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New Analysis: The Regional Greenhouse Gas Initiative Is Critical for Pennsylvania

RGGI could help the Commonwealth seize billions in additional IRA subsidies and lower utility bills.

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Executive Branch State Climate Action
Pennsylvania state sign along the highway that reads
© 2023 Tony Webster/Flickr CC BY-NC-ND 2.0

In April of 2022, Pennsylvania became the twelfth state to join the Regional Greenhouse Gas Initiative (RGGI). Launched in 2005 and implemented in the first member states in 2009, RGGI was the first cap-and-invest program aimed at curbing carbon pollution from the power sector to be implemented in the United States. Under the program, power plants purchase allowances for each ton of carbon pollution emitted. To further cut pollution and reduce energy costs, proceeds from these auctions can fund investments in areas such as clean electricity, sustainable transportation, weatherization and energy efficiency. The market-based program design ensures least-cost, economically efficient emissions reductions while providing strong incentives to power producers to reduce climate pollution. 

Pennsylvania’s entry into the program is currently on hold due to legal challenges and bad faith attacks by Pennsylvania fossil fuel interests. 

But RGGI is critical to Pennsylvania’s efforts to lower energy costs, maximize the benefits of the Inflation Reduction Act (IRA), and reduce climate pollution. New analysis from independent modeling firm Synapse Energy Economics shows that RGGI can help Governor Shapiro meet his climate commitments, secure almost $1 billion of additional federal investment, and lower energy costs across the Commonwealth.

 

RGGI’s record of success

RGGI sets a declining cap on carbon dioxide (CO2) pollution from all electric generators with capacity of 25 megawatts (MW) or greater. Since its launch, RGGI participating states have successfully reduced their power emissions by more than 50 percent while investing over $3 billion to transition their state economies to a clean energy future. Each state has the power to utilize the revenues to meet their own climate and clean energy needs and interests. RGGI states have invested most of their revenue in energy efficiency, renewable energy projects, other projects like transportation electrification, and direct bill assistance for consumers. 

Importantly, by capping emissions and significantly increasing investment in a clean energy economy, RGGI has unlocked transformative benefits for the economies and residents of member states, contributing to reduced electricity costs, and fewer incidents of childhood asthma. Pennsylvania’s participation is a chance to grow and deepen its impact even further.  

That’s why major employers in Pennsylvania support RGGI as a market-based system to accelerate emissions reduction while preserving Pennsylvania’s status as a leading power generator amid the clean energy transition.  

 

RGGI can unlock more funding from the IRA

Governor Josh Shapiro has rightly made securing federal infrastructure and climate investments for Pennsylvania a top priority for his administration, setting ambitious goals regarding well plugging and deploying planning resources from the Climate Pollution Reduction Grants program.  The bulk of the IRA’s climate investments come in the form of tax credits that significantly reduce the cost of clean energy projects while promoting strong labor standards and investment in energy communities. According to Synapse, without RGGI, Pennsylvania would forgo an additional $930 million in investment via the uncapped Investment Tax Credit and the Production Tax Credits. 

Upside-down bar chart showing the millions in tax credits Pennsylvania could lose by year. PA could lose 930 million by 2039.

Increased deployment of solar, wind, and battery storage due to participation in RGGI could bring $930 million of additional IRA tax credits to Pennsylvania.

Download our rggi fact sheet

Here’s how this works: Under RGGI, power plants purchase allowances per ton of carbon pollution. But unlike fossil fuels, renewable energy sources like wind and solar do not produce climate pollution and therefore incentivize energy as the most cost effective option. Greater renewable deployment will bring in more federal tax credits, which can help power local economies and fund clean energy jobs while keeping consumer energy costs low.

In total, $2.2 billion in IRA tax credits will come to Pennsylvania clean energy projects constructed from 2023 and 2030, including $2 billion in Production Tax Credits from wind and solar and $170 million in Investment tax Credits from battery storage

Pennsylvania will lose out on a massive amount of federal investment without RGGI. 

 

RGGI proceeds and IRA tax credits can catalyze investment in energy communities 

Many communities in Pennsylvania have been built on an economy and tax base that is heavily dependent on fossil fuels. Pennsylvania is the third largest producer of coal in the United States and is the second largest producer of fossil gas. 

In other states, RGGI proceeds have been allocated to critical investment in coal communities. For example, New York and Massachusetts have both invested significant RGGI proceeds to replace lost tax revenue for communities impacted by coal plant closures, as well as related workforce development initiatives. 

Wide shot of a bustling street in Philadelphia, Pennsylvania. People are walking and biking. School buses are parked on the side of the street. A mural is seen in the back.

Pennsylvania can use federal funds to catalyze investment in energy communities, like certain areas of Pittsburgh (pictured above). (© 2011 cityLAB pittsburgh/Flickr CC BY-NC-ND 2.0)

These investments can now be paired with the bonus adder to the IRA’s clean energy tax credits to incentivize investment in “energy communities.” 

Energy communities are specifically defined in the IRA statute, generally including communities that have suffered hardship from the decline of the fossil fuel industry. (The US Department of Energy has helpfully released a mapping tool to help identify energy communities as defined by the IRA.)

 

RGGI can help lower and stabilize energy costs

Many complex factors impact electricity prices and household utility bills, a reality exploited by opponents who have erroneously suggested that by joining RGGI, Pennsylvania will cause massive increases in residents’ electricity bills. This has been debunked by multiple independent studies over the past several years. 

Synapse confirms this, and their analysis finds that RGGI will, in fact, lower and stabilize energy costs, helping Pennsylvania’s communities and businesses.

Instead, Synapse finds that from 2025-2030, RGGI will:

  • Generate $1.5 billion in reduced energy costs for Pennsylvania’s residents, businesses, and industrial sector as the Commonwealth invests billions in auction revenues towards lowering electricity bills and funding clean energy programs. 
  • Decrease utility costs by $24 per year for the average household. 
  • Stabilize energy prices. From 2021 to 2022, residential electricity rates in Pennsylvania increased by 9 percent due in part to volatile natural gas prices.

Energy affordability is a real and pressing issue, particularly for communities of color. RGGI’s investments can help make energy more affordable. By investing auction proceeds in weatherization and other energy efficiency projects, Pennsylvania can lower costs and also help reduce the impact of volatile and unpredictable price spikes driven by fossil fuels. And it’s not just a hypothetical, this is exactly what’s happened in other RGGI states.

 

Pennsylvania can’t afford to miss this opportunity

There’s never been a better moment for Pennsylvania to implement RGGI. RGGI was already a common sense approach to tackling climate pollution and investing in the Commonwealth’s communities. With unprecedented federal funding to leverage, it’s now a slam dunk. 

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