What's Next for Pennsylvania and RGGI

Six months after Governor Wolf's Executive Order requiring action to limit carbon pollution from power plants, the Pennsylvania Department of Environmental Protection remains on track to finish drafting a “cap-and-invest” regulation by the end of July, even as the Wolf administration rightfully focuses its attention on containing the spread of COVID-19 and protecting Pennsylvanians from its impacts.

That's good news, as well as a testament to the perseverance of DEP staff and the Governor’s team, because when the regulation ultimately becomes law Pennsylvania won't just be putting a declining cap on carbon pollution; it will also be requiring carbon-emitting power plants to buy pollution "allowances" through the Regional Greenhouse Gas Initiative (RGGI), a multistate effort in the Northeast and Mid-Atlantic to cut power sector carbon emissions. The Commonwealth can then invest the proceeds from these sales (projected to be hundreds of millions of dollars annually) into its economy to help expand clean energy and drive a post-pandemic economic recovery that benefits all Pennsylvanians.

This blog provides an update on where the DEP stands now with its carbon limits rule and previews what we can expect in the next three months.

What the DEP Has Done So Far

Regulatory rulemaking in Pennsylvania is notoriously complicated, especially for DEP air quality regulations. As with all rulemakings by state agencies, the DEP must take public comment on a proposed regulation, then get approval from the Independent Regulatory Review Commission (IRRC) while avoiding a legislative veto from the General Assembly (which is often hostile to environmental regulation). But first the DEP needs approval from the Environmental Quality Board (EQB) to start the process. And the EQB expects the DEP to have vetted any proposal with the Air Quality Technical Advisory Committee (AQTAC) before even that. Welcome to Harrisburg!

The DEP is currently in the middle of the AQTAC process with its RGGI regulation. Last fall, the agency presented concepts for the rule to AQTAC, and in February introduced an 89-page preliminary draft. Generally the draft closely tracks the RGGI "Model Rule," a template that's served as the basis for the current RGGI states' respective implementing laws and regulations. But the DEP has proposed some changes to the Model Rule to "fit [Pennsylvania's] specific energy landscape," and there are also some key blanks to be filled in.

The proposed changes include a proposal to exempt waste coal plants from having to buy carbon allowances on account of their "environmental, health, and economic benefits;" a way for Pennsylvania to implement the rule outside of the RGGI framework, i.e., by creating its own platform for allowance auctions and intrastate trading; and a proposal to allow power plants to "offset" a small part of their emissions by plugging abandoned oil and gas wells. (The Model Rule provides for limited offsets when they lead to emission reductions that are “real, additional, verifiable, enforceable, and permanent within the framework of a standards-based approach.”)

The single-most important element that the DEP still needs to add to the draft proposal is the number of tons of carbon dioxide that Pennsylvania would add to the regional RGGI cap—the state's baseline carbon "budget." RGGI's regional cap is the sum of all the participating states' budgets; while emissions in any particular state may exceed its budget due to trading, emissions across the region can't exceed the overall cap. This budget is critical because the lower it is, the tighter RGGI's cap and the more it will drive pollution reductions. Conversely, too high a cap will undermine the effectiveness of the program because it won’t drive reductions. The DEP is currently doing power sector "modeling" to determine what budget to propose.

Another very important program element that requires clarification is how allowance auction proceeds will be invested. The DEP's preliminary draft provides for proceeds to be deposited into Pennsylvania’s Clean Air Fund established under the state Air Pollution Control Act. Since that law already clearly requires use of the monies in the fund "in the elimination of air pollution," the DEP’s completed regulatory proposal is unlikely to go into more detail. Eventually, however, the DEP will need to clarify what kinds of projects and activities qualify for funding.

While a formal public comment on the DEP’s proposal won't start until this summer, some stakeholders have already commented on the DEP's preliminary draft. Comments submitted by NRDC and several other organizations argued for a strong budget; coverage of power plants smaller than 25 megawatts (as New York has already proposed); measures to ensure that low-income and other vulnerable communities benefit from the program; a set-aside of allowances for additional voluntary renewables purchases; and argued against the proposed waste-coal set-aside and abandoned well offsets.

Opposition in the General Assembly

The Republican-controlled General Assembly recently made news for refusing to pledge any of its $172 million in cash reserves to help Pennsylvanians impacted by the COVID-19 pandemic, instead advancing legislation to give state-regulated businesses new powers to fight oversight by the DEP, the Public Utility Commission, and other state agencies.

So it may not come as a surprise that the legislature has warmed to the DEP's work on a RGGI regulation about as much as it has to a severance tax on fracked gas and modest cash assistance for the most vulnerable Pennsylvanians. Last November, members in both chambers introduced legislation to strip the DEP of its authority to regulate carbon dioxide emissions under state law. In February, the House Environmental Resources and Energy (ERE) Committee conducted a farce of a hearing on RGGI to which only critics (most with links to fossil fuel interests) were invited to speak; several cheerfully promoted disinformation.

Of course, many state legislators, including some Republicans, support clean energy policies, including RGGI—but they have been mostly quiet. Although several legislators rallied in support of a carbon limits bill last September, none was ever introduced. It’s not too late. Even as the DEP moves forward with its rulemaking, legislation could enable auction proceeds to be spent in important ways not currently allowed under state law, including economic development for workers and communities affected by power plant closures and utility bill support for low-income Pennsylvanians, as well as pollution elimination.

What's Next

The DEP will update AQTAC on its progress on a carbon limits rule tomorrow and brief its Small Business Advisory Committee on April 22. On April 23, the DEP will present its modeling results to a special joint informational meeting of AQTAC and the DEP's Citizens Advisory Council. The DEP is expected to release a complete draft carbon limits regulation, including a proposed carbon budget, next month—in time for AQTAC to review it before its next scheduled meeting in June. The Environmental Quality Board will vote in June or July to advance the proposal for public comment during the summer. 

After the DEP's modeling presentation on April 23, NRDC will post another blog that analyzes the results and shares results from our own latest modeling (an update of the Pennsylvania modeling we did last year).

With the COVID-19 pandemic killing and sickening tens of thousands of Pennsylvanians and bringing economic hardship to millions, the state government's priority must be—and has been—responding to the crisis. But as we know, this crisis is not simply a public health issue; it is directly connected to social equity and our fight for clean air, a healthy environment, and healthy, resilient communities. So while fossil fuel interests—citing the pandemic—are now pressuring the DEP to stop working on carbon limits and other policies to protect human health and ensure a clean environment, that’s the last thing the DEP should do. Such policies matter now more than ever.