Coal-heavy Pennsylvania to join Northeast's carbon cap and trade program

Dive Brief:

Pennsylvania Gov. Tom Wolf, D, on Thursday committed his state to joining the Regional Greenhouse Gas Initiative (RGGI), a mandatory carbon cap and trade program in the Northeast.
Pennsylvania exports about a third of its total generation to other states. The states importing the power will ultimately bear the costs of RGGI compliance, according to the governor's office.
Wolf's executive order directs the state's Department of Environmental Protection (DEP) to propose rules by July 31, 2020 that would significantly reduce carbon emissions from the state's fossil fuel plants. Pennsylvania is the eleventh state to join the initiative and the second largest energy net-supplier in the country.

Dive Insight:

As state and local leaders look to cut carbon emissions from the power sector, the Northeast has been adding states since 2005 to limit power plant emissions, with the cap growing more stringent over time. Power producers must purchase allowances for each ton of carbon emitted — either through quarterly regional auctions or on secondary trading markets — with proceeds from the auctions returned to participating states.

Pennsylvania generates a little more than half its power from coal and natural gas, according to the U.S. Energy Information Administration, while around 43% comes from nuclear power. In 2016, the state's power sector emitted almost as much CO2 (82.1 million metric tons) as all the other current RGGI states combined (92.4 million metric tons).

"As a major electricity producer, Pennsylvania has a significant opportunity to reduce emissions and demonstrate its commitment to addressing climate change through a program with a proven track record," DEP Secretary Patrick McDonnell said in a statement.

RGGI auctions held Sept. 4 set the carbon price at $5.20 per ton, according to Wolf's office, and participating states have reduced carbon emissions from the power sector 45% since the initiative started.

Though state regulators have yet to set specific guidelines, the governor's order directs the DEP and Public Utility Commission to "engage with PJM Interconnection to promote the integration of this program in a manner that preserves orderly and competitive economic dispatch within PJM and minimizes emissions leakage."

Wolf also called on the legislature to take action, noting "[t]he conversation we've begun over the past year needs to continue if we are going to craft regulations that fit Pennsylvania's unique energy mix, while making sure that the transition to a cleaner energy mix doesn't leave behind workers and communities our state has relied on for decades to produce its power."

Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New York, Rhode Island and Vermont are also in the initiative, with New Jersey rejoining the program in June.