Pennsylvania court halts publication of RGGI rule, legislative activity continues

The battle continues in Pennsylvania over whether the state will join the Regional Greenhouse Gas Initiative after the Commonwealth Court issued a stay late April 5 on publishing the final RGGI regulation, pending a preliminary-injunction hearing scheduled for May 4.

The Legislative Reference Bureau was expected to publish the final RGGI rulemaking in the coming days after the Senate failed to garner the two-third majority votes needed April 4 to overturn a governor's veto of a Senate resolution to stop RGGI entry.

The court scheduled a hearing May 4 on the legislative intervenors' request for a preliminary injunction.

"It's unlikely the court would make a ruling from the bench after that hearing," Mark Szybist, Natural Resources Defense Council senior attorney for the Climate & Clean Energy Program, said in an email April 6. "More likely it will issue an order and opinion soon afterward."

The earliest Pennsylvania could likely participate in RGGI is third quarter 2022, which would be the Sept. 7 RGGI auction, Szybist said. Pennsylvania was originally slated to join RGGI in Q1.

"It depends on what happens in court," Szybist said. "We're on track for Q3 unless the courts slow things down."

Pennsylvania RGGI background

Pennsylvania Governor Tom Wolf has made joining RGGI a focus of his climate change plans. In January 2019, he set Pennsylvania's first statewide climate goals, aiming to reduce greenhouse gases by 80% by 2050, compared to 2005 levels. An October 3, 2019 executive order instructed the state Department of Environmental Protection to join RGGI.

In January, Wolf vetoed a Senate resolution that would have hindered the state from joining RGGI, achieving climate goals and reducing carbon emissions. The Senate voted April 4 to try to override the governor's veto and came up short.

The LRB did not publish the final RGGI regulation in late 2021 as the resolution was still pending legislative action, leading the DEP to initiate the court case against the LRB claiming it broke the law by refusing the publish the state's RGGI rule. The case is now on hold until the court's scheduled May 4 preliminary injunction.

Critics of Pennsylvania joining RGGI say the move essentially creates a carbon tax.

"It is simply absurd that we would initiate a tax increase on Pennsylvanians and our Commonwealth's energy resources at a time when inflation and gas prices are skyrocketing," Senate Majority Leader Sen. Kim Ward (R-Westmoreland) said an April 4 statement.

In its latest nuclear risk assessment report, S&P Global Commodity Insights shows the RGGI situation being a factor in Energy Harbor's 1,872-MW Beaver Valley nuclear plant retirement planning, saying "The plant had announced retirement for 2021, but opted not to in lieu of [Pennsylvania] potentially joining RGGI in 2022. The outlook for this remains uncertain."

Pending RGGI legislation

Pennsylvania House Bill 637 and Senate Bill 119 are still in the legislature

HB 637 would essentially kill the move to join RGGI by preventing the DEP from regulating carbon dioxide emissions without further legislation and provides $250 million for carbon capture, abandoning well plugging and transition for coal communities. It is the Republican's answer to a RGGI alternative, something they had faced criticism over not providing in the past.

SB 119 would allow the General Assembly to determine RGGI participation. It would authorize the DEP to conduct a public comment process and submit to the General Assembly "a measure or action intended to abate, control or limit carbon dioxide emissions by imposing a revenue-generating tax or fee on carbon dioxide emissions," according to the bill's short title that was posted to the General Assembly's website.

RGGI additions

RGGI is a cooperative effort of 11 New England and Mid-Atlantic states -- Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island, Vermont and Virginia -- to reduce CO2 emissions from the power sector.

In 2009, it became the first mandatory cap-and-trade program in the US to limit carbon emissions by requiring power plants with generating capacity at or above 25 MW to obtain a number of allowances equal to the number of tons of CO2 they emit.

New Jersey rejoined in January 2020 after an eight-year hiatus.

Virginia joined RGGI in January 2021 but its future with the cap-and-trade program is now unclear. Virginia Governor Glenn Youngkin is pushing to extract the state from RGGI. He signed an executive order to direct the Department of Environmental Quality to examine the impact of RGGI and start the process of ending Virginia 's participation following a report that concluded "participation in RGGI is in effect a direct carbon tax on all households and businesses" since Virginia joined RGGI, according to a March 15 statement.

RGGI Auction 56

The next RGGI auction is scheduled for June 1 with 22,280,473 CO2 allowances available for sale, according to RGGI's Auction 56 notice. The number of allowances for sale in Q2 are up nearly 3% from Q1.

The minimum reserve prices is $2.44/st in 2022.

There will also be 11,611,278 cost containment reserves available, which are triggered if the interim clearing price exceeds $13.91/st. In addition, Auction 56 includes 10,961,898 emissions containment reserves, which are available to be withheld if the interim clearing price falls below $6.42/st.