The Regional Greenhouse Gas Initiative (RGGI): The Mid-Atlantic Expansion is Underway . . . Or is It?
Over the course of the past two years, three Mid-Atlantic states—New Jersey, Virginia, and Pennsylvania—have either initiated or finalized efforts to join the Regional Greenhouse Gas Initiative (RGGI). For the uninitiated, RGGI is a regional, market-based CO2 cap-and-trade program that is designed to reduce CO2 emissions from the electric power sector. Within RGGI states, fossil fuel-fired power plants with a capacity of at least 25 megawatts (MWs) must procure CO2 allowances, either through quarterly auctions or on the open market, in quantities sufficient to offset their CO2 emissions. The revenues generated by RGGI’s quarterly auctions—more than $3.5 billion to date—accrue to the participating states. In turn, those states use the RGGI auction proceeds primarily to support energy-related policy initiatives (e.g., energy efficiency, renewable energy, and consumer assistance).
The RGGI program has historically been implemented in nine northeastern states—Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New York, Rhode Island, and Vermont. New Jersey, which was one of the original signatories to RGGI in 2005, but withdrew from the program in 2012, once again became a full RGGI participant as of January 2020. Virginia, after several years of fits-and-starts, is now set to become a full RGGI participant as of January 2021.
Meanwhile, in Pennsylvania, the policy debate currently rages (in multiple forums) over whether the Commonwealth should join RGGI, and on what terms. This section briefly discusses the current status and potential implications of efforts in Pennsylvania to join RGGI, a decision that will have real-world impacts not only within the Commonwealth, but throughout the PJM Interconnection.
All Eyes on Pennsylvania
On 3 October 2019, Pennsylvania Governor Tom Wolf issued an Executive Order (No. 2019-07) that marked the Commonwealth’s first official overture toward joining RGGI. The Executive Order directed Pennsylvania’s primary environmental regulator, the Department of Environmental Protection (PADEP), to develop rules that would enable the implementation of RGGI in Pennsylvania, should the Commonwealth decide to formally sign-on to the regional program.
Under Pennsylvania’s unique environmental rulemaking process, PADEP must present all proposed rules to a separate regulatory body, the Environmental Quality Board (EQB), for approval before they can be officially released in proposed form for public comment. Accordingly, on 15 September 2020, PADEP presented its draft proposed RGGI rules to the EQB, which approved them by a 13–6 margin. Notably, the EQB’s approval came despite the fact that three separate PADEP advisory committees—the Air Quality Technical Advisory Committee, Citizens Advisory Council, and Small Business Compliance Advisory Committee—all failed to pass motions supporting the proposal in the months leading up to the vote (an unusual if not unprecedented occurrence).
The proposed RGGI rules still have a long way to go before they would take effect. After the close of the public comment period, the rules will undergo several layers of review by the EQB, the Independent Regulatory Review Commission, the attorney general, and both of the General Assembly’s Environmental Resources and Energy Committees. If the rules survive that gauntlet—a process that can take a year or more—only then would the EQB be able to promulgate them in final form.
Meanwhile, a majority of lawmakers in both chambers of the Pennsylvania General Assembly recently voted in favor of legislation (House Bill 2025) that would expressly require legislative authorization before the governor, PADEP, or the EQB could adopt rules or take other actions to join or participate in RGGI. Governor Wolf promptly vetoed that legislation, although the General Assembly still has an opportunity to override the governor’s veto with a two-thirds majority vote in each chamber.
If the EQB does ultimately promulgate rules designed to implement RGGI, it is all but certain that opponents would challenge those rules in court. Even if House Bill 2025 does not become law, there are serious questions regarding whether the EQB possesses the requisite constitutional and statutory authority under existing law to adopt the rules as proposed, in part because they implicate the legislature’s taxing and spending powers.6 Thus, in the absence of legislative buy-in, the rules could become mired in litigation, and the courts could potentially strike them down.
The outcome of these legal and policy battles will have real world impacts. Pennsylvania’s electric power sector generates far more electricity (and CO2) from coal and natural gas than any of the current RGGI states,7 and unlike New Jersey and Virginia, Pennsylvania is a net energy exporter.8 While Pennsylvania’s participation would fill a significant geographic gap for the RGGI program, it’s notable that other similarly situated states within the PJM marketplace—namely, Ohio and West Virginia—have not made similar overtures toward joining RGGI. This presents a serious issue in terms of CO2 emissions “leakage”—a significant portion (but not all) of the CO2 emissions reductions that RGGI would drive in Pennsylvania (primarily from early coal plant retirements, but also from reduced usage of newer natural gas-fired plants) would likely be offset by emissions increases in these other PJM states as they make-up for Pennsylvania’s lost generating capacity, as indicated by PADEP’s own power sector modeling.9 This has led some Pennsylvanians to question whether the marginal regional/global emission reduction benefits of Pennsylvania’s participation in RGGI would be worth the anticipated in-state economic impacts that would flow from expected energy price increases and lost jobs in the communities served by coal-fired power plants.
Given the stakes involved, RGGI continues to generate intense interest among a wide range of stakeholders in Pennsylvania and beyond, with opportunities for participation in multiple forums (regulatory, legislative, and judicial). All those who may be impacted by these developments (either positively or negatively) should actively engage now while key decisions are still to be made.