PA Court: Cap-and-Trade Energy Program RGGI Deemed Unconstitutional
PA Court Rules Against Governor’s Decision to Join Greenhouse Gas Initiative
In a groundbreaking decision, the Pennsylvania Commonwealth Court has declared that former Gov. Tom Wolf’s unilateral decision to join the Regional Greenhouse Gas Initiative (RGGI) without involving the Legislature violated the state’s constitution. This ruling effectively prevents Pennsylvania from becoming a member of the cap-and-trade program aimed at reducing carbon emissions.
However, the fight is not over yet. There are whispers in the Capitol that an appeal may be pursued, keeping the possibility of joining RGGI alive.
RGGI, a program between member states, seeks to cut CO2 emissions from the power sector by 30% by 2030. Power companies are given emission caps and must either purchase CO2 permits or find innovative ways to reduce their emissions. This will undoubtedly increase the cost of energy production.
Power generators that produce less than the cap can sell their excess CO2 permits to those exceeding the limit. The number of permits allocated will gradually decrease, reducing overall emissions.
RGGI, a nonprofit organization, oversees the auction of permits among partner states. Currently, Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island, Vermont, and Virginia are members. If Pennsylvania were to join, it would be the largest energy-producing state involved. Concerns have been raised that RGGI could lead to job losses, bankrupt power companies, and higher energy costs for Pennsylvanians.
State Senate Republicans argued that the Department of Environmental Protection (DEP) and the Environmental Quality Board (EQB) imposed an unconstitutional tax on energy companies by entering RGGI.
The crux of the argument revolves around whether RGGI is considered a tax. While the DEP and EQB claim it is not, the Senate and now the Commonwealth Court view it as such. Judge Ellen Ceisler dissented.
Moving Money
Both the DEP and EQB stand to gain a significant windfall from RGGI. According to court documents, the auction proceeds would be deposited into Pennsylvania’s Clean Air Fund, which aims to reduce air pollution.
From 2016 to 2021, the Pennsylvania Clean Air Fund maintained a yearly balance of $20 million to $25 million, occasionally spending slightly more than it received. However, with the introduction of RGGI auction proceeds, court papers estimate that the 2022–2023 budget year could see receipts exceeding $443 million.
The court decision states, “There is no cited authority under which DEP and EQB may obtain or retain the auction proceeds for Pennsylvania allowances that are purchased by non-Pennsylvania covered sources, which are not subject to DEP’s and EQB’s regulatory authority, and which are not tethered to CO2 emissions in Pennsylvania.” The ruling declares the rulemaking invalid and prohibits the enforcement of its provisions.
State Republicans have expressed their satisfaction with the court’s decision.
“The Commonwealth Court decision confirms what we have known for some time—which is the tax known as RGGI is unconstitutional,” said Senate President Pro Tempore Kim Ward. “One of Pennsylvania’s greatest assets is our ability to produce energy, which is being held hostage by flawed public policy resulting in higher electricity rates for our citizens. Gov. Shapiro should drop the RGGI lawsuit and work with us to unleash Pennsylvania’s energy potential by working together to develop a responsible energy policy for the people we represent.”
Other Republicans, including Pennsylvania House Republican Leader Bryan Cutler and State Rep. Martin Causer, have also praised the court’s ruling, emphasizing the potential negative impact RGGI could have on the state’s energy industry and consumers.
The Pennsylvania Chamber of Business and Industry, along with several other organizations, filed an amicus brief opposing RGGI.
How would the funds generated through the PAA program be allocated towards environmental initiatives in Pennsylvania?
Official estimates, the program could generate over $300 million in annual revenue for the state. This money would be used to fund a variety of environmental initiatives, including clean energy projects and energy efficiency programs. However, opponents argue that these funds are effectively a tax on energy companies, as they are required to purchase permits in order to continue operating within the state.
Furthermore, critics argue that RGGI will have negative effects on Pennsylvania’s economy. The state is a major producer of coal, and the coal industry has already been struggling in recent years. The implementation of RGGI could exacerbate this decline, leading to job losses and economic hardship for communities that rely on coal mining.
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