Pennsylvania adopts draft ETS regulation with RGGI linkage

On 15 September 2020 Pennsylvania’s Environmental Quality Board (EQB) by a 13 to 6 vote adopted draft regulation for an ETS covering CO₂ emissions from the power sector and  joining the Regional Greenhouse Gas Initiative (RGGI) in 2022. Implementation of the regulation might depend on a potential legal challenge by the Republican-controlled state legislature and the state-level outcome of the upcoming election.

The proposal was first released by the Department of Environmental protection (DEP) in January 2020 and further updated in April 2020. The draft proposal comes after Pennsylvania’s Democratic Governor Tom Wolf directed the department to develop and present a final ETS proposal to the board by 15 September 2020.

The draft proposal is largely consistent with the system design features of the RGGI Model Rule and includes an emissions cap of 78 MtCO₂ in 2022 that would decrease annually by 3% to 58.1 MtCO₂ in 2030. Pennsylvania would be added to the RGGI cap and, due to the size of the state’s power sector emissions (accounting for 29% of the state’s total GHG emissions in 2017), increase the RGGI cap substantially to 194.3 MtCO₂ in 2022. Pennsylvania’s share of emissions in the 2022 RGGI cap would amount to 40.2%.

The regulation will now go through a 60-day public comment period followed by the state’s regulatory review process before a final proposal could be adopted in 2021. This would put the state on pace to launch its ETS and its RGGI linkage by 2022. However, the Republican-controlled state legislature on 9 September 2020 passed a bill (HB-2025) that would block the implementation of the ETS regulation and the RGGI linkage by requiring legislative approval for any regional carbon pricing initiative initiated by the state government.

Wolf has announced he will veto the bill, but the regulation might still be challenged in court given opposition from the Republican-controlled legislature and its position that implementation of the ETS via executive measures lies outside of the governor’s authority. Pending the outcome of elections at the state level in November, which coincide with federal elections, the state’s legislative makeup could shift and open the door for ETS via legislative action.