HARRISBURG, PA — Last week, Pennsylvania’s Commonwealth Court struck down the state’s participation in an interstate carbon-reduction program, known as the Regional Greenhouse Gas Initiative (RGGI). The issue could go before the PA Supreme Court next.

The Commonwealth Court, currently made up of five Republican justices and three Democrats, ruled in two different cases that former Gov. Tom Wolf (D) had overstepped his executive power by attempting to join RGGI in 2019. Wolf’s successor, Gov. Josh Shapiro, and the state Department of Environmental Protection (DEP) have 30 days to appeal the ruling.

According to the initiative’s website, RGGI is a “market-based,” cooperative effort among 12 eastern states to cap and reduce carbon emissions within each participating state. The participants—including New York and New Jersey—collectively agreed to set a limit on the emissions from regulated power plants. In order to emit carbon, power plants within RGGI states must purchase emission allowances.

These allowances are distributed at quarterly auctions, where they can be purchased by power plants and other entities. In 2021, participating states received $926 million from the allowance auctions. Some states hold a limited number of allowances in accounts to sell at a fixed price or otherwise distribute outside of the auction process. Over time, the regional cap declines, so that greenhouse gas emissions decrease in a “planned and predictable way.”

“Since its inception, RGGI emissions have reduced by more than 50 percent—twice as fast as the nation as a whole—and so far raised nearly $6 billion to invest into local communities,” reads the program’s fact sheet.

From the start, PA’s involvment in RGGI has come up against great resistance from Republicans and the energy industry. In 2022, the Commonwealth Court issued an injunction blocking PA from participating in the quarterly auctions.

Republican lawmakers are now lauding the Commonwealth Court for its latest rulings.

“The unlawful entrance into RGGI by the prior administration was a slap in the face to Pennsylvanians who continue to deal with rising energy prices and increasing inflation,” PA House Republican leader Rep. Bryan Cutler said in a statement. “Today’s decision by Commonwealth Court is a positive development in ensuring that RGGI will not add to increasing energy costs on Pennsylvania families.”

A tax, or a licensing fee?

The two court cases essentially hinged on whether the RGGI regulation on energy producers should be considered a tax or a licensing fee. Only the state legislature—not the governor—is allowed to levy taxes. Since Wolf joined RGGI through an executive order, critics argue that he unconstitutionally forced through a tax without the support of the legislature.

The program’s supporters, in turn, say that Wolf was allowed to regulate energy companies under the aegis of the Clean Air Act—a federal law. They argue that the cap on emissions for energy companies is a fee, not a tax, and therefore doesn’t require legislative authority to impose.

In one of the cases, Pennsylvania power plants, unions and other energy interests rounded out the plaintiffs. The other case centered around state legislative leaders who argued that Wolf upset Pennsylvania’s separation of powers by issuing his executive order. If a higher court were to find that the RGGI regulation constitutes a licensing fee, and not a tax, then both groups of plaintiffs’ positions would essentially become moot.

Environmental advocates have criticized the Commonwealth Court’s decision and called on Shapiro to make an appeal.

“This is not the final word on Pennsylvania’s participation in RGGI or the vast benefits it confers on the people of this state. For nearly 20 years, Gov. Shapiro has been a champion for clean air, climate action and a prosperous Pennsylvania,” said Manish Bapna, president and CEO of the Natural Resources Defense Council. “[Shapiro] should appeal this misguided decision at once and make the case before the state Supreme Court for a program that’s already proven itself across the Northeast and mid-Atlantic.”

At press time, however, Shapiro’s administration has not made any promises to appeal. The governor has taken a much more equivocal 

 stance than his predecessor on the state’s involvement with RGGI. According to emails obtained by news outlet Spotlight PA through an open-records request, aides have been researching alternatives to RGGI since “almost the beginning” of the fairly new Shapiro administration.

State Republicans, looking to capitalize on Shapiro’s skepticism, have called on him to let the Commonwealth Court decision be the final nail in RGGI’s coffin.

“I encourage the Shapiro administration, which has thus far refused to completely embrace RGGI and its associated energy tax, to not appeal today’s Commonwealth Court decision,” Cutler said. “The House Republican caucus remains ready, willing and able to work with all interested parties to find a sound path forward for Pennsylvania’s energy development in a way that respects the pocketbook issues of our families who are already facing increasing energy prices and the overall economic health of our commonwealth.”