Pennsylvania Withdraws From RGGI, But A State-Specific Cap-and-Trade Program May Be In The Commonwealth's Future

In a significant move for energy policy and climate action, Pennsylvania has officially announced its withdrawal from the Regional Greenhouse Gas Initiative (RGGI), a cap-and-trade program aimed at reducing greenhouse gas emissions in the Northeastern and Mid-Atlantic regions. RGGI was established in 2009, facilitating what is touted as a cooperative, market-based approach to controlling greenhouse gas emissions from the power sector. Through a cap-and-trade system, participating states set a limit on emissions and distribute or auction off allowances that power plants must hold to emit CO₂.

In 2019, former Governor Tom Wolf signed an executive order directing Pennsylvania's Department of Environmental Protection (PADEP) to develop rules enabling the state's participation in RGGI. PADEP spent two years producing the CO₂ Budget Trading Program, which was finalized and immediately subject to legal challenges in April 2022. The Program's implementation was stayed pending the ongoing litigation and has never gone into effect. In 2023, a court order permanently enjoined PADEP from implementing the program on the basis that it constituted an unlawful tax on regulated entities. The Shapiro administration appealed the decision to the Pennsylvania Supreme Court, where it remains pending.

However, since filing the appeal, Governor Shapiro and democratic state representatives agreed to withdrawal from RGGI in the budget-enabling fiscal code bill, HB 416, to finalize the state's delayed $50.1 billion budget for fiscal year 2025-2026. PADEP has since filed applications with the court to discontinue its appeal on the basis that it is now moot. Democrats' acquiescence to passage of the budget without RGGI may be due in part to the fact that Governor Shapiro has proposed an energy plan of his own, which would include a state-specific cap-and-trade program. The plan, referred to as the Pennsylvania Climate Emissions Reduction Program (PACER) was introduced in the House in April 2025 and would require support from the GOP to pass.

Given that PADEP's CO₂ Budget Trading Program never went into effect, the state's withdrawal from RGGI does not alter the substantive requirements of its greenhouse gas producers. However, they should be on the lookout for the Shapiro Administration's and Democratic lawmakers' continued advocacy to pass and implement PACER and other climate initiatives in 2026.

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