DV Journal

State Sen. Gene Yaw has filed legislation to repeal the Regional Greenhouse Gas Initiative (RGGI) carbon tax.

Former Gov. Tom Wolf (D) signed an executive order in 2019 to bring the state into RGGI, a move the state legislature previously rejected. According to Yaw, RGGI, a multi-state compact, would increase consumer electricity rates while cutting energy and manufacturing jobs and lead to the closure of Pennsylvania power plants.

In a memo circulated to Senate members, Yaw said Senate Bill 1058 would repeal a CO2 Budget Trading program regulation promulgated by the Department of Environmental Protection (DEP) and the Environmental Quality Board (EQB) despite bipartisan objection from the General Assembly.

“For four years, Pennsylvania taxpayers have footed the bill for this unconstitutional, unilateral decision,” said Yaw (R-Bradford). “RGGI is wrong for Pennsylvania, and it is time to repeal this regulation and focus on putting forth commonsense, environmentally responsible energy policy that recognizes and champions Pennsylvania as an energy producer.”

Last year, the Commonwealth Court ruled Pennsylvania’s entrance into RGGI may only be achieved through legislation duly enacted by the General Assembly, not merely through rulemaking promulgated by DEP and EQB. That ruling has been appealed to the Pennsylvania Supreme Court by Gov. Josh Shapiro (D), and the appeal remains pending. In the past, legislation preventing Pennsylvania from unconstitutionally being entered into RGGI has received bipartisan support.

Perhaps to appear moderate while campaigning for governor, Shapiro did not back RGGI and refused to call for an end to fracking. Now that he is in office, he is fighting in court to uphold his predecessor’s action. Shapiro justified his decision to appeal the Commonwealth Court RGGI ruling as a defense of executive authority.

But other states that are part of RGGI—Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island, Vermont, and Virginia—joined with legislative approval rather than executive fiat.

According to the nonpartisan Independent Fiscal Office, RGGI could cost Pennsylvanians more than $663 million per year. The Department of Environmental Protection estimate put the number tens of millions of dollars higher, at $688 million.

Virginia, which Republican Gov. Glenn Younkin leads, is trying to leave RGGI. However, Democratic legislators oppose the withdrawal, and the Association of Energy Conservation Professionals has filed a lawsuit to block it.

Yaw said this legislation comes after a series of hearings with members of the Ohio General Assembly to discuss PJM and the reliability of the mid-Atlantic power grid it manages. PJM projects 20 percent of its existing capacity will retire between now and 2030. That would leave it without sufficient power to meet the demands of consumers.

Yaw added thermal generation retirements, like the recently announced Brandon Shores power plant closure in Maryland, coupled with the threat of RGGI, only further compromise the integrity of the electric grid. One Federal Energy Regulatory Commissioner (FERC) recently said the shutdown could cause a “potentially catastrophic” scenario. However, a recent FERC order shows concerns about the outlook of the region’s power production are being heard.

“Not only would RGGI leave thousands struggling to pay their utility bills during a time of record inflation, but it would also have a detrimental impact on the reliability of our region’s already strained electric grid,” Yaw said. “There is more work to be done, but this legislation is an important component to ensuring energy reliability, sustainability, and affordability for Pennsylvania families and businesses.”

The other RGGI member states are not energy-producing states. Pennsylvania has the highest production of natural gas after Texas. And fossil fuels here fund 424,000 jobs.

The threat of RGGI in Pennsylvania has driven fossil fuel plants out of existence, halted the construction of new natural gas power plants, and handcuffed businesses from making further investments with an uncertain regulatory future, according to Yaw. When this generation is retired by states with “clean energy goals,” the new generation cannot keep pace with the former plants.

The ongoing energy transition has had a detrimental impact on the reliability of Pennsylvania’s electric grid, making blackouts and restrictions on when and how residents and companies can use electricity inevitable, he noted.

Carl A. Marrara, executive director of the Pennsylvania Manufacturers’ Association, commended Yaw and the Senate for “tackling this important issue.”

“Senate Bill 1058 is necessary legislation to remove the unconstitutional mess, in the form of a $500 million energy tax, that the Wolf administration unilaterally imposed upon Pennsylvania’s ratepayers,” said Marrara. The Commonwealth Court’s decision last year clearly stated that RGGI is a tax and that, per the Constitution of Pennsylvania, taxation authority is granted solely to the legislature. Repealing RGGI will allow the General Assembly and Gov. Shaprio to debate and implement energy policies that make actual sense for our commonwealth.”

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One year, $663 million.

That is the price tag Pennsylvania’s nonpartisan Independent Fiscal Office said will likely result if and when the state joins the controversial Regional Greenhouse Gas Initiative as Gov. Josh Shapiro has indicated it will.

Shapiro’s administration “estimates that proceeds from this initiative will total $663 million for fiscal year 2023-24,” the IFO said in its state Senate Appropriations Committee report last month.

The IFO noted that a Pennsylvania Department of Environmental Protection estimate put the number tens of millions of dollars higher, at $688 million. Either way, the green-energy plan will increase energy costs by billions over the next decade.

At last month’s appropriations hearing, Montgomery County state Sen. Tracy Pennycuick (R-Bucks/Montgomery) quizzed Independent Fiscal Office Director Matthew Knittel on RGGI’s potential effects on job development in the state.

“We are a net producer of energy, which is great,” Pennycuick said. “But if we were to enter into RGGI, how would that affect our ability to attract new businesses to Pennsylvania?”

Knittel did not answer the question directly. “Like other levies on energy, I would assume that those costs would be passed forward to the ultimate consumers of the energy,” he said.

Asked by Sen. Elder Vogel “how [the money] would be collected,” Knittel said, “The RGGI entity runs the auction process, they would collect the revenues, and then redistribute them out to the states.”

Knittel said the money would be funneled into the Pennsylvania Clean Air Fund, after which it would be distributed throughout the state.

Vogel told the Delaware Valley Journal the state’s adoption of RGGI “will certainly raise energy prices, which I believe will burden both current Pennsylvania businesses and prospective businesses interested in establishing roots here, as well as vastly increase the number of jobs lost across our state.”

Vogel admitted that “it is unclear at this time if these increased energy costs would indeed be a reasonable trade-off because we don’t truly know what the impact on the environment will actually be.”

At the hearing, Senate Appropriations Chair Sen. Scott Martin (R-Lancaster) told DEP Acting Executive Deputy Secretary Jessica Shirley the state has been “fighting this battle over RGGI for a very long time.” 

“There’s a lot of ideas out there,” Martin said. “We want to be part of that conversation with you. It’s really important now more than ever. People are facing inflationary costs now.”

As a gubernatorial candidate, Shapiro originally indicated he opposed the implementation of RGGI in the state. Since taking office, he has moved to consider enacting it.

Former Gov. Tom Wolf had previously tried to implement RGGI via executive directives. The state Commonwealth Court blocked the move last summer, with the program’s adoption in the state still tied up in litigation as of this month.

Sen. Kristin Phillips-Hill (R-York) told DVJournal the Shapiro administration planned on “going it alone” on RGGI.

“This is something they’re trying to enter us into without the consent of the General Assembly,” she said. “Every other state has done it expressly through their legislatures. From a process point of view, I’m really concerned.”

Phillips said the state assembly tried to litigate the potential unilateral implementation of RGGI. “We were not successful,” she said.

Sen. Greg Rothman (R-Cumberland/Dauphin/Perry) echoed Phillips-Hill’s criticism of potential unilateral RGGI implementation.

“I do not [support it],” he told DVJournal. “And even if I did, it should be joined with legislature’s consent or by legislation.”

“Obligating the citizens of Pennsylvania to pay higher energy costs without accountability is undemocratic,” he added.

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Investment behemoth Vanguard may have decided recently to quit a net zero climate effort, but do not expect the Pennsylvania-based advisor group to walk away from all things environmental.

Economist Jerry Bowyer of Boston, Pennsylvania-based Bowyer Research says Vanguard has been quieter about the climate change political agenda than Blackrock, but Bowyer’s research shows Vanguard is “in many ways” a more consistent vote against fossil fuels.

“This political intrusion into finance violates the intention of the firm’s founder, John Bogle,” adds Bowyer. “The energy policy side may well violate Vanguard’s agreement with government regulatory officials to stop interfering with management decisions in this space.”

In short, Bowyer says Vanguard is supposed to be a money management firm, not an energy regulatory agency. The regulation of energy is what the Net Zero Asset Managers (NZAM) Initiative involves. In fact, the very commitment that managers agree to is an acknowledgment that “there is an urgent need to accelerate the transition towards global net zero emissions” and for asset managers to help deliver the goals of the Paris Agreement. In signing on to NZAM, organizations commit to supporting the goal of net zero greenhouse gas (GHG) emissions by 2050, in line with global efforts to limit warming to 1.5°C (‘net zero emissions by 2050 or sooner’).

“It also commits to support investing aligned with net zero emissions by 2050 or sooner,” says the commitment, which is available on NetZeroAssetManagers.org.

Vanguard, one of the world’s biggest mutual fund managers, announced its decision to quit the Net Zero Asset Managers (NZAM) Initiative on December 7. Vanguard officials said they wanted to provide the clarity that its investors desire about the role of index funds and about how they think about material risks, including climate-related risks. Vanguard also wants to make clear that the firm speaks independently on matters of importance to its investors.

Vanguard’s announcement comes as members of the State Financial Officers Foundation and attorneys general have been holding large asset aggregators such as Blackrock and Vanguard accountable for environmental, social, and government (ESG) policies. Had it not been for these efforts, Bowyer thinks Vanguard would still be in the Net Zero group.

“It’s a victory, but a partial one,” says Bowyer. “Vanguard has shown no indication that is changing its policies one iota, and in announcing this change, it reasserted its commitment to fighting global warming.”

Vanguard’s statement says climate change and the ongoing global response will have “far-reaching economic consequences” for companies, financial markets, and investors, presenting what Vanguard considers a clear example of a material and multifaceted financial risk. Vanguard adds this change in NZAM membership status will not affect its commitment to helping investors navigate the risks that climate change can pose to their long-term returns.

“We will continue to provide investors the information and products they need to make sound investment choices, including products designed to meet net-zero objectives,” Vanguard officials said. “We will continue to interact with companies held by Vanguard funds to understand how they address material risks, including climate risk, in the interests of long-term investors, and we will continue to publicly report on our efforts with respect to climate risk, grounded in our deep commitment to our investors and their financial well-being.”

If you ask Bowyer, the only change announced here is that Vanguard will speak with an independent voice in the future. However, that says nothing about whether the independent voice will be any different from its past voice. Bowyer also doubts that Attorney General turned Governor-elect Josh Shapiro (D-Pennsylvania) will in any serious way challenge Vanguard on climate change. Like Governor Tom Wolf, Bowyer considers Shapiro a reliable left-of-center voice who represents Philadelphia regional politics and not the pro-fossil fuel agenda of the rest of the state.

Professor Burton Hollifield with the Tepper School of Business at Carnegie Mellon University can see where Vanguard is coming from with this decision. Vanguard is owned by its funds, themselves which are owned by the fund investors. Therefore, Hollifield says Vanguard has a duty to produce high, long-term returns for their owners.

“Vanguard provides low-cost products to meet long term investment goals, offering many passive index products,” says Hollifield. “Their stated reason for withdrawing from the NZAM is that they want to provide clarity on their focus on how net-zero approaches can impact index products.”

Hollifield adds that long-term index returns reflect long-term risks faced by the economy as a whole. Meanwhile, Hollifield says climate change is an economy-wide risk. So, Vanguard has strong incentives to worry about climate risk for their funds. Pulling out of NZAM does not change that. Vanguard has strong incentives to work to manage long-term climate risks.

“That other investment funds remain in NZAM means that investors who decide to embrace the net-zero goals will still have access to competing products committed to that approach,” says Hollifield. “Competition may force Vanguard to change their approach in the future if the NZAM approach is the only way to deal with climate risks.”

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You might call it the “Little Red Hen” law.

In the children’s story, none of the barnyard animals got to eat Little Red Hen’s delicious bread because they refused to help her make it. Advocates for Pennsylvania’s fossil-fuel sector have proposed the same approach for counties — often with Democratic leadership — that won’t help the state develop its energy economy.

By an 8 to 3 vote, the Senate Environmental Resources and Energy (ERE) Committee voted to prohibit counties that have banned natural gas development within their borders from receiving the county share of impact fee payments and the Marcellus Legacy Fund drilling funds.

“It makes no sense if you ban drilling on land that a county owns then turn around and hold your hand out and want funds from the very source that you say, ‘We’re banning,’” said Sen. Gene Yaw (R-District 23) chair of the commitment and the author of the bill (SB 1331). “If you ban it then you can’t reap the benefits.”

All three “no” votes were from Delaware Valley Democrats.

The impact fee generated a reported $234 million in 2021. up more than 60 percent from 2020’s $146 million. The only year close to last year’s amount was 2018 when the Public Utility Commission (PUC) announced collections of $252 million. 

“County and municipal governments directly affected by drilling will receive a total of $123,217,163 for the 2021 reporting year,” the PUC reported in June. “Additionally, $86,030,934 will be transferred to the Marcellus Legacy Fund, which provides financial support for environmental, highway, water, and sewer projects, rehabilitation of greenways, and other projects throughout the state.”

The top receiving counties for 2021 were Washington, Susquehanna, Bradford, Greene, Lycoming, Tioga, and Butler. 

Yaw said he is seeking to provide what he called “a little bit of consistency,” and to make counties wake up and say, “‘We have to pay attention to how our land is used, and we can’t just make a blanket ban and say no.’”

The bill passed with just one Democratic vote, from Sen. Lisa Boscola (D-Bethlehem).  Minority Chair Carolyn Comitta (D-West Chester) said she was a “no” even before the vote was taken. 

“Local leaders who want to protect their natural resources, parklands, and communities from the potential dangers of fracking should be able to do so without being penalized,” said Comitta. “Furthermore, I do not believe it’s fair to withhold all of this funding simply because fracking is not permitted on certain lands, and in some cases these areas account for a very small percentage of overall county land.”

As a result, Comitta said the bill seems like a heavy-handed approach to what is a local control issue. She also noted that while the natural gas industry appears to want all the land opened to fracking and drilling permits for unconventional wells expedited, data shows many wells that are permitted are not even drilled. 

Yaw said the bill “has nothing to do with fracking,” but is instead a preventative action to put every county on equal footing.  “One of the purposes of this legislation is to preempt problems down the road” when it comes to natural gas infrastructure.

And, natural gas advocates note, there have been other attempts at restrictions, such as restricting the ability of builders to provide natural gas hookups in new construction.

Sen. Katie Muth (D-Chester) was also a “no” vote. She expressed concern that counties banning fracked gas development would not be eligible for their share of the impact fee even if they have truck traffic from the industry. Pointing to Allegheny County as one example, Muth said there are multiple landfills there that take fracked gas waste. 

Yaw and the other Republican members of the committee were unmoved. Yaw even made it a point to say there is a total lack of understanding of what is happening in the natural gas development field. 

“Nothing prohibits a county from controlling by contract what happens on their land,” said Yaw, just before taking a vote. “They just can’t have a knee-jerk reaction and say, ‘everything is banned,’ (so) they have to think about it.”

The bill will now be submitted to the full Senate for consideration. 

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Last month, seven environmental groups wrote a misguided letter to Philadelphia officials bashing legislation that I sponsored as counterintuitive to the city’s decarbonization goals.

In October, six Democrats, including two from the southeast corner of the state, joined all 28 Republicans and our chamber’s lone independent to approve Senate Bill 275. That’s a veto-proof majority, for those counting.

Why? Because the bill’s purpose is simple. It prevents Pennsylvania’s 2,500-plus municipalities from banning access to certain utilities, like natural gas or heating oil. That will preserve consumer access to affordable electricity, no matter where they live, and prevent a chaotic patchwork of regulations that ultimately undermine statewide environmental and energy policies.

It also reaffirms what many local and statewide officials, including the Pennsylvania Public Utility Commission, already understand to be true: municipalities do not have the authority to restrict energy sources.

What the bill does not do is prevent the Philadelphia City Council from pursuing its goal to retrofit all publicly owned buildings to reduce emissions 50 percent over the next decade. It’s not just about ripping out gas lines and oil tanks and installing heat pumps instead. Reducing electricity usage – through upgraded windows, roofs, and insulation – is also a crucial piece of the puzzle.

The aforementioned environmental groups said SB 275 will eliminate any hope of Philadelphia reaching carbon neutrality by 2050. Which begs the question, if the only way to achieve decarbonization is by indiscriminatingly banning utilities deemed “dirty” and “bad,” is that even a good plan? Isn’t there an old adage forewarning the danger of putting all your eggs in one basket?

Banning specific fuel sources in pursuit of “clean energy” makes zero sense in Philadelphia and beyond. First, clean energy is a misnomer. There’s simply no such thing. Even if we shuttered every coal and gas plant across the world tomorrow and began a frantic campaign to install wind and solar farms in their place, we’d need to cover about 1.8 million square kilometers of land and coastline to replace the lost capacity.

And we would need fossil fuels to produce all of those solar panels and wind turbines. Just like we need oil and gas to create and distribute nearly every product we use every single day, from the medications we take to the clothes we wear to the packaging we use to preserve our food. To assume that banning fossil fuels will only impact emissions and electricity prices is to ignore the intricate web that is our economy.

Besides, the city doesn’t exist in a vacuum. It’s connected to a vast, 13-state power grid called PJM, that manages the safe and reliable flow of electricity for 65 million people from Chicago to Washington D.C. and many places in between.

PJM’s operators ensure that its network of transmission lines and generation facilities work in tandem every minute of the day, preventing system overloads that could trigger massive utility failures and inflict untold suffering on millions in its territory. So, if electricity demand spikes in Philadelphia, but environmental policies have forced fossil-fuel plants into nonexistence, there are fewer reliable energy sources to shoulder the burden.

A similar story unfolded in Texas in February when an unprecedented winter storm froze generators and rendered solar and wind farms useless, leaving as many as 4 million Texans without power or water. More than 200 people died amid the chaos. The Electric Reliability Council of Texas, the state’s grid operator, promised to winterize its system to harden it against future storms, but the damage was done. The rest of the nation should take note: a diversified and robust grid is key to preventing systemwide catastrophes.

Which brings me back to the idea of banning access to fossil fuels. If we are willing to sacrifice our food, clothing, shelter, and transportation, doing so might eliminate some carbon emissions in the United States. Globally, U.S. emissions equal about half of what China produces on an annual basis, according to 2018 figures. The annual combined emissions from the other three top polluting nations – India, Russia, and Japan – would likewise take our place.

Then there are the emissions from sources we can’t always control: Volcanic eruptions, livestock, forest fires. Or the damage caused by human activity like deforestation and degenerative agriculture. Even if the United States found a solution to every single unsustainable practice that critics say contributes to climate change, the rest of the world’s leading nations aren’t following suit.

So, what do these groups really want from the city? They want officials to take a sledgehammer to our carefully planned and managed power grid, collapse our economy, and leave Pennsylvanians with higher electric bills, fewer jobs, and unreliable utilities. All for the sake of reducing carbon emissions that will be offset by the rest of the world in perpetuity.

Protecting energy choices for consumers means that residents can pursue “cleaner” electricity sources if they want to or can afford to, while not punishing those who don’t have the option. SB 275 isn’t about protecting special interests – what does a senator from Williamsport owe to Philadelphia’s gas utility?

What I do care about is promoting a sound energy policy that doesn’t leave others behind for the constant pursuit of ideological purity, no matter how impractical or impossible or harmful it is for the very people such policies purport to help.

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