will no longer seek to be part of the Regional Greenhouse Gas Initiative (RGGI) due to a $50.09 billion budget deal. In 2019, then-Governor Tom Wolf issued an order to join RGGI, which was challenged in court and has been the subject of an ongoing legal fight. A case is currently pending before the state Supreme Court over whether the RGGI-imposed levy on power producers constitutes a tax or a fee. A tax could not be imposed by a governor since only the legislature has the authority to impose a tax. While the current Pennsylvania Governor, Josh Shapiro, agreed with the budget deal, the governor has his own energy-related “Lightning Plan,” which includes a cap-and-invest provision for greenhouse gas emissions.
Shapiro’s Lightning Plan
Pennsylvania’s Climate Emissions Reduction Act would establish a carbon limit for the state and invest proceeds in reducing electricity costs. Under the act, 70% of the revenue generated would be returned to Pennsylvanians as rebates on their electric bills. Clearly, Shapiro’s plan would increase electricity rates (or there would be no need for a rebate), as the state moves toward carbon-free sources of energy under the plan. Pennsylvania is attempting this change despite the state’s rich natural gas and coal resources, including numerous coal- and natural gas-fired power plants. Pennsylvania is second only to Texas when it comes to natural gas production and is the third-largest producer of coal.
The governor’s plan also includes tax credits. According to the Governor’s Press Office, the Reliable Energy Investment Credit would provide up to $100 million per facility for three years for adding reliable energy sources to the grid. The Regional Clean Hydrogen Tax Credit would add up to $49 million annually for regional hydrogen projects. The credit for sustainable aviation fuel would provide up to $15 million per year for a taxpayer who makes a $250 million capital investment and creates 400 jobs at a facility to produce sustainable aviation fuel. To speed up permitting, reduce red tape, and support the next generation of energy projects in the state, the Governor is proposing to set up a Pennsylvania Reliable Energy Siting and Electric Transition (RESET) Board.
A Pennsylvania Reliable Energy Sustainability Standard in the governor’s plan would update Pennsylvania’s energy standards, incentivizing innovation in nuclear and renewable energy, and battery storage. The governor’s plan would update the state’s energy efficiency standards and reform Act 129, the law that provides rebates and incentives to buy new energy-efficient appliances. The governor’s “Community Energy” is a proposal that helps rural communities, farmers, and low-income Pennsylvanians jointly share energy resources to lower costs. An example the office provides is farmers using methane digesters to produce energy for their farms, reducing reliance on utility companies and lowering their energy prices.
The Pennsylvania budget does include an additional $25 million for a grant program that provides schools with money to install solar panels and authorizes the spending of federal funding for solar panel construction.
The Regional Greenhouse Gas Initiative
The RGGI that the state is exiting is an effort among 11 states — Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island, and Vermont — to cap and reduce carbon dioxide emissions from the power sector. The RGGI requires power plants in the 11 states to purchase allowances to release carbon dioxide that they cannot reduce by other methods to meet the cap, which increases electricity prices as utilities no longer have recourse to the cheapest options to satisfy demand and maintain reliability of the grid. The revenues from the tax are divided among the participating states.
Analysis
Pennsylvanians should rejoice that the state has finally decided to ditch the RGGI, which threatened to impose high costs on reliable energy producers in the state, hurting everyday people and threatening the reliability of the electric grid. As a report from Pennsylvania’s Commonwealth Foundation explains, “RGGI operates from a premise of climate idealism that fundamentally promotes degrowth and would cause significant economic damage, threaten jobs, deflate Pennsylvania’s role as a top-energy-producing state, and lower the commonwealth’s standard of living. The tradeoffs are demonstrably unreasonable.”
However, the significance of this victory could be dampened if Shapiro’s “Lightning Plan” gets enacted because its subsidization of “green” sources would raise costs for Pennsylvanians, while diverting resources away from investments in utilizing the state’s vast reserves of natural gas and coal.
For inquiries, please contact [email protected].
