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Policy Memo: In Support of Pennsylvania Joining the Regional Greenhouse Gas Initiative

Martha Danly

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Subject:  Pennsylvania Membership in the Regional Greenhouse Gas Initiative (RGGI)

To:  State Representative Daryl Metcalfe, Chair, Environmental Resources & Energy Committee, Pennsylvania House of Representatives; Representative Greg Vitali, Minority Chair, Environmental Resources & Energy Committee, Pennsylvania House of Representatives

Cc:  Katie Dykes, Vice-Chair, Regional Greenhouse Gas Initiative

From:  Martha Danly, entrepreneurial product and marketing leader, Martha Danly Consulting

Date:  January 3, 2020

Pennsylvania Governor Tom Wolf proposed Regional Greenhouse Gas Initiative (RGGI) legislation in the fall 2019 legislative season. By voting to join RGGI, Pennsylvania can reduce electricity rates, improve the state and regional economy, and make the state a leader in the global effort to combat climate change. As the third-largest emitter of carbon dioxide in the U.S., we have an opportunity to join forces with the RGGI cooperative by contributing to carbon limit setting and participating in carbon auctions, and ultimately benefitting from RGGI’s economic and environmental impacts.

The September 2019 shuttering of the Three Mile Island nuclear plant is an immediate reminder that energy policy is complex and has a direct impact on Pennsylvania’s citizens and businesses. RGGI does not pit nuclear energy against wind and solar, but instead helps each participating state taking a long-term, integrated approach to decreasing use of fossil fuels and replacing them over time with the right mix of zero- and lower-emissions energy sources, including solar, wind, hydro and nuclear.

The goal of this memo is to offer support for the RGGI bill by assisting you in communicating to state legislators about RGGI’s open market-based approach to carbon pricing, its proven economic and environmental gains, and how its cap-and-trade market applies to Pennsylvania.   

How RGGI Works

RGGI was created in 2009 as a cooperative effort of Northeastern and Mid-Atlantic status to cut carbon dioxide pollution from fossil fuel power plants. There are nine RGGI members today, including Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New York, Rhode Island and Vermont, with a tenth state, New Jersey, slated to return in 2020. RGGI members agree to a regional limit on carbon dioxide emissions from power plants. Through quarterly auctions, power plants that perform better than the limit sell their pollution allowances to those that do not reach the target. Hence the term “cap-and-trade.” The cap declines each year, increasing the costs that fossil-fuel-burning power plants incur for polluting. This raises pressure on the business decision to either reduce emissions or pay for allowances.

RGGI’s Proven Success

Ten years into the program, RGGI has created positive economic outcomes that carry weight well beyond carbon reduction. RGGI members in aggregate have produced:

  • $4 billion in economic value for participating states
  • $1.7 billion in lifetime energy bill savings
  • 44,700 job years of employment in the region
  • 30.4 trillion British Thermal Units of fossil fuel use and 5.8 metric tons of carbon dioxide emissions avoided, the equivalent of over one million homes’ electricity use for a year.

Benefits to Pennsylvania

Revenue raised at RGGI auctions is invested in local businesses that provide jobs focused on improving energy efficiency and delivering clean energy; the funds may also offer low-income energy assistance. This aspect of the system has led the NRDC and others to brand the program “cap-and-invest” rather than cap and-trade. By creating a virtuous cycle of carbon reduction, decreased energy use and lower energy prices, the RGGI approach shortens the path to long-term energy health.

Importantly, RGGI gives states broad options for policy making. With Pennsylvania’s coal- and gas-burning power plants and four remaining nuclear power sites, a major challenge lies in finding the means to transition workers and communities that will be displaced as the clean energy economy grows. RGGI auction revenue offers a strategic source of funding that would allow Pennsylvania to transfer the profits of greenhouse-gas emitters to job training and community redevelopment. For example, assuming feasible economics, the state’s Beaver Valley Nuclear Power Station could remain online for an additional limited period beyond its planned 2021 shutdown. Before the plant is decommissioned, the state could direct RGGI revenue to retrain and redeploy workers in the Shippingport area around the plant.

RGGI auction revenue offers a strategic source of funding that would allow Pennsylvania to transfer the profits of greenhouse-gas emitters to job training and community redevelopment.

Pennsylvania can also benefit from RGGI’s growing scale and track record. Every three years, member states participate in a policy and performance review. In 2017, based on performance to date, members decided to extend the initiative through 2030 and strengthen it by tightening carbon-reduction goals an additional 30%. In addition to lowering the cap, RGGI aims to increase its impact by adding more states to the cooperative, targeting not only Pennsylvania, but Virginia, North Carolina, Illinois, Michigan, Wisconsin and Minnesota. Consumer sentiment is rapidly shifting towards a clean energy mandate, so becoming a leader in renewable energy is a win with a growing majority of voters.

Supporting Pennsylvania’s Legislative Effort

As member of RGGI, Pennsylvania can expect to see energy prices fall, not rise; jobs increase, not disappear; and greenhouse gases to stop growing at their current alarming rate. The question remains: how can you educate and influence your fellow legislators to pass the legislation needed to join RGGI? I offer two proposals:

Assist you with hosting a RGGI Roundtable for assembly members, in which RGGI members from several states present case studies, and then engage in a question-and-answer session with assembly members, so they are prepared to ask the tough questions and reach their own conclusions

Provide guidance from a RGGI expert to help design the carbon trading program for Pennsylvania, build a model of potential economic outcomes, and assist in drafting legislation for the state’s participation in quarterly auctions starting in 2020.

RGGI has something to offer both Republicans and Democrats. I believe you will have bipartisan support once the General Assembly understands how RGGI works and how much Pennsylvania stands to gain from participating in cap-and-trade. If you are interested in the above ideas or have others I can support, please contact me. I would be delighted to help make this legislation a success.

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