On April 23, 2022, Pennsylvania became the 12th state to join the Regional Greenhouse Gas Initiative ("RGGI"). Entry into the cap-and-trade program is one of the cornerstones of Governor Tom Wolf's efforts to mitigate carbon dioxide ("CO2") emissions from the Commonwealth's power sector. While Pennsylvania's move to join RGGI, beginning in 2019, has ended, the collaborative work of implementing the program and remaining a member has just begun.
RGGI is a market-based program that began in 2005 and has since expanded throughout the northeastern United States. By entering RGGI, states agree to place a limit on the amount of CO2 their power plants can emit. Regulated power plants then buy pollution permits up to a set maximum emissions limit. Due to the regional nature of the agreement, emission allowances can be bought and sold across state lines. Proceeds from pollution permit sales are reinvested into state programs supporting energy efficiency, renewable energy, and greenhouse gas abatement. Participating states' maximum CO2 emissions limits get reduced each year as the clean energy sector grows.
Immediate Effects of RGGI
The Pennsylvania Environmental Quality Board made Pennsylvania's entry into RGGI official via a publication in the Pennsylvania Bulletin. RGGI will affect the Commonwealth's fossil fuel-powered generators able to produce 25 MW or more of electricity. The rulemaking establishes that the Commonwealth's CO2 emissions cap will start at 78 million tons in 2022 and decline to roughly 58 million tons by the end of 2030.
Affected power plants have been tasked with accounting for their CO2 emissions. Facilities must then obtain one CO2 allowance per one ton of CO2 emitted. Relevant dates for CO2 accounting are as follows:
- The emissions accounting period officially began on July 1, 2022;
- Facilities must account and obtain allowances for 50% of their 2022 emissions by March 1, 2023; and
- Facilities must account and obtain allowances for 100% of their 2022 emissions by March 1, 2024.
The CO2 Budget Trading Program has built in protection from extreme price fluctuation in CO2 allowances. The program also has annual CO2 allowances set aside for waste coal-fired facilities, combined heat and power facilities, and strategic use allocation. Further, the program offers a limited exemption available to plants providing power to industrial, institutional, or commercial facilities.
The Pennsylvania Environmental Quality Board anticipates that, by 2030, Pennsylvania's participation in RGGI will decrease greenhouse gas emissions in the Commonwealth by 31% compared to 2019 levels. The Pennsylvania Department of Environmental Protection has also projected that participation in RGGI will bring Pennsylvania an increase in jobs and a gross state product boost of nearly $2 billion. The precise impacts on the Commonwealth, however, remain to be seen.
Victoria Kline, a summer associate in the Pittsburgh Office, contributed to this article.
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