(The Center Square) – Energy is big business in Pennsylvania.
Its storied fossil fuel reserves have kept utility bills lower and the regional power grid more stable for the better part of a century.
That’s remained key as states opt for lower-emission power sources, which have so far relied on fledgling technologies not yet able to keep the lights on with batteries, solar panels and wind turbines alone.
A new report from the Commonwealth Foundation concludes it could have been even bigger business had state regulators not spent the last six years “flirting” with a carbon tax program called the Regional Greenhouse Gas Initiative, the success of which many critics say relies on the fossil fuels it means to curb.
For the program’s most ardent supporters, the transition away from coal and gas must start somewhere. And, to them, a 50% reduction in emissions and $6 billion in revenue over the last 18 years isn’t a bad one.
“The Keystone State’s six-year on-again, off-again relationship with RGGI is a cautionary tale for other states, such as Virginia,” said Elizabeth Stelle, vice president of policy for the Commonwealth Foundation. “RGGI is a carbon tax in sheep’s clothing, toppling the energy future of every state it touches.”
RGGI, as the program is often referred to, profits from reductions in harmful emissions by charging generators for the air pollution they create, measured in carbon dioxide. Across 12 states in the mid-Atlantic and New England, power plants and industrial sites buy an ever-decreasing number of emissions “credits” at the program’s annual auction to cover that anticipated pollution.
Those credit prices have risen sharply since RGGI’s first auction in 2008, and because of the balance needed between fossil fuels and renewable power, the program has put financial pressure on the entire grid, leaving utility companies – and by extension, ratepayers – scrambling to make up the difference.
Sometimes relief comes from RGGI-funded bill-reduction programs administered by participating states. Or the proliferation of more efficient renewable sources, supported by government taxpayer-funded subsidies, that require less support from gas and coal. In recent years, it’s been the pooling of smart thermostats, rooftop solar panels, and battery storage to compensate consumers for lower electricity usage.
And yes, it’s been rate increases too. But if not for Pennsylvania, where 25% of the regional power grid’s electricity is sourced, conventional wisdom has long held that those hikes could have been far steeper.
Which is why former two-term Democratic Gov. Tom Wolf’s 2019 executive order adding Pennsylvania to the RGGI program triggered a six-year regulatory war with lawmakers to stop it before it ever happened.
The foundation, a conservative policy group based in Harrisburg, was among the loudest critics – behind legislative Republicans, with whom the organization typically aligns – of the proposal, citing quadrupled energy costs and a $5 billion investment shortfall, according to its report.
In terms of raw numbers, the chilling effect of potentially joining RGGI is stark. Between 2013 and 2018, 73% of proposed power projects in the commonwealth became operational. After regulators set their sights on RGGI in 2019, that conversion rate collapsed to 9%.
By comparison, the rate for Ohio – a non-RGGI state with a wealth of fossil fuel plants – declined much more slowly, from 62% to 48%, in part due to falling gas prices.
“Unfortunately, that loss is not shocking,” Stelle said. “While Pennsylvania debated, litigated, and delayed over carbon tax policy, Ohio provided developers with a predictable regulatory environment to commit billions in capital. Projects that might have started in Pennsylvania went to Ohio or never came to fruition.”
Losing to “friggin’ Ohio” has jokingly been a thorn in the side of first-term Democratic Gov. Josh Shapiro since he took office in 2023, even calling out the Buckeye State’s competitive economic policies during his first budget address to the General Assembly.
Shapiro, on the campaign trail, expressed his doubts about RGGI, though he continued the Wolf administration’s legal fight to make Pennsylvania participate for two more years, only dropping it as part of a four-month-late budget deal this past November.
RGGI detractors say taxing generators would not just make it less profitable to build new power plants. It would raise energy costs for everyone by accelerating the closure of long-serving facilities, reducing supply, and raising electricity prices.
Shapiro, too, worries about affordability and instability, though he’s pointed the finger at PJM, the organization that manages the power grid, and at its lengthy planning process. He even filed complaints with federal regulators to force the organization to lower electricity price caps, temporarily preventing a 30% spike for ratepayers.
He’s even threatened, more than once, to decouple the state from the grid and “go it alone” – an unprecedented move that could undo a century of cooperation.
It hasn’t come to that yet. Instead, Shapiro has lobbied the General Assembly to act on his state-centric Lightning Plan to quadruple wind and solar power over the decade – and still limit emissions from larger plants.
Stelle said doing so would double residential electricity bills.
“Affordable, reliable energy is not achieved through Green New Deal-style mandates and burdensome regulation,” she said. “It happens naturally when we pursue policies that welcome the investment its grid desperately needs, letting Pennsylvania’s rich energy sector do what it does best.”
In the eyes of some, air pollution is what the energy industry does best. In 2020, federal data ranked Pennsylvania fourth nationwide for carbon emissions, and estimates suggest that 1% of global greenhouse gas pollution comes from the commonwealth alone.
Supporters of programs like RGGI often point to the dual impacts of reduced emissions and investment in renewable technology as key to their value for an energy-rich state like Pennsylvania.
A 2023 report from the Kleinman Center for Energy Policy at the University of Pennsylvania concluded that RGGI participation would have reduced the state’s electricity-sector emissions by 84% in 2030, compared to roughly 52% without it.
It could have been achieved without raising utility bills or decimating energy exports, according to the report. Researchers said wind and solar generation would have softened the impact of lost natural gas production and retail electricity prices will actually decline 0.6% by the time the RGGI cap zeroes out in 2040.
Shapiro’s state-based plans – the Pennsylvania Reliable Energy Sustainability Standard and the Pennsylvania Climate Emissions Reduction Act, PRESS and PACER for short – similarly broaden the mix of energy providers so that the power grid isn’t sustained primarily by fossil fuels.
This time, however, 70% of the money recovered from state-imposed emissions caps would support bill-reduction programs.
And, based on modeling from Synapse Energy Economics that was commissioned by the state Department of Environmental Protection last year, it would lower residential bills by $1 per month.
What’s not entirely clear is how rapid data center development would collide with such policy, if it were to be implemented. More than 50 proposals are pending across the state, and their economic viability could falter if the state recommits to carbon taxing programs.
