By Paul J. Gough
Pittsburgh Business Times
Mar 3, 2021
For David Cranston Jr., the debate over whether Pennsylvania should join the Regional Greenhouse Gas Initiative doesn’t center on the environment, but instead on the cost RGGI will have on the businesses and people of western Pennsylvania.
Cranston’s grandfather started Cranston Material Handling Equipment Corp. in McKees Rocks in 1957, and since then the company has seen the ups and downs of the local manufacturing industry to whom the firm sells equipment. Cranston’s convinced that RGGI — a carbon trading program implemented in 11 states that taxes carbon emissions from power plants and puts the proceeds toward green energy, efficiency, workforce and infrastructure — will lead to a sea change in the economy, forcing manufacturers to pay more for electricity and dissolving their competitiveness in the national and global marketplace by wiping away cheaper forms of generation like coal-fired power plants.
That would have an impact on not only the already dwindling number of coal-fired power plants and coal mines in southwestern Pennsylvania, but also on smaller companies like Cranston’s whose business at least partially depends on serving the mines, the plants and their employees.
“All the small businesses, they’re going to get crushed in these communities where the power plants are going to go out of business,” Cranston said.
RGGI seeks to control greenhouse gas emissions through the marketplace, cutting down on pollution from fossil-fuel power generation plants while increasing investment in cleaner sources of energy. Each power plant in a RGGI state has to calculate the tons of greenhouse gases emitted and get enough allowances to cover itself, with the state capping the amount it can emit overall. Power plants can trade allowances, but they can’t escape the fact that under a cap-and-trade program, states progressively reduce the amount of allowances and emissions statewide.
The battle lines have long been drawn over RGGI. On one side are Gov. Tom Wolf, who committed Pennsylvania to joining RGGI and put the state on a path to do so beginning Jan. 1, 2022, and environmentalists who want to see cleaner air in Pennsylvania and a heightened investment in green energy. They point to cleaner air, lower carbon emissions and more green energy projects that are happening in the RGGI states, from Maine to Virginia, since they joined.
On the other side is a group representing the state’s coal and manufacturing industries, and trade unions that work with them, who say RGGI will lead to the closure of cheap, coal-fired power plants and the companies that support them, and make electricity costs much higher for individuals and businesses. The Pennsylvania Legislature is on this side and has tried and so far failed to stop Wolf from unilaterally moving to RGGI.
Now as the Pennsylvania Department of Environmental Protection moves toward adopting RGGI later this year, opponents are waging a campaign to stop it while advocates are pushing hard to ensure it’s implemented.
The case for RGGI
RGGI officially began in 2005, with the cap and trade program starting in 2009. The number of states in the program has grown since then, and according to RGGI, CO2 emissions from electric generation sources dropped 62.9 million tons, or 45%, in the two-year period of 2015-2017 compared to 2006-2008 among RGGI states. In addition, electricity prices have dropped 2% since the first year of RGGI among RGGI states, according to a report from the Cato Institute, with only two states seeing rises.
Allen Landis, executive director of the DEP’s Pennsylvania Energy Development Authority and a member of the state’s RGGI team, said direct regulation of CO2 also reduces other emissions, including sulphur dioxide and nitrogen oxide, that have a negative impact on health.
“We’ve made projections of the reductions and then the health benefits: What do those mean for asthma across the state, what does that mean for children’s health, what are the economic value for the health benefits? We tried to quantify that to highlight the benefits and how it impacts people’s real lives, day in and day out,” Landis said.
Marc Mondor, co-principal of EvolveEA, an architectural and design firm working to make buildings use less energy or generate their energy from renewable sources, is also vice chair of the Climate Change Advisory Committee, which counsels the DEP on the commonwealth’s Climate Action Plan. He and EvolveEA are big supporters of RGGI.
“In our minds, one of the best things that RGGI does is that it puts a price on carbon, and with that, the market sends a signal that you can’t just emit unregulated greenhouse gases,” Mondor said. “It makes the emissions more precious and makes the emitters more conscious of the impact.”
But beyond that, Mondor believes RGGI is the right thing for Pennsylvania’s future. He thinks every moment that the state in general, and the Pittsburgh region in particular, clings to the old fossil-fuel economy just forestalls the inevitable. And he said Pennsylvania risks losing its traditional dominance in the energy economy — with dire impacts down the line.
“If we as a region are ignoring the benefits of green jobs and green power, there’s just no way we’re going to be in a leadership position. We have an opportunity here. We’ve been such a juggernaut for so long … the first coal mines, the first oil wells, the first nuclear power plant,” Mondor said. “Here’s an opportunity for us to lead with clean energy in the 21st century. That’s part of the message we want to make sure gets out. We have an opportunity to lead here.”
Leadership in the economy and the environment are precisely the reasons why Pennsylvania should jump into RGGI, said Robert Sroufe, Murrin Chair of Global Competitiveness in the Duquesne University MBA Sustainable Business Practices Program. In the past, he said, greenhouse gas emissions have been given no value and not accounting for the actual consequences to health and the environment. Pittsburgh, he said, has some of the dirtiest air in the U.S.
RGGI seeks to change that and move Pennsylvania and the country away from coal power, 150-year-old technology that he said was inefficient and wasteful in the conversion of raw material to energy.
“RGGI is a way for us to measure this and become more innovative, more efficient,” Sroufe said.
He said the world is already innovating its way out of fossil-fuel energy, and to remain competitive, Pennsylvania needs to do the same or risk getting left behind. That includes solar tech that can be put on a rooftop, geothermal and wind technology that is always advancing.
“These are the ways of the future instead of sitting on something that we think is low cost when the false argument is that it will cost us more jobs in the future, when they are afraid to measure the full costs,” Sroufe said. “What we’ll find is we’re paying a pretty high cost already.”
‘A direct impact’
But implementing RGGI could be costly for businesses.
Opponents point to data that shows that RGGI will lead to electrical costs that will be higher than they are now. Rachel Gleason, executive director of the Pennsylvania Coal Alliance and a leader in the fight against RGGI, said that will be devastating for the coal industry, the manufacturers who use large amounts of energy and residents who will see their electricity bills go up.
“The economic impacts are huge for individuals and businesses,” Gleason said.
Power PA Jobs Alliance, a group of associations that represent the state’s coal and manufacturing industries and have joined forces to fight RGGI, cited DEP data that showed it would cost state residents upward of $2.5 billion over nine years. They say another analysis, from the Penn State Center for Energy Law and Policy, shows electrical rates will go up 7.8% on average.
“Think about a manufacturer that is paying sometimes up to a million dollars in energy costs per month,” said Carl Marrara, VP of government affairs for the Pennsylvania Manufacturers’ Association. “Adding to that is a big deal, and it undermines our competitiveness. It’s going to make it that much harder for us as a commonwealth to attract and retain manufacturers.”
Marrara and Gleason said RGGI comes at an inopportune time for Pennsylvania’s economy, which has been reeling from the impacts of the pandemic as well as one of the highest corporate tax rates in the country. Doing anything to energy costs, one of the true advantages Pennsylvania has in the marketplace, will make things worse for the economy and workers, they say.
“We’re really undermining how we’re going to be able to grow and expand the manufacturing sector,” Marrara said.
Kevin Lee, president of Lee Supply Company Inc. in Charleroi, sees a potentially high cost to RGGI in his own business. Lee supplies pumps and pump supplies to a number of industries in western Pennsylvania, beginning with the coal industry in 1954 when his grandfather started the business. While Lee Supply has diversified in recent years, Lee estimated that about half of the business is either coal or natural gas related.
“I have 118 families that rely on our company for their livelihoods,” Lee said. “I think RGGI is going to have a direct impact.”
Lee said while the general public may not know about RGGI — opinion polls say there’s support for the initiatives in the abstract but that few know about RGGI specifically in Pennsylvania — business owners and employees, as well as politicians in western Pennsylvania, are well aware of the looming threat.
“This has been an ongoing discussion for several years now,” he said.
Lee thinks that not enough effort is being made to support the emerging technologies that make fossil fuels cleaner. He pointed to Consol Energy Inc.’s efforts to build a clean coal-fired power plant, which recently received $15 million in funding from the federal government.
“That’s a wave of the future,” Lee said. “You don’t eliminate the whole coal footprint (with RGGI).”
Opponents of RGGI also say Pennsylvania isn’t the best fit for RGGI.
“RGGI is a tax on CO2 emissions from fossil-fuel generation. What is different from Pennsylvania and all these other states is that these other states import all their electricity,” Gleason said. “Pennsylvania is an exporter, and we’re very different from all the other RGGI states because we participate in PJM (the regional transmission grid).”
What’s going to happen?
Businesses — and a majority of the state Legislature — have been upset by the manner in which Wolf and the administration has been implementing RGGI. Pennsylvania, unlike other states that have joined RGGI, chose to do it through executive action, instead of legislatively. It’s now going through the rulemaking process at the DEP, a process that could stretch into 2022.
The executive action didn’t sit well with the GOP-controlled Pennsylvania Legislature, which voted in September to try to force Wolf to have the Legislature’s approval to join RGGI. That was vetoed by Wolf. It’s unclear what steps the Legislature will take next.
State Rep. Pam Snyder, D-Greene County, was one of the Democrats who joined with Republicans to oppose RGGI.
“We’ve asked the governor in the past, can’t you just take a pause (in joining RGGI), let’s get through the pandemic … but instead it’s full steam ahead,” Snyder said.
Snyder, who has four big coal mines in her district, said the General Assembly has the right to have a say.
“It’s the people of my district who are going to suffer greatly if it continues down this path,” Snyder said. “But I have had no one tell me what’s going to solve the problem (of coal mines closing) when that happens. That is why we should have a say in what happens with RGGI.”
One of the other unanswered questions is what will happen with the money generated from the carbon tax if RGGI is implemented. The Independent Regulatory Review Commission, in a report released in late February, expressed concern about how the funds from the carbon tax will be dispersed. The first year could generate $300 million. The Environmental Quality Board of the DEP estimated it will go to renewable energy projects (32%), energy efficiency projects (31%) and greenhouse gas abatement (31%).
“We’ve got the framework in place, but the big question is what happens with the proceeds,” said Rob Altenburg, director of the PennFuture Energy Center and a member of the DEP’s air quality advisory committee.
Altenburg said one of the priorities should be not only investing in climate improvement, but also areas that would help communities and workers. Some RGGI states provide money for direct energy bill assistance for low-income ratepayers.
“They could also do worker training programs and things like that that aren’t strictly related to reducing air pollution but investing in other businesses that could be coming into these communities,” Altenburg said.
But, Altenburg said, a lot of what could be done has to be approved by the Legislature, which would require lawmakers to support RGGI and not fight it.
EvolveEA’s Mondor said he’s sensitive to the concerns of the people and industries that will be displaced by the closing of fossil-fuel generation plants. He believes the proceeds should in part go to community reinvestment, and he believes the competitiveness argument should be about how the U.S. will not only keep up with others in the country, but also for Pennsylvania to become a leader in the green energy industry.
“People have to look at this as an investment,” Mondor said. “Yes, it costs a little bit more upfront, but we’re really able to invest in more progressive technologies that lead to green jobs, which is one of the fastest-growing sectors in our economy. … That is what will allow us to remain competitive in the global market.”