Environmental Quality Board Approves Regional Cap-and-Trade Electricity Regulation

On July 13, by a 15-4 vote, the Environmental Quality Board advanced the final-form version of a regulation that would join Pennsylvania with the Regional Greenhouse Gas Initiative, or RGGI. The final regulation will next be evaluated by the Independent Regulatory Review Commission (IRRC) and the Office of Attorney General, and the standing environmental committees in the state House and Senate. IRRC may take the final regulation up at their next scheduled meeting on Sept. 1. Under the state’s Regulatory Review Act, the standing committees have a limited time to advance disapproval resolutions, which must be presented to the Governor for enactment and whose potential veto may be overcome with a two-thirds vote in both chambers.

The draft final rulemaking looked only slightly different than the version published for comment last December, a docket in which the PA Chamber submitted extensive comments. Dismayingly, the final regulation contains none of the suggestions offered by PA Chamber, including any effective measures to control for leakage, clear delineation between power generation facilities and CHP facilities or codified conditions which can inform the future withdrawal or rescission of the regulation by a different administration. Such a safety valve may very well have been useful should RGGI states agree that the mutual goals of the program (securing a 30% reduction in GHG emissions by 2030) need to be made more stringent – perhaps in alignment with President Biden’s call for a national reduction 50% reduction by 2030.

In its comment letter, the PA Chamber raised several questions about the need for a more robust cost-and-benefit analysis in the proposal, including an explicit delineation of costs to commercial and industrial customers. In its proposals, DEP blended in the hypothetical values of various spending plans from program revenues, including bill offsets, against the program’s cost.

Should the rule win approval by IRRC and the Attorney General and withstand disapproval resolutions from the legislature, it will be final upon publication in the Pennsylvania Bulletin. Effective Jan. 1, 2022 fossil-fuel power plants and some combined-heat and power facilities will be required to obtain a CO2 allowance from RGGI’s quarterly auctions or a secondary market. Pennsylvania’s initial budget allowance will start at 78 million short tons of CO2. The final-form regulation does contemplate the potential for PA to not be in RGGI until spring or summer 2022, given remaining procedural hurdles.


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