In 2022, Pennsylvania became the 12th member of the Regional Greenhouse Gas Initiative (“RGGI”). Pennsylvania joined RGGI pursuant to a 2019 executive order and a subsequent rulemaking promulgated by the state’s Department of Environmental Protection (“DEP”) and Environmental Quality Board (“EQB”). 

Later that year, various parties—including power producers, coal mine owners, and labor unions (collectively, the “Petitioners”)—filed a lawsuit in the state’s Commonwealth Court alleging that Pennsylvania’s participation in RGGI was unconstitutional. 

The Petitioners had asserted that the RGGI rulemaking was “unconstitutional because it usurps the authority of the General Assembly to levy taxes under the Pennsylvania Constitution and is not otherwise statutorily authorized.” Respondents, the Pennsylvania Department of Environmental Protection (“DEP”) and the Pennsylvania Environmental Quality Board (“EQB”), argued that the allowance auction payments do not constitute a tax, but rather a fee, and that such fees are within the scope of DEP's and EQB’s existing regulatory authority. 

The Commonwealth Court issued an Order on Nov. 1, 2023, declaring the RGGI rulemaking void. The court held that the RGGI regulation “constitutes a tax that has been imposed by the DEP and EQB in violation of the Pennsylvania Constitution,” and further stated that “participation in RGGI may only be achieved through legislation duly enacted by the Pennsylvania General Assembly, and not merely through the Rulemaking promulgated by DEP and EQB.”

In December 2023, the DEP initiated an appeal of the decision to the state’s Supreme Court by filing a notice of appeal. Constellation Energy Corporation, Constellation Energy Generation LLC, Citizens for Pennsylvania's Future, Sierra Club, the Clean Air Council, and the Environmental Defense Fund have also filed notices of appeal as amici curiae.

We anticipate that the issue before the Supreme Court is fundamentally the same as that decided by the Commonwealth Court: whether the RGGI rulemaking established a fee or an unconstitutional tax. Each party that filed notices of appeal described the questions on appeal slightly differently, though all of them focused on the tax vs. fee distinction. Several of the parties also raised questions of standing that, while important to those parties, do not bear on the merits of the decision.

The Supreme Court has not yet scheduled a date for oral arguments.

On March 13, 2024, Pennsylvania Governor Josh Shapiro unveiled a proposal to adopt an RGGI-like carbon-pricing program in the state. According to the Associated Press, Shapiro said “he will back legislation to make power plant owners in the nation’s third-biggest energy-producing state pay for their greenhouse gas emissions and require utilities to buy more electricity from renewable sources.” The Pittsburgh Post-Gazette reports that the governor said he would pull Pennsylvania out of RGGI if the legislature enacted his proposal. 

We’ll continue to monitor updates regarding Pennsylvania’s participation in RGGI and the newly unveiled carbon-pricing program.