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Pennsylvania could look to RGGI as means to comply with Clean Power Plan


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Pennsylvania could look to RGGI as means to comply with Clean Power Plan

Participation in the Regional Greenhouse Gas Initiativecould provide an established and straight-forward path for Pennsylvania tocomply with the U.S. Environmental Protection Agency's Clean Power Plan.

Under the Clean Power Plan, Pennsylvania will need to reduceits carbon emission rate by 35% of 2012 levels by 2030. The rule, promulgatedunder Section 111(d) of the Clean Air Act, establishes statewide carbon dioxideemission standards for existing fossil fuel-fired electric generating unitswith the goal of cutting CO2 emissions by 32% as measured from a 2005 baselineby 2030.

The final rule accounts for the use of programs like RGGI,providing targets in mass-based terms, facilitating the use of multistatetrading programs and allowing states to treat emissions from new and existingunits equally. Under the guidelines of the final Clean Power Plan, Pennsylvanianow has a goal of 1,095 lbs/MWh.

However, in early February, the U.S. Supreme Courtunexpectedly granted a stay of the Clean Power Plan, effectively putting theimplementation of the rule on hold. Despite the uncertainty created by thestay, officials in many states, including Pennsylvania are still moving ahead on planning,assessing all of their options for compliance with the Clean Power Plan,including joining the RGGI. In the final few months of 2015, the PennsylvaniaDepartment of Environmental Protection engaged with state residents through aseries of listening sessions. Discussions leaned toward the use of a mass-basedstate implementation plan to satisfy Pennsylvania's obligations under the CleanPower Plan.

"The RGGI model is ideally structured for compliancewith the CPP, and it's a model that Pennsylvania is quite familiar with. Thestate's governors and policymakers have given RGGI participation seriousconsideration in the past, and many of Pennsylvania's power suppliers alsooperate in the RGGI footprint," Jordan Stutt, policy analyst with AcadiaCenter, said in a March 31 email.

RGGI is a large trading region, and Pennsylvania utilitiesalready have experience with the RGGI market, as they are producing and sellingpower in the Pennsylvania-New Jersey-Maryland region. is a regionaltransmission organization that coordinates the movement of wholesaleelectricity in all or parts of 13 states and the District of Columbia.

The RGGI was the first mandatory cap-and-trade program inthe U.S., designed to limit CO2 emissions from the power sector. Currently,RGGI comprises nine Northeastern states: Connecticut, Delaware, Maine,Massachusetts, Maryland, New Hampshire, New York, Rhode Island and Vermont. Theparticipating states use a market-based cap-and-trade program to reducegreenhouse gas emissions from regional power plants, selling nearly allemissions allowances through auctions and investing proceeds in energyefficiency projects in the residential, commercial and municipal sectors.

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If Pennsylvania were to join the RGGI, participation in theprogram could serve as a simple plug-and-play method for the state to complywith the Clean Power Plan. The current RGGI states have already laid thegroundwork by setting the cap, and by creating allowance auction and trackingplatforms.

"Those responsible for drafting Pennsylvania's [CleanPower Plan] compliance plan are aware of the economic and environmentalbenefits that RGGI has produced for the participating states, and it would beprudent for them to adopt many of RGGI's key design elements in order to bringthose benefits to Pennsylvania. Setting ambitious cap levels and usingallowance value for investments in energy efficiency and renewable energy willjumpstart Pennsylvania's transition to a thriving clean energy economy,"Stutt added.

Inclusion in a regional mass-based trading program like theRGGI could produce significant revenue for the state of Pennsylvania. Since2009, when the RGGI was first launched, cumulative proceeds from all of the 32CO2 allowance auctions held exceed $2.4 billion.

While there would be many positives to Pennsylvania joiningthe RGGI, several uncertainties remain regarding the possible pitfalls to thestate becoming a member of the program to satisfy requirements of the CleanPower Plan.

Amid the unknown costs to utilities as well as consumers ofcomplying with the Clean Power Plan, 14 state senators in Pennsylvania in earlyFebruary introduced a resolutionseeking a delay, by up to two years, implementing the federal mandate to cutemissions. Senate Resolution 277 asks the state Department ofEnvironmental Protection to delay submitting its compliance plan for the CleanPower Plan until September 2018. The nonbinding resolution followed Gov. TomWolf's decision to forgo a two-year extension by submitting a fast-track planbefore a Sept. 6 deadline to comply early with the rule.

Additionally, market sources have indicated that onefactor that makes it difficult to determine the effect that the addition ofPennsylvania, or any other state for that matter, could have on RGGI is that a2030 program cap has not been set.

Pennsylvania produces the fourth-largest amount of coal inthe country, according to the EIA, and it is a major natural gas producer. In2014, Pennsylvania ranked second in the nation in electricity generation fromnuclear power. As of December 2015, the EIA noted that nuclear generationaccounted for 42.9% of the state's electricity generation, with natural gasaccounting for 29.6%, coal representing 21.8% and renewable energy representingmore than 5%.

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"Pennsylvania can lay the foundation for futureparticipation or trading with the RGGI market. Larger markets yield lower costemissions reductions, and both Pennsylvania and the RGGI states would benefitfrom an expanded market. Pennsylvania has an opportunity to initiate thispartnership by developing a plan that is closely aligned the RGGI model,"Stutt said.