On July 13, 2021, the Environmental Quality Board (EQB) voted in favor of Final Rulemaking: CO2 Budget Trading Program (25 Pa. Code Chapter 145). The vote was Y:14:N:4, with Sen. Gene Yaw (Chairman of the Senate Environmental Resources and Energy Committee), Rep. Daryl Metcalfe (Chairman of the House Environmental Resources and Energy Committee), John St. Clair (Rosebud Mining), and Jim Welty (Marcellus Shale Coalition) voting in the negative.

The rulemaking will now be delivered to the House and Senate Environmental Resources and Energy Committees and to the Independent Regulatory Review Commission (IRRC) for consideration. Following delivery, IRRC cannot act for at least 20 days so that the Committees have an opportunity to review the regulation. IRRC may have until its next scheduled meeting (which occurs no less than 30 days after delivery of the regulation) to approve or disapprove the regulation.

Committees can take action on the final-form regulation at any time up to 24 hours before IRRC’s public meeting. A Committee can approve, disapprove, or notify DEP and IRRC of its intent to review the regulation. If a Committee takes no action prior to IRRC’s public meeting, the Committee is deemed to have approved the regulation. If a Committee disapproves or notifies IRRC and DEP of its intent to review the regulation, the Committee will have 14 days after it receives IRRC’s order to take action.

The final-form rulemaking would establish a program to limit the emissions of carbon dioxide (CO2) from fossil fuel-fired electric generating units (EGUs) with a nameplate capacity equal to or greater than 25 megawatts. It also includes a declining annual CO2 emissions budget that is anticipated to reduce CO2 emissions by 31% compared to 2019. The rulemaking would provide for the Commonwealth’s participation in the Regional Greenhouse Gas Initiative (RGGI), a cooperative regional market-based cap-and-trade program that sets a regulatory limit on CO2 emissions from fossil fuel-fired EGUs and permits trading of CO2 allowances to effect cost efficient compliance with the regulatory limit.  

Eleven states currently participate in RGGI, with each states’ regulations based on the RGGI Model Rule. DEP has stated that Pennsylvania’s final-form rulemaking is consistent with the Model Rule. However, it also accounts for unique environmental, energy, and economic factors of the Commonwealth.

There are six main areas in which the final-form rulemaking differs from the Model Rule.

  1. Under § 145.306(b)(3) (relating to standard requirements), DEP is making a commitment to assess changes in emissions and air quality by providing an Annual Air Quality Impact Assessment.
  2. Under § 145.342(i) (relating to CO2 allowance allocations), DEP will set aside 10,400,000 CO2 allowances at the beginning of each year for waste coal-fired units. The amount of the set aside increased from 9,300,000 CO2 allowances to account for one waste coal-fired units remaining in operation.
  3. Under § 145.342(j), DEP will set aside CO2 allowances for a strategic use allocation. Under the strategic use set-aside, DEP will allocate these undistributed CO2 allowances directly to eligible projects that result in greenhouse gas emission reductions.
  4. Under § 145.342(k), DEP will set-aside CO2 allowances for combined heat and power units.
  5. Under § 145.305 (relating to limited exemption for CO2 budget units with electrical output to the electric grid restricted by permit conditions), there is additional flexibility in the form of a limited exemption for combined heat and power (CHP) units that are interconnected and supply power to an industrial, institutional or commercial facility.
  6. The final-form rulemaking includes §§ 145.401—145.409 (relating to CO2 allowance auctions) outlining the procedure for auctioning CO2 allowances, which is not contained in the RGGI Model Rule.

Rep. Daryl Metcalfe (R-Butler), Chairman of the House Environmental Resources Committee, stated that his committee will likely consider S.B. 119 (Pittman, R-Indiana) in September or October. The bill, which passed in the Senate by a vote of Y:35/N:15, would prohibit DEP from joining RGGI unless authorized by the General Assembly. Similar legislation passed in both chambers last legislative session, but was vetoed by the Governor.