Yes, the PA DEP Has Legal Authority to Do a RGGI Rule

Existing Statutory Authority Provides Pennsylvania Agencies with Pathways to Join the Regional Greenhouse Gas Initiative
Pennsylvania State Capitol
Credit: Mark Szybist

The following article was written for NRDC by West Virginia University Law Professor James Van Nostrand, who is also Of Counsel with the law firm of Keyes & Fox LLP. The analysis, which was co-authored by Keyes & Fox associate Beren Argetsinger, considers whether the Pennsylvania Department of Environmental Protection (DEP) has the authority under existing statutory law (i.e., without additional legislation by the General Assembly) to promulgate a carbon dioxide limits regulation for the state's power sector.

We commissioned the analysis because state legislators who oppose greenhouse gas reduction policies have argued that the DEP lacks authority, even as they work to pass legislation to strip the DEP of that (supposedly non-existent) authority. Ultimately, these arguments will be hashed out in court: opponents of the DEP's RGGI rulemaking have made no secret of the fact that they intend to sue over it. In the meantime, we offer Professor Van Nostrand's analysis for RGGI followers who are interested in a reasoned discussion of the legal issues, rather than in polemics.

Curbing Power Plant CO2 Emissions Through a Multi-State Framework Delivers More Cost-Effective Reductions and Greater Consumer Benefits Than "Go-It-Alone" Strategies

Existing Statutory Authority Provides Pennsylvania Agencies with Pathways to Join the Regional Greenhouse Gas Initiative

Political leaders in Pennsylvania are considering whether the Commonwealth should join the Regional Greenhouse Gas Initiative (RGGI), a “cap and invest” initiative to cut carbon dioxide (CO2) pollution from fossil fuel-fired electric generating plants in Northeast and Mid-Atlantic states. Ten states—Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island, and Vermont—currently participate in RGGI, and Virginia plans to join RGGI beginning in January 2021. On October 3, 2019, Pennsylvania Governor Tom Wolf issued an executive order that would lay the groundwork for the Commonwealth to join RGGI. Executive Order No. 2019-07, titled Commonwealth Leadership in Addressing Climate Change through Electric Sector Emissions Reductions, directs the Pennsylvania Department of Environmental Protection (DEP) to develop a proposed rulemaking package for adoption by the Environmental Quality Board (EQB) that (1) sets a CO2 emissions cap that is “consistent in stringency to that established in the RGGI participating states”; (2) provides for the auction of carbon allowances; and (3) is “sufficiently consistent” with the RGGI Model Rule that the other RGGI states will agree to the trading of Pennsylvania allowances on the RGGI markets. DEP is currently developing these proposed rules and, by September 15, 2020, will present them to EQB, which in turn will decide whether to issue them for public comment.

Opponents have argued that EQB and DEP do not have the statutory authority to include Pennsylvania within RGGI or otherwise implement the Executive Order without authorization from the General Assembly. This blog briefly describes how RGGI works, and examines the existing statutory authority of EQB and DEP to: (1) regulate CO2 emissions from power plants pursuant to emission allowance auction and trading mechanisms consistent with the RGGI framework; (2) deposit proceeds generated from the auction into the Clean Air Fund for administration by DEP to advance clean energy objectives in the Commonwealth; and (3) link Pennsylvania’s CO2 emission reduction program with similar programs in other RGGI states to achieve more cost-effective reductions in Pennsylvania. We conclude that existing statutory authority provides a sufficient legal basis to support adoption and implementation of proposed rules to accomplish Pennsylvania’s participation in RGGI.

How RGGI Works

As explained in detail here by NRDC’s Bruce Ho, RGGI is a “cap and invest” program. Together, the RGGI states set a regional “cap”—composed of individual CO2 “Budget Trading Programs” in each participating state—on the amount of carbon pollution that power plants are allowed to emit. Through independent regulations based on the RGGI Model Rule, each state’s Budget Trading Program sets a cap on CO2 emissions from electric power plants, provides for the issuance of CO2 allowances, and enables participation in the regional CO2 allowance auctions. The 2020 cap for the ten currently participating states is 96.2 million tons. By way of context, Pennsylvania’s power sector alone emitted almost 82 million tons of CO2 pollution in 2018. Upon Pennsylvania joining RGGI, the overall cap will increase based on an agreed number of tons among all participating states.

The “invest” part of RGGI is an extension of the “polluter pays” principle. Under RGGI, power plants must buy one “allowance” for every ton of CO2 they emit. The number of allowances is lowered each year, so that the region’s power plants contribute progressively fewer emissions to global warming. Most allowances are purchased at quarterly auctions held by RGGI, Inc., a non-profit corporation that administers the RGGI auction market; in addition, allowances can be bought and sold on secondary trading markets. Auction proceeds are returned to the participating states for them to invest in energy efficiency, renewable energy, bill rebates, and other clean energy projects and programs that create jobs, further lower pollution, and benefit consumers.

Existing Authority of EQB and DEP to Implement the Executive Order

Three different issues of statutory authority are involved in the implementation of the Governor’s Executive Order: (1) the authority to regulate CO2 emissions from power plants pursuant to emission allowance auction and trading mechanisms consistent with the RGGI framework; (2) the authority to deposit proceeds generated from the auction into the Clean Air Fund for administration by DEP to advance clean energy objectives in the Commonwealth; and (3) the authority (if necessary) to link Pennsylvania’s CO2 emission reduction program with similar programs in other RGGI states.

1. Authority to Regulate CO2 Emissions from Power Plants Using Emission Allowance Auction and Trading Mechanisms

The Pennsylvania Air Pollution Control Act (APCA) provides EQB and DEP with broad statutory authority to promulgate and enforce regulations for the control and abatement of “air pollution” in the Commonwealth. While the term “air pollution control program” is not defined by APCA, the powers delegated to EQB and DEP to regulate “air pollution” in Pennsylvania give the agencies the authority to (1) implement federal pollution control standards under the Clean Air Act (CAA), and (2) adopt additional state specific pollution control standards pursuant to separate provisions of APCA independent of CAA implementation requirements. (Although APCA imposes certain limitations on EQB’s authority to adopt standards that are more stringent than the federal standards for certain pollutants (e.g., criteria pollutants and hazardous air pollutants) these limitations do not appear to extend to COemissions.)

The power and duty of DEP and EQB to control “air pollution” (defined in 35 P.S. § 4003) by establishing “maximum allowable emission rates” (e.g., rate-based standards) or “maximum quantities” (e.g., mass-based standards) (provided in 35 P.S. § 4005(a)(1),(2)), for “air contaminants” from “air contamination sources” (defined in 35 P.S. § 4003) provide a sound basis to develop a statewide CO2 emission “budget” or “cap” for power plants, as directed by the Executive Order.

The vast majority of CO2 allowances issued by RGGI states are distributed through regional CO2 allowance auctions. Auction proceeds are returned to the RGGI states and invested in consumer benefit programs such as energy efficiency, renewable energy, direct energy bill assistance, and other CO2 reduction programs.

Section 4005(a)(1) of APCA grants EQB broad authority to adopt rules to control air pollution and EQB and DEP currently administer emissions budget trading programs for NOx that include provisions for intra- and interstate trading. Moreover, Section 4006.3(a) of APCA authorizes EQB to establish fees (1) sufficient to cover the indirect and direct costs of administering the air pollution control plan approval process, operating permit program required by Title V of the CAA, and other requirements of the CAA, and (2) to support the air pollution control program authorized by APCA and not covered by fees required by Title V of the CAA. While the first part of §4006.3(a) speaks to EQB’s authority to establish “fees”—including “emission fees” as provided in §4006.3(c)—to support administrative costs of implementing CAA Title V programs, this provision relates to the federal requirements under the CAA.

The second part of §4006.3(a) authorizes EQB to establish fees to support those parts of the air pollution control program that EQB implements under APCA, independent of the CAA, and not covered by fees required under Title V of the CAA. As discussed above, if DEP and EQB implement the COpollution control program pursuant to the agencies’ authority under APCA, the agencies’ authority to establish fees is not governed by the Title V fee provisions related to the CAA. While the extent of EQB’s authority to establish non-Title V fees in the RGGI auction mechanism context has not been tested, EQB likely has the discretion to establish non-Title V fees to support the air pollution control program under APCA and could establish a “user fee” pursuant to this authority to support the RGGI auction mechanism.

EQB and DEP’s authority to implement the RGGI auction mechanism and facilitate emission trading for regulated entities to comply with CO2 emission standards is untested but those sections of APCA noted above appear to provide the agencies with sufficiently broad authority to implement these provisions.

2. Authority to Deposit Auction Proceeds into the Clean Air Fund for Administration by DEP to Advance Clean Energy Objectives

The user fee concept can be summarized as a fee paid for the privilege of using the Commonwealth’s airshed to emit CO2 pollution into the air of the Commonwealth. See California Chamber of Commerce v. State Air Res. Bd., 10 Cal. App. 5th 604, 649, 216 Cal. Rptr. 3d 694, 728 (Ct. App. 2017). Under this framework, the user fee proceeds would be deposited into the Clean Air Fund for use by DEP in the “elimination of air pollution.” This is consistent with the RGGI Model Rule requirements that auction proceeds be used to advance clean energy and other consumer benefit programs.

The extent of EQB’s authority to establish a user fee to support the RGGI auction framework is also informed by whether a reviewing court would find that such a fee is instead a “tax.” A CO2 auction under RGGI would generate substantially more proceeds than are required to cover the oversight, implementation, enforcement and operation of the CO2 control program under the RGGI framework. (The additional funds would be used by DEP on clean energy programs and projects to reduce CO2 pollution.) Opponents claim that because Pennsylvania’s participation in RGGI would result in proceeds that exceed certain “administrative costs,” the auction would constitute the imposition of an impermissible tax. Because auction proceeds would be used to advance clean energy programs and initiatives to reduce COemissions, however, Pennsylvania court precedent (White v. Com. Medical Professional Liability, 571 A.2d 9, 131 Pa. Cmwlth. 567 (1990); Phone Recovery Servs. v. Verizon PA, 2016 Pa. Dist. & Cnty. Dec. LEXIS 17546), indicates that a reviewing court could find that those programs and initiatives are actually part of the administrative costs of implementing the “air pollution control program” under APCA, and therefore do not constitute an impermissible tax.

In White v. Com. Medical Professional Liability, 571 A.2d 9, 131 Pa. Cmwlth. 567 (1990), the Pennsylvania Supreme Court held that an “annual surcharge” imposed on physicians that was deposited into a fund to cover the costs of medical malpractice claims was not a tax because its “purpose is not to raise revenues for public purposes or to defray the necessary expenses of government.” Critically, the court also found “[i]n addition to the expense involved in administering the Fund, a part of the cost of supervision and regulation is the actual payment of claims to patients.” The Court concluded that such a fee did not constitute a tax.

As in White, where the annual surcharge was deposited into a dedicated account, CO2 auction proceeds deposited into a segregated account within the Clean Air Fund would be segregated for use solely for expenses associated with the elimination of CO2 emissions. These costs would include staff costs for permit and CO2 emission reduction plan reviews, auction monitoring and associated costs, and costs of projects and programs that reduce CO2 pollution. Also consistent with the findings in White, DEP’s use of the auction proceeds to pay expenses associated with (a) administering the costs of the fund and the CO2 emission control program, and (b) funding clean energy projects and programs to eliminate CO2 emissions, would all be natural parts of the “cost of supervision and regulation” as contemplated by APCA.

The Supreme Court’s application of Article I, §27 of Pennsylvania Constitution (commonly referred to as the “Environmental Rights Amendment”) in Pa. Envtl. Def. Found. v. Commonwealth, 161 A.3d 911 (2017) (Pa. Envtl. Def. Found. II) and Pa. Envtl. Def. Found. v. Commonwealth, 214 A.3d 748 (2019) (Pa. Envtl. Def. Found. III), provides additional support for a reviewing court to find that RGGI auction proceeds are not a tax. In Pa. Envtl. Def. Found. II, the Pennsylvania Supreme Court held that the environmental rights amendment prohibits the use of proceeds derived from the sale of trust assets for appropriation for non-trust purposes.

The CO2 emission control program established under the Executive Order would require power plants to pay the user fee to cover the CO2 pollution emitted into the Commonwealth’s atmosphere. When CO2 pollution is emitted, clean air is severed from the trust. The Environmental Rights Amendment would prohibit the use of user fee proceeds from being appropriated to the Commonwealth’s general fund for general “public purposes.” Instead, the proceeds must be used to protect trust assets; which is also required by APCA – the user fee proceeds would be deposited into the Clean Air Fund and used to eliminate air pollution. Accordingly, a reviewing court would have a sound basis to find the RGGI auction (i.e. the user fee) is not a tax.

3. Authority to Link Pennsylvania’s CO2 Emission Reduction Program with Similar Programs in Other RGGI States

The RGGI framework does not require interstate agreements for the participating states to link their programs or to facilitate the trading of emission allowances between regulated entities in different states, inasmuch as each individual state determines whether it will accept emission allowances from other states. Accordingly, DEP and EQB do not require statutory authority to enter into agreements with other states to link Pennsylvania’s CO2 emission reduction program with similar programs in other states. If a more formal agreement were pursued for Pennsylvania to enter RGGI, the Uniform Interstate Air Pollution Control Act (UIAPA) and APCA provide DEP two possible avenues of existing statutory authority.

UIAPA authorizes DEP to make administrative agreements “for cooperation and coordination of efforts to control air pollution with State and local authorities of other states affected by airsheds or regional air masses lying partly within another state or states, or moving between or among this State and another state or states.” 35 P.S. § 4103(a). Among other provisions, UIAPA specifically authorizes DEP to make such agreements to provide for “the development and revision of plans for the complementary and coordinated administration of air pollution control programs by each of the participating governments or agencies on an airshed or regional basis.” 35 P.S. § 4103(b)(1). These specifically enumerated grants of authority, along other more general grants of authority in UIAPA, provide a strong statutory basis for DEP to enter agreements with the RGGI states to coordinate efforts and control CO2 emissions under the RGGI framework if such authority is necessary.

In addition to UIAPA, APCA also authorizes DEP to cooperate with other states on air pollution control matters and to formulate interstate air pollution control agreements. 35 P.S. § 4004(24). While APCA appears to clearly grant DEP the power necessary to work with and formulate agreements with the RGGI states to control CO2 emissions on a regional basis, it also requires “submission” of such agreements to the General Assembly. 35 P.S. § 4004(24). The plain language of the statute indicates it is intended to grant DEP the power to enter such agreements and simply “submit” them to the General Assembly for informational purposes, but does not require “approval” from the General Assembly.


The RGGI framework offers Pennsylvania a proven mechanism to cost-effectively reduce climate pollution from power plants and advance a just transition to a clean energy economy. DEP and EQB have a path to implement the directives of Executive Order No. 2019-07 pursuant to these agencies’ existing statutory authority.