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PA Commonwealth Court Strikes Down RGGI Carbon Tax

PA Commonwealth Court Strikes Down RGGI Carbon Tax

In two rulings issued on November 1, 2023, Pennsylvania’s Commonwealth Court struck down one of Governor Tom Wolf’s signature environmental proposals, the Regional Greenhouse Gas Initiative (RGGI), an interstate program he joined via regulation to reduce carbon emissions from state power plants.

States participating in RGGI agree to cap the amount of carbon that energy producers release, with the cap decreasing over time. States keep the proceeds from sales of emissions allowances under the cap. In Pennsylvania, that revenue was proposed to fund other pollution-reduction initiatives.

Pennsylvania joined RGGI in 2019 when Governor Wolf’s Department of Environmental Protection (DEP) finalized its RGGI regulation. It was quickly challenged in court by Senate Republicans, energy companies, and unions. In 2022, Commonwealth Court issued an injunction prohibiting PA from participating in RGGI until the challenges were resolved.

An issue in the court cases was whether the fee for emissions allowances was a tax or a licensing fee. Though licensing fees may be promulgated by a governor as part of a regulation, taxes may only be levied by the state legislature. The fee at issue would affect consumers in the end. Some estimates pegged an increase in consumer electrical rates at 30 percent or more as a result of RGGI.

In opinions filed last Wednesday, Commonwealth Court ruled by a vote of four to one that RGGI is “invalid and unenforceable.” The court found that money raised by RGGI is a tax and that DEP does not have the constitutional authority to collect revenue through the program because only the state legislature may levy taxes.

It is not known whether Governor Shapiro will appeal the ruling to the state’s Supreme Court. Shapiro has raised concerns with the program, saying it’s not clear whether RGGI will address climate change while protecting jobs and affordable power. He did not, however, reverse Gov. Wolf’s participation in the program when he had the opportunity. He has thirty days to decide on an appeal.


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