RGGI Regional Greenhouse Gas Initiative

(The Center Square) – At a joint Senate hearing Tuesday on the Regional Greenhouse Gas Initiative, a report from the Independent Fiscal Office solidified Republican opposition to the plan that would tax CO2 emissions.

The IFO’s assessment of the Department of Environmental Protection’s model for Pennsylvania to join RGGI noted that higher prices would cost energy producers much more than initial estimates suggested – almost $800 million.

Republicans have attempted to assert the General Assembly's authority to decide on entering RGGI, rather than the executive branch.

Matthew Knittel, director of the Independent Fiscal Office, gave testimony concerning the IFO review of the DEP model that estimated RGGI’s effect in Pennsylvania. His testimony emphasized that his comments were limited to the model’s assumptions, and Knittel declined to comment on the model’s accuracy or reliability.

The nominal price of RGGI allowances, which power companies would have to pay, was assumed by the model to be $3.57 for 2022, Knittel noted, which would bring in gross proceeds of $207 million. However, the current price of allowances is $13.50, making the gross proceeds $781 million, 3.8 times higher than assumed.

“Conventional modeling assumes those costs would be pushed forward to final consumers,” Knittel said. 

The model’s assumption also under-estimated the price of natural gas, assuming a price of $3.27 per MMBtu, while the latest price data has it at $4.78, 46% higher. MMBtu is an acronym for 1 million British thermal units, a standard unit of measurement for natural gas financial contracts.

“Higher prices could impact overall demand and in-state generation,” Knittel said.

Among the 10 original states that formed RGGI, power generation fell 15% and emissions fell 47% from 2008 to 2020. In Pennsylvania, without RGGI, generation rose 3.5% while emissions fell by 42%. 

Democrats saw RGGI as a way to further environmental protection and transition to renewable energy. Republicans saw it as harming the economy and moving resource extraction to more environmentally harmful countries like Russia, without any environmental benefits, given that Pennsylvania’s emissions have dropped at almost the same rate as RGGI states.

“RGGI has been extensively analyzed for more than a decade,” said Sen. Carolyn Comitta, D-Chester. “RGGI has more than a long history of economic success.”

“[The Department of Environmental Protection] suggests that the way to reduce greenhouse gas emissions is to make the polluters pay. However, your data suggest that payment is going to be spread across all households in Pennsylvania,” Sen. John Yudichak, I-Carbon/Luzerne, said to Knittel.

Yudichak worried the “$800 million tax” would add “further disruption to an already disrupted economy.”

Staff Reporter

Anthony Hennen is a reporter for The Center Square. Previously, he worked for Philadelphia Weekly and the James G. Martin Center for Academic Renewal. He is managing editor of Expatalachians, a journalism project focused on the Appalachian region.