Unprecedented: Pennsylvania’s RGGI Repeal

More than six years ago, former Pennsylvania governor Tom Wolf signed an executive order directing DEP to develop rules, as authorized by the Air Pollution Control Act, to cut carbon pollution from the state’s power plants and enable participation in the Regional Greenhouse Gas Initiative (RGGI), a cooperative cap-and-invest program launched in 2009 that currently includes 10 states: Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island, and Vermont (with Virginia poised to rejoin next year). 

As specified in the executive order, DEP spent more than two years hosting public hearings, soliciting public comments, and testifying before legislative committees to shape what became the commonwealth’s CO2 Budget Trading Program (more commonly referred to as the “RGGI regulation”). 

When finalized in April 2022, this program was immediately challenged in state court (in fact, lawsuits commenced prior to publication, focusing on important procedural questions under the Regulatory Review Act and leading to challenges to RGGI’s lawfulness before the regulation even existed on the books). Following a hearing, and shortly after compliance obligations for Pennsylvania electric-generating units were to officially take effect on July 1, 2022, the Commonwealth Court issued a preliminary injunction that blocked DEP from implementing the program while litigation moved forward. Since then, Pennsylvania’s fossil-fired power plants have continued to operate without any carbon price in effect and with no binding, declining cap on the fleet’s carbon pollution statewide. 

Ultimately, in November 2023, the lower court issued a decision permanently enjoining agency enforcement and voiding the RGGI regulation for imposing an unlawful tax. A few weeks later, the Shapiro administration appealed the decision to the Pennsylvania Supreme Court. As publicly stated, the governor’s office sought to protect executive authority. Moreover, the RGGI regulation’s lawfulness and constitutionality were already consistent with the office of attorney general’s findings in 2020 and 2021 when it exercised its statutory role in evaluating proposed agency regulations under former attorney general Shapiro. Upon taking office as governor, Shapiro established a RGGI Working Group, comprised of stakeholders with starkly different views on the program to evaluate its policy merits and try to reach consensus (full details here). 

The state supreme court justices heard oral arguments on May 13, 2025. The question of whether the sale of carbon allowances at auction—and the resulting proceeds that would be returned to DEP—constituted a tax or a permissible agency fee was the only issue on which the lower court decided the case. The justices thoughtfully inquired about whether the RGGI regulation might be characterized as something else, a third category that might exist outside the tax/fee binary. Notably, Pennsylvania’s Environmental Rights Amendment (enshrined in the state’s constitution) provides an important tool that would have helped interpret the regulation and scope of DEP’s authority. NRDC filed an amicus brief in July 2024 that analyzed this line of argument in much greater detail. 

However, with the RGGI regulation now repealed by statute before the court’s decision, Pennsylvania will potentially move forward without clarity or guidance on these critical issues. One of the budget bills signed on November 12, Act 45 of 2025, contained a brief, consequential clause stating that the subchapter of the Pennsylvania Code containing the RGGI regulation had been abrogated. On November 13, DEP filed applications with the court to discontinue its appeals because of mootness. At the time of this blog’s publication, nonprofit environmental parties had filed in opposition, urging the state supreme court to issue a decision because of a public interest exception to mootness; essentially, the court’s determination is of such critical public importance to future actions by the commonwealth to carry out its constitutional obligations—and the record is so fully developed—that a ruling is warranted. 

Regardless of how the litigation concludes, Governor Shapiro has become not only the first Democratic governor to withdraw from RGGI but also the first of either party to sign a bill into law wiping his state’s RGGI regulation off the books. 

Pennsylvania is the country’s largest net exporter of electricity, with the third-dirtiest power sector in terms of carbon pollution (behind only Texas and Florida), according to 2024 U.S. Environmental Protection Agency data. Pennsylvania power plants emitted nearly 78 million tons of CO2 from their smokestacks last year, an increase from 2023, albeit a meaningful decline from peak emissions two decades ago. That long-term decline has been driven largely by market forces with cheaper natural gas–fired generation replacing dirtier, less efficient coal-fired power. But there are now only two large, traditional coal-fired plants still operating in Pennsylvania, and an unprecedented surge in forecasted electricity demand from hyper-scale data centers is providing financial incentive for another boom in fossil generation from new gas plants into the 2030s. 

A well-designed, market-based price on carbon coupled with a declining cap on overall emissions—i.e., the RGGI regulation—would have allowed for significant investments to protect Pennsylvania consumers’ pocketbooks while keeping pollution from skyrocketing. Pennsylvania did not simply copy a playbook from other states: It designed its own cap (see table above) and tailored aspects of its regulation to meet Pennsylvania’s specific generation mix, e.g., making accommodations for power plants that burn waste coal. Based on current prices for allowances in RGGI’s regional marketplace (the December 2025 auction cleared at $26.725 per short ton of CO2 emitted), Pennsylvania would’ve had the opportunity to invest more than $370 million from that auction alone in energy efficiency programs and new sources of clean, reliable power to keep consumer costs down and address the growing supply-demand imbalance in our competitive wholesale electricity market (managed by PJM). NRDC conservatively estimates that Pennsylvania would have received more than $3 billion in total had the commonwealth been participating in RGGI auctions as originally intended back in 2022. Other projections related to forgone revenue land even higher. 

To be clear, the primary purpose of the RGGI regulation was to limit air pollution, not to generate revenue, which is why the number of allowances available declined predictably over time. By statute, DEP is obligated to adopt regulations “for the prevention, control, reduction, and abatement of air pollution” and to establish fees to support the agency’s air pollution control program. The RGGI regulation was a straightforward exercise of DEP’s traditional authority to establish fees. And the overall framework of the program was designed to maximize flexibility for regulated entities while ensuring predictability in terms of costs and obligations. The argument that RGGI would have imposed a carbon “tax” on power plants directly passed down to consumers has been thoroughly debunked. 

Moreover, RGGI had not deterred plans to revive the shuttered Homer City coal plant site to serve as a massive data center campus powered by the largest gas plant in the country. On the contrary, RGGI would have ensured that any electric generator above 25 megawatt capacity was incentivized to reduce pollution to protect the public interest. It would’ve also attracted reputable businesses to the commonwealth, some of which have adopted their own clean energy targets and are familiar with operating in jurisdictions that don’t allow power plants to externalize all costs of carbon pollution onto the public. 

In January 2025, while unveiling his six-bill package of energy legislation, collectively dubbed the Lightning Plan, Governor Shapiro offered to those who had “spent years just simply complaining about RGGI” an alternative—that, in fact, “the quickest way out of RGGI is to pass [his] plan.” NRDC recognized that RGGI had been established as a benchmark in Pennsylvania; we supported consideration of additional policy pathways through the legislature so long as they delivered benefits equal to or greater than the RGGI regulation. Companion bills were officially introduced in the House and Senate in the spring, several bills have since moved out of committee in the House, and as of this publication, two Lightning Plan bills have passed the House (only to be ignored by the Senate thus far). 

Then, on June 30, 2025, Pennsylvania missed its constitutional deadline to finalize the FY25–26 budget. Despite many twists and turns during budget negotiations in a divided government over the summer and fall, the Senate majority’s demand that the governor and House majority cave on RGGI remained constant. On October 8, 2025, House Majority Leader Matt Bradford noted his caucus’s willingness to compromise to achieve results but stated flatly, “No, we’re not getting out of RGGI without taking care of our environment. Period. Full stop.” 

However, on November 12, the repeal of Pennsylvania’s RGGI regulation ultimately served as the primary concession to finalize a nearly $50.1 billion state budget with funding through June 30, 2026. Like all state budgets, it included trade-offs and a mixed bag of policy wins. However, none of Governor Shapiro’s Lightning Plan bills were included. To note the few clean energy issues that did pass with the budget: 

• Renewal of $25 million in state funds to support Solar for Schools grants in FY25–26. This wildly popular and oversubscribed Pennsylvania program has seen bipartisan support.
• Removal of a state law restriction that is specific to Pennsylvania on spending federal Solar for All funds ($156.12 million total). This program is still separately tied up in federal litigation.
• Creation of new authority for the Pennsylvania Public Utility Commission to review and validate the accuracy of load forecasts submitted by Pennsylvania electric utilities to PJM. 

Otherwise, there were no meaningful concessions made by the Senate on energy policy; certainly none that came remotely close to meeting the RGGI benchmark. In recent conversations with legislative leaders and senior staff, as well as rank-and-file members, there was a pervasive sense of fatalism that the Pennsylvania Supreme Court would strike down the RGGI regulation anyway. Therefore, the stance became, to paraphrase, “Let’s get something for it while we can.” Turning Pennsylvania’s most significant climate policy and energy affordability lever into a low-value poker chip in a budget negotiation is a shortsighted decision, to say the least. It is one whose consequences will be felt for years to come. 

For Pennsylvania, joining RGGI would have lowered energy bills and put a check on runaway electricity costs, including those driven by data centers and other large-load customers. The program sets a clear, modest price on carbon emissions, forcing power plants to compete on efficiency and cleaner energy rather than passing costs on to households. Auction proceeds would have been invested in energy efficiency programs and renewable energy projects, directly cutting utility bills for families and businesses.  

The sustainability nonprofit Ceres reported that these investments could have saved Pennsylvania households from higher electricity bills. Renewable energy deployment, incentivized by RGGI, reduces long-term power costs compared with fossil fuels and stabilizes the energy market. The cap-and-invest system includes cost containment measures to prevent runaway allowance prices, ensuring the program stays affordable. 

Data centers, which are currently spiking regional electricity rates, face real market limits under RGGI. Electricity prices in participating states fell faster than in non-RGGI states, proving that cleaner energy could also be cheaper energy. At the same time, reductions in sulfur dioxide and nitrogen oxide cut pollution and health care costs. RGGI is not just about climate—it is about holding fossil fuel companies’ power in check, protecting consumers, and creating a cleaner, more resilient energy market for everyone. 

During the signing ceremony for the final package of budget bills, Governor Shapiro noted: “For years, Senate Republicans have used RGGI as an excuse to stall substantive conversations about energy. Today, that excuse is gone. It’s time to look forward—and I’m going to be aggressive about pushing for policies that create more jobs in the energy sector, bring more clean energy onto the grid, and reduce the cost of energy for Pennsylvanians.” 

To its credit, the Shapiro administration has shown strong leadership in engaging with PJM to protect Pennsylvania ratepayers, but it remains to be seen how conceding to Senate Republicans on RGGI will make it any easier to enact a clean energy and energy affordability agenda this legislative session. Virginia is poised to once again reap the benefits of RGGI next year, while the other 10 participating states reached agreement in July on a path to cooperatively strengthening their respective RGGI programs through to 2037. Meanwhile, with Pennsylvania having officially walked away from RGGI after years of determined effort, the commonwealth now goes back to the drawing board.