• Emissions Reductions
  • Carbon Emissions
  • Regional Greenhouse Gas Initiative
  • Policy and Regulation

Pennsylvania Joining ETS Could Lead to Significant Emissions Reductions: Part 2

Elizabeth Wilson
Feb 15, 2022

Guidehouse Insights

Part 1 of this blog series discussed the Regional Greenhouse Gas Initiative’s (RGGI’s) background and structure. This blog explores RGGI’s challenges in having a measurable carbon reduction impact and how Pennsylvania joining the initiative could affect those challenges.

RGGI Has Limitations

RGGI has been effective in establishing bipartisan cooperation among states and in funding consumer benefit programs. It has established jobs and contributed to economic growth. That said, RGGI has not contributed to significant carbon emissions reductions in the US.

One criticism of regional and national emissions trading systems (ETSs) is that they lead to carbon leakages—carbon that would have been produced through electricity generation is exported to another economy with no ETS or fewer restrictions. Because US states lack trade barriers among one another, this is an apt criticism.

Another RGGI-specific limitation is that as of early 2022, RGGI member states were not major fossil fuel-using or fossil fuel-producing states on average. For example, Vermont is known for its dairy industry more than its nonexistent coal industry, and it has a relatively tiny population of electricity users. During the 2010s, the 11 RGGI states accounted for approximately 10% of total carbon emissions in the US. Within that limited emissions quantity, only one-fifth qualifies as fossil fuel power plants of at least 25 MW (what RGGI restricts). In fact, most fossil fuel power plants already existed outside of the RGGI states.

Finally, fossil fuels produced by RGGI states that are exported for power generation in other states are not covered. Pennsylvania is one of the top five net exporting states of fossil fuels, meaning that a large amount of carbon emissions will not be covered by RGGI.

Potential Impacts of Pennsylvania Joining RGGI

Pennsylvania alone accounts for approximately 4% of US carbon emissions. It ranks fourth for producing the most carbon in the country and third for producing the most coal. Although not all these emissions will be captured in RGGI because the regional ETS only captures power-producing carbon emissions, Pennsylvania’s power-producing emissions alone are significant. Pennsylvania joining RGGI could allow the ETS to have a larger impact on US emissions. Governor Wolf of Pennsylvania hopes to join RGGI in early 2022, but his administration’s decision to join is under intense scrutiny.

Critics within the state legislature argue that Pennsylvania joining will lead to carbon leakages throughout its power generation market, the Pennsylvania-New Jersey-Maryland Interconnection (PJM), because not all states connected through PJM are part of RGGI. They say this will lead to job losses in the fossil fuel industry.

Proponents argue that participating in RGGI could lead to an increase of 30,000 net new jobs from clean energy involvement and an increase of roughly $2 billion in gross state product. They say joining RGGI could create a cleaner, more sustainable Pennsylvania.

Moving Forward

RGGI is a strong model for a bipartisan ETS working and providing successful consumer programs—especially around distributed energy resources programming. It should serve as a model for national energy policy. With potentially 12 states involved, the US should bring this ETS to a national level, eliminating leakages between states. However, this is unlikely to happen given the partisan politics in federal government around climate and infrastructure bills. The best alternative is other states joining RGGI and regions such as the West Coast joining regional ETSs rather than establishing multiple individual ETSs.

In the short term, leakages are possible. The best preventative measure is encouraging more states to join RGGI. Adding more sectors would lead to greater impact. Even with carbon leakages, RGGI is likely to create revenue that Pennsylvania can use to transition to clean energy and benefit consumers.