Former Gov. Tom Wolf’s signature climate program has been on hold for more than a year.
By some estimates, the state has lost close to $1 billion in the delay.
That money could have been put toward addressing climate change by boosting clean energy programs. If the legislature and Gov. Josh Shapiro had agreed on a plan, it also could have offered relief to fossil-fuel industry workers who lost jobs when power plants closed.
States make money through the Regional Greenhouse Gas Initiative by auctioning off allowances for carbon pollution four times per year.
Pennsylvania’s regulation to join RGGI was done in late 2021 but was held up by the legislature until April 2022. It was paused by a court ruling last July.
What Pa. lost without RGGI
Robert Routh, Pennsylvania clean energy state lead at the Natural Resources Defense Council, crunched the numbers and found the state could have brought in around $800 million if it participated in the last four auctions. It could have raised $1.25 billion in the last six auctions.
That’s based on the price set in each of the past auctions and how many allowances Pennsylvania said it planned to sell. The Department of Environmental Protection said it would set an initial budget of 78 million tons of carbon dioxide, which would decline each year. Each ton would need to be covered by an allowance.
The estimate differs from past projections of how much the state could raise. DEP initially estimated the state could raise $300 million in the first year. It later revised the number to around $200 million. A March 2022 analysis from the Independent Fiscal Office found the state could get $700 million per year. Gov. Josh Shapiro’s proposed budget estimated raising $600 million in the next year from RGGI. The state would pay a small percentage for administering the program.
Allowance prices rose from $5.65 per ton of carbon dioxide in March 2020 to $13.90 in June 2022. The most recent price was $12.73 per ton.
Routh said it’s not clear how Pennsylvania entering the program would have affected prices.
“Where bids come in at a particular auction is going to be a really complicated matter of individual investment decisions, how far along certain plants are with their compliance obligations, and basic supply and demand,” Routh said.
Rob Altenburg, who directs PennFuture’s Energy Center, came up with similar estimates as Routh’s for how much Pennsylvania could have raised at auction.
He said the state missed a huge opportunity to get ahead on reducing pollution with the RGGI delay and is now falling behind other states.
Where would the proceeds have gone?
Money raised through RGGI automatically goes to the state’s Clean Air Fund, which can only be used to reduce air pollution. DEP proposed spending RGGI proceeds on clean energy, energy efficiency, and greenhouse gas abatement programs.
“Imagine how far one and a quarter billion dollars could go,” Routh said.
Senate Majority Leader Joe Pittman (R-Indiana), who opposes the state joining RGGI, does not see the missed revenue as a loss.
“I’m pleased that every person in our commonwealth paying an electric bill ‘missed’ the opportunity to pay $1.25 billion in increased costs for electricity,” Pittman said in a statement.
A May report from the Kleinman Center for Energy Policy at the University of Pennsylvania found that joining RGGI would cause only a minor increase in retail electricity prices or possibly a small decline.
Lost funds for communities impacted by power plant closures
The legislature could direct the money elsewhere. The Wolf Administration wanted to use some money to help communities affected by closing coal-fired power plants.
Cheswick Generating Station in Allegheny County shut down in spring 2022.
Homer City Generating Station in Indiana County closed this summer. Last year, the company said it had 129 workers. The plant’s owners put part of the blame on the “ongoing uncertainty” around the state joining RGGI.
All of the state’s remaining coal plants are slated to be shut down or converted to natural gas by 2028.
Reaction to the study
Critics of RGGI have said that joining would only hasten those shutdowns. Gov. Josh Shapiro has been noncommittal on the program. He has said he is unsure if joining RGGI can reduce pollution while reserving jobs.
Shaprio has convened a working group of labor, industry, and environmental representatives to look into RGGI. The group’s meetings have not been open to the public.
Shapiro’s office did not return a request for comment on the missed revenue estimates.
Katie Blume, political and legislative director for Conservation Voters of PA, said coal has been in decline for at least the last decade.
“We have not proactively helped those communities or their workers and proceeds from a RGGI auction can help with that,” Blume said.
She added RGGI money could be used in combination with federal climate money to help a transition to clean energy.
“We are missing out on financing that could spur the growth of green energy technologies, generation and infrastructure right here in Pennsylvania,” Blume said.
Where the court case stands
The notice for the next RGGI auction in September says Pennsylvania will not offer allowances because of the ongoing court order.
The Commonwealth Court heard arguments on the merits of the state joining RGGI in November. The state Supreme Court heard arguments on the lower court’s pause of the program in May.
Industry groups and Republican state lawmakers argue RGGI amounts to an unconstitutional tax on power plants by the executive branch. DEP counters that the money plants have to pay for pollution is a fee–not a tax–and that it has authority to implement the fee under the state’s Air Pollution Control Act.
“Either court could issue a decision at any time. We’re all just waiting,” Routh said.
A court decision soon could allow the state to join in the December auction.
DEP did not return a request for comment on how much time it would take the agency to prepare for participation.
This story is produced in partnership with StateImpact Pennsylvania, a collaboration among The Allegheny Front, WPSU, WITF and WHYY to cover the commonwealth's energy economy.
