Public Comment Period Opens on Proposed Rulemaking to Establish Pennsylvania as Member of Regional Greenhouse Gas Initiative

November 12, 2020
Bryan P. Franey and Thomas M. Duncan
MGKF Special Alert

On November 7, 2020, the Environmental Quality Board (EQB) opened a public comment period on its proposed rulemaking entitled “CO2 Budget Trading Program,” which would establish Pennsylvania as the newest member of the Regional Greenhouse Gas Initiative (RGGI).  A link to the proposed rulemaking is included here

RGGI is an intergovernmental organization consisting of ten member-states (CT, DE, ME, MD, MA, NH, NJ, NY, RI, VT) that has established a market-based cap-and-trade program for CO2 emissions from fossil fuel-fired power plants that have 25 megawatts or more of nameplate capacity and send at least 10% of their gross generation to the grid.  In October 2019, Governor Tom Wolf signed Executive Order No. 2019-07 which directed the Pennsylvania Department of Environmental Protection (PADEP) to develop and present to the EQB a proposed rulemaking that would enable Pennsylvania to join RGGI. 

The proposed rulemaking would provide an initial CO2 allowance budget for Pennsylvania (beginning 2022) of 78 million tons of CO2, which will be reduced by approximately 2.5 million tons per year through 2030, resulting in a 25.5% reduction between 2022 and 2030.  After 2030, the RGGI states would need to renegotiate the next set of reductions.  PADEP expects that the auctions will yield annual revenues of between approximately $179 million and $320 million through 2030.  The Air Pollution Control Act requires that all auction proceeds be directed to the Clean Air Fund “for the use in the elimination of air pollution.”  PADEP has not yet developed a reinvestment plan for the auction revenues but anticipates that potential areas of reinvestment will include energy efficiency, renewable energy, and greenhouse gas abatement.

Notably, the proposed rulemaking would include several set-aside accounts.  The first, a waste coal set-aside account, would allow for the allocation of CO2 allowances equal to the highest year of CO2 emissions from a waste coal-fired unit during the five-year period beginning January 1, 2015 through December 31, 2019.  The proposed rulemaking would also create a strategic use set-aside account to promote renewable energy and CO2 emissions abatement, as well as a cogeneration set-aside account.

Based on an analysis conducted by a consultant retained by PADEP, most emission reductions are expected to come from reductions in coal use, while a smaller percentage would come from natural gas.  While Pennsylvania would expect to see an emissions reduction of 183 million tons of CO2 by 2030, approximately 96 million of the 183 million tons of CO2 emissions would simply be shifted (i.e., leaked) to other states within PJM territory (PJM is a regional transmission organization that coordinates the movement of electricity in Pennsylvania, all or parts of twelve other states, and the District of Columbia).  In fact, nearly all of the anticipated reductions in natural gas emissions and generation in Pennsylvania are expected to be leaked to other PJM states.  Largely for these reasons, both the PADEP Air Quality Technical Advisory Committee and the PADEP Citizens Advisory Council failed to pass a vote to concur in the proposed rulemaking, by votes of 9-9-1 and 4-9-1, respectively.

The comment period for the proposed rulemaking is set to close on January 14, 2021.  If you would like to discuss the potential impacts of this rulemaking, please contact Bryan Franey (484-430-2308) or Tom Duncan (484-430-2358).