This article was updated 15 December 2023 to reflect the recent court decision and appeal. The original article was published 5 July 2022.
On 1 November 2023, the Pennsylvania Commonwealth Court ruled that funds generated through the Regional Greenhouse Gas Initiative (RGGI) are to be considered an unconstitutional tax, effectively preventing the state from participating in RGGI. Democratic governor Josh Shapiro has now appealed the decision in front of the state’s Supreme Court.
The Pennsylvania government initiated the development of an ETS in 2019, through an executive order issued by then-Governor Tom Wolf. The regulation for the ETS and its linkage with RGGI, known as the CO2 Budget Trading Program, was published in the Pennsylvania Bulletin on 23 April 2022. It originally came into effect on 1 July 2022 and linked Pennsylvania to RGGI as its 12th member. Under this regulation, covered entities in Pennsylvania would have had compliance obligations for their CO2 emissions from the second half of 2022 onwards. Pennsylvania’s inclusion in the multi-state initiative would have considerably increased the size of the market-based program, with the state making up about 40% of RGGI’s capped emissions in 2023.
However, shortly after its publication in April, the regulation was disputed by a collection of local coal stakeholders, including power plant owners, coal mine owners, and workers unions, who filed a lawsuit at the Commonwealth Court contending that the law is unconstitutional. A separate lawsuit was also filed by Republican lawmakers that sought to prevent the regulation from being published. As a result, on 8 July 2022, the Pennsylvania Commonwealth Court entered an injunction that temporarily prevented the state from implementing its CO2 Budget Trading Program.
The November 2023 Commonwealth Court decision then asserted that the Trading Program Regulation “constitutes a tax that has been imposed by DEP [the state’s Department of Environmental Protection] and EQB [an independent board that adopts all of DEP's regulations] in violation of the Pennsylvania Constitution”. According to the decision, “participation in RGGI may only be achieved through legislation duly enacted by the Pennsylvania General Assembly, and not merely through the Rulemaking promulgated by DEP and EQB”.
Following the decision, the Shapiro administration had a 30-day window to appeal before the Supreme Court. They submitted their appeal on 21 November 2023. While the state’s Supreme Court is mandated to review the appeal, there is no specified timeframe for reaching a decision.
