Pa. justices ask in oral arguments: Is RGGI a tax, a fee, or something completely different?

Yahoo

14-05-2025

The Pennsylvania Supreme Court July, 2024 (Jen Barker Worley/ Administrative Office of Pennsylvania Courts)
The Regional Greenhouse Gas Initiative could put fossil fuel-burning power plants out of business and significantly increase energy costs for consumers, electricity producers and Republican opponents of the program said Tuesday in state Supreme Court.
They argued the state Department of Environmental Protection overstepped its authority and violated the constitution by imposing an impermissible tax on electricity generators who release climate-warming carbon dioxide into the atmosphere.
Democratic Gov. Josh Shapiro's Department of Environmental Protection says that's not the case, because lawmakers decades ago gave it broad authority to control air pollution. Its lawyer, Thomas Hazlett, argued before the court that requiring power producers to pay for allowances to release climate-warming carbon dioxide is within that authority.
'The policy choice that the legislature made and the duty that it imposed … is to prevent, control, reduce and abate air pollution,' Hazlett said. 'Carbon dioxide is an air pollutant.'
Environmental groups argued the state constitution guarantees the protection of public resources including clean air and that the DEP's plan to limit carbon emissions is constitutional because it is part of its program to protect the public's environmental rights.
'Air is a public trust resource, and the department and other trustees have to act to protect it,' Jessica O'Neil, who represented Penn Future, the Sierra Club, the Clean Air Council and the Environmental Defense Fund, said.
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But Brigid Landy Khuri, representing Senate Republican Leader Joe Pittman, President Pro Tempore Kim Ward and Energy Committee Chairman Gen Yaw, said the agency overstepped its authority by joining 11 other northeast states in the carbon credit exchange.
'If the purpose is just to cap and regulate CO₂, that's one thing,' Khuri said. 'If the purpose is … to change the entire dynamic of our electric generation system, that's absolutely a policy decision that must be made in the General Assembly, that was not made here.'
Pennsylvania joined the program, known as RGGI, in 2022 under Gov. Tom Wolf's administration.
RGGI requires power plant operators to bid for the rights to emit quantities of carbon dioxide as a byproduct of burning coal, oil and natural gas to make electricity. It's designed to reduce emissions by gradually decreasing the number of credits over several years and investing the auction proceeds in energy efficiency and clean energy technologies in each state.
In more than two hours of arguments the justices questioned the extent to which the DEP can regulate other sources of greenhouse gas emissions from cars, or even cows.
But the main question before the court was whether the lower Commonwealth Court incorrectly determined the requirement to buy carbon credits was an illegal tax.
In its 2023 decision, the appellate court said that Pennsylvania's participation in RGGI must be approved through the General Assembly and that the Department of Environmental Protection does not have the authority to impose a tax.
Hazlett said the DEP contends that the requirement to purchase carbon credits is actually a fee, but the justices asked whether there is a third option.
Justice David Wecht suggested the creation of a marketplace for carbon credits is more like the state is selling a product or an asset.
'It's like environmental Bitcoin,' Wecht said, noting that the credits are different from licenses for which the DEP charges fees because they can be sold on a secondary market.
'What authority does DEP have to create a product that the General Assembly has not authorized them to create … and then reap the profits from the sales, whatever they may be, along with its brothers and sister states who agree to enter into this conglomerate?' Wecht asked.
The legislature created the authority for the DEP to regulate the burning of fossil fuels and the emission of pollutants in the Air Pollution Control Act, which was first passed in 1959. The sale of carbon credits was determined to be an efficient way to exercise that authority, Hazlett said.
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He added that controlling industrial emissions with credits that can be traded has been around since the 1980s, when the state sought to control acid rain emissions. Hazlett said the intent of the program is not to put the fossil fuel industry out of business.
'The idea of the regulatory regime is to allow the regulated entities to manage their business in the most efficient way,' Hazlett said, noting that generators could reduce their carbon dioxide emissions by improving technology or using other fuels.
David Fine, who represents a consortium of generating companies that use fossil fuels, said the case before the court is not about whether RGGI is a good program, but rather, whether the executive branch has the authority to implement such a program.
Responding to the court's inquiry about how much RGGI would generate in auction proceeds, Fine said that based on an auction for the other states last year, Pennsylvania would have received $2 billion in costs that electricity producers would pass on to consumers. He argued the court should conclude a cost of that magnitude should not be implemented without legislative approval.
'That's multiple times the entire DEP budget,' Fine said. 'All of that without the General Assembly voted in favor of it. This will cripple an industry. This will imperil jobs, and it will also imperil investment in Pennsylvania business.'