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Introducing A Fossil Fuel State’s Carbon-Pricing Plan

Environment Policy Brief #130 | By: Katelyn Lewis | September 21, 2021

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Photo taken from: Times Observer

Policy Summary

Pennsylvania’s carbon-pricing plan cleared its final regulatory hurdle on September 1, making the Keystone State the first major fossil fuel state to adopt a cap-and-trade policy.

The plan is two-pronged: It imposes a price on carbon dioxide emissions and sets declining limits on carbon dioxide emissions from power plants. It also paves Pennsylvania’s way into the Regional Greenhouse Gas Initiative (RGGI), a consortium of nearly a dozen Northeastern and Mid-Atlantic states – Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island, Vermont, and Virginia – working “to cap and reduce CO2 emissions from the power sector,” according to the initiative’s website.

Under RGGI, each state establishes its own carbon dioxide emissions budget, setting the total amount of greenhouse gases released from fossil fuel-fired electric generating units, or EGUs. Power producers can buy credits at an annual auction, but the policy incentivizes them to lower their overall emissions as the total available decreases while making the energy market more cost-competitive for renewable energy sources, such as nuclear, wind and solar.

In Pennsylvania, this initiative translates to the dozens of coal, oil, and natural gas-fueled power plants across the state being “forced to buy hundreds of millions of dollars in credits in the coming years that the state could then spend on clean energy efforts,” the Associated Press reports. These efforts include promotion of and investments in emissions reductions and energy efficiency programs.


“By participating in RGGI, Pennsylvania is taking a historic, proactive and progressive approach that will have significant positive environmental, public health and economic impacts,” Pennsylvania Gov. Tom Wolf said in a statement.

Over the next decade, the Wolf administration estimates the state’s GDP will increase by $2 billion while creating 27,000 jobs and eliminating up to 225 million metric tons of carbon dioxide from the atmosphere, the Washington Examiner reports. It will simultaneously lower rates of childhood asthma, respiratory disease, premature deaths, lost work days, and healthcare costs, according to Pennsylvania’s Department of Environmental Protection (DEP). 

“Participating in RGGI is one more way for Pennsylvania, which is a major electricity producer, to reduce carbon emissions and achieve our climate goals,” Wolf said. “[P]articipating in this cap-and-trade initiative will (also) allow Pennsylvania to make targeted investments that will support workers and communities affected by energy transition.”

Pennsylvania is the fifth leading carbon dioxide emitting electricity generation sector In the United States, according to the Pennsylvania Pressroom. With a regulatory limit set on carbon emissions from these electric generating units, Pennsylvania’s leaders hope the RGGI “cap and invest” program will help to reduce the state’s net greenhouse gas emissions from 2005 levels by 26% by 2025, and 80% by 2050.


The annual carbon dioxide allowance will total 78 million metric tons in the 2022 RGGI auction, according to the DEP. To hit their emissions reduction goals, this total is expected to shrink 25%, to 58 million metric tons, by 2030.

“Pennsylvania (has) moved one step closer to assuring that its residents and visitors can live healthier lives,” Patrick McDonnel, the state’s secretary for the Department of Environmental Protection, said in a statement. “Participating in RGGI will have immediate and lasting beneficial impacts on our communities.”

While the Wolf administration hopes to join the regional carbon initiative by Jan. 1, the package awaits review by Pennsylvania’s General Assembly.

Policy Analysis

The progression of Pennsylvania Gov. Tom Wolf’s climate action plan with this carbon pricing policy in a state sometimes referred to as “The Coal State” or “The Oil State” shows a big step in the environmentally friendly direction, but it still faces an uphill battle in the state’s legislature and most likely the courts.

The plan to reduce carbon emissions in Pennsylvania has, of course, become political – in fact, the Independent Regulatory Review Commission’s vote was 3-2, falling along party lines. On one side sits many of the state’s Democrats as well as nuclear power plant owners and the renewable energy sector, while its Republicans, fossil fuel plant owners, blue-collar labor unions, and heavy industry sit adamantly on the other.

Fossil fuel-rich and heavily populated, Pennsylvania is the United States’ No. 2 in natural gas and No. 3 in coal mining production, and its energy sector releases about 34% of the state’s overall carbon dioxide emissions.

One primary argument against the plan has been its potential push of power generation to neighboring states that have no caps, destroying local coal-mining jobs and economies.

Photo taken from: Public News Service

There’s also little evidence the carbon pricing plan will significantly reduce greenhouse gases in a state that has long been one of the nation’s biggest polluters and power producers, AP reportsIts effectiveness could depend on where emissions caps are set and whether money from the emissions credits are wisely spent on clean energy and energy efficiency programs

“It’s easy to say that I’m going to stand for the environment and we will see how that shakes out,” Commission Vice Chairman John Mizner said before voting against the plan. “But when I think of those people, especially in Indiana and Armstrong [counties], whose livelihoods for generations have relied on coal, I don’t think we’ve thought enough through how we are going to help them when it’s them who are going to bear the most cost.”

Proponents argue that the state can’t wait to act on climate change, and this action will put Pennsylvania ahead in the growing clean energy market while paving the way for more states and the federal government to follow suit.

“Not only is it the right thing to do, but it is in each state’s self-interest to do it,” Mark Szybist, a senior attorney for the Natural Resources Defense Council, told AP.

Its effectiveness at reaching its carbon-cutting goals therefore lie in the time it takes to navigate the state legislature, changes made in the process, the emissions caps set, and the use of the funds generated from the credit program toward sustainable and effective clean energy and energy efficiency programs.

Engagement Resources​

Click or tap on image to visit resource website.

Big greenhouse gas emitter moves to join climate initiative – Associated Press (Oct. 3, 2019) – https://apnews.com/article/71f1649b5dc84c99a589f7dc855f0410

Carbon pricing on Pennsylvania power generators clears latest regulatory hurdle – Washington Examiner/The Center Square (Sept. 2, 2021) – https://www.washingtonexaminer.com/politics/carbon-pricing-on-pennsylvania-power-generators-clears-latest-regulatory-hurdle

Gov. Wolf Issues Statement on Commission Approval of RGGI – Office of Governor Tom Wolf (Sept. 1, 2021) – https://www.governor.pa.gov/newsroom/gov-wolf-issues-statement-on-commission-approval-of-rggi/

Independent Regulatory Review Commission Approves CO2 Budget Final Rulemaking – Pennsylvania Pressroom (Sept. 1, 2021) – https://www.media.pa.gov/pages/DEP_details.aspx?newsid=1488

Pennsylvania’s carbon-pricing plan at last regulatory hurdle – Associated Press (Sept. 1, 2021) – https://www.wfmz.com/news/area/poconos-coal/pennsylvanias-carbon-pricing-plan-at-last-regulatory-hurdle/article_fbf021fa-0b53-11ec-9cac-2f1548932a5e.html

Welcome – The Regional Greenhouse Gas Initiative – https://www.rggi.org/

Wolf’s carbon-cutting plan ‘in the public interest,’ review board finds – Pittsburgh Post-Gazette (Sept. 1, 2021) – https://www.post-gazette.com/business/powersource/2021/09/01/RGGI-carbon-dioxide-regulation-Independent-Regulatory-Review-Commission-IRRC/stories/202109010110

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