HARRISBURG — Gov. Josh Shapiro and Democratic leaders are considering a budget deal that would pull Pennsylvania out of an interstate program that charges power plant operators for releasing carbon into the atmosphere, according to a source with knowledge of discussions.
Lawmakers involved in talks to end the four-month budget impasse have been quiet about what is on and off the table, and the exact details of a plan that would formally end the state’s participation in the Regional Greenhouse Gas Initiative (RGGI) aren’t known.
But environmental groups and a handful of Democratic state lawmakers were concerned enough to hold an all-hands-on-deck news conference outside Philadelphia City Hall last week to make their opposition clear.
“Some of our leaders seem ready to turn their backs on clean air, climate progress, and the people they were elected to serve for nothing meaningful but a one-year budget,” said Patrick McDonnell, the former secretary of Pennsylvania’s environmental department who now leads the conservation group PennFuture.
“It is time to step up,” he added, “not sell out.”
State Sen. Nikil Saval (D., Philadelphia) said he would vote no on any budget deal that pulled Pennsylvania out of RGGI (pronounced “Reggie”), regardless of what else was offered in the final package.
“I would describe it as Faustian, except Faust got so much more out of his bargain with the devil,” Saval told Spotlight PA.
A bargaining chip
Pennsylvania’s entrance into RGGI has long been a sore spot in Harrisburg, pitting environmentalists against business interests and organized labor.
In 2019, former Gov. Tom Wolf, a Democrat, unilaterally directed the state to enter RGGI through an executive order. However, Pennsylvania’s full participation in the initiative has been blocked by ongoing litigation. The state Supreme Court heard oral arguments in May and could rule at any time.
Legislative Republicans are among those who want Pennsylvania to exit RGGI, and that opposition has largely stalled progress on other renewable energy policies, including a RGGI replacement plan proposed by Shapiro.
RGGI has been a rumored budget bargaining chip before, though this year’s impasse is the longest and most painful in recent years.
The budget was due June 30. With the state unable to make billions in payments, schools, counties, and nonprofits have either slashed services, furloughed workers, or gone into debt to continue operations. At least one school district says it will be forced to shut down in January if the impasse continues.
Shapiro, the Democrats who lead the state House, and the Republicans who control the state Senate have been unable to come to an agreement due to deep disagreements over state spending.
However, all the major parties returned to the bargaining table in person last month as the external pressure increased. The state House is scheduled to return to Harrisburg this Wednesday.
Leaders on both sides of the aisle have made it clear they know a compromise on RGGI could move the needle.
“We need to finally see our friends in the House call up some of our priorities that passed this chamber in a bipartisan fashion,” state Senate Majority Leader Joe Pittman (R., Indiana) said last month before the chamber passed a bill to exit RGGI. “Maybe then we can get all of this in front of us finally wrapped up.”
At least one top Democrat has expressed openness to such a compromise, although the exact terms matter.
"We're not getting out of RGGI without taking care of our environment, period, full stop,” state House Majority Leader Matt Bradford (D., Montgomery) said at a news conference last month.
Shapiro has been vocally skeptical of the program since he announced his run for governor in 2021. He appealed a state appellate court ruling striking down Pennsylvania’s participation in RGGI to protect executive power, his office says.
“I understand that [RGGI] was a priority of my predecessor,” Shapiro said last year, adding that his “priority” is passing his plan.
Big business, tricky politics
There’s a reason energy policy is so complicated in Pennsylvania.
The commonwealth is a top energy-producing state, and businesses, unions, and other special interest groups involved in the industry have deep connections to top policymakers.
The Keystone State is also a top emitter of greenhouse gases due to the presence of gas drilling, coal mining, and industries such as power generation and steelworking that use fossil fuels.
At a recent news conference, state Rep. Greg Vitali (D., Delaware), chair of the chamber’s environment committee, said he believes RGGI is the only policy Pennsylvania can embrace to fight climate change.
“There was a reason Gov. Wolf did this through the regulatory process and not legislatively, and that reason is the political impossibility of getting good climate change regulation through … the Republican Senate,” he said.
Supporters of RGGI say the economic hit would be minimal. A 2023 study by the University of Pennsylvania’s Kleinman Center for Energy Policy found that RGGI could raise tens of millions of dollars in revenue and significantly cut emissions while having “minimal to no impact on electricity rates and overall employment in the state.”
Energy interests and free-market advocates have their own opposing research to point to.
Nearly a dozen states, including many of Pennsylvania’s neighbors to the east, participate in RGGI, but none have economies as linked to fossil fuels as the commonwealth’s. The initiative's requirement that energy producers pay for the carbon they release could put Pennsylvania’s energy companies at a competitive disadvantage, opponents say.
A 2018 study from the libertarian Cato Institute, for instance, found that 34% of “energy-intensive businesses” like metal production, food processing, and chemicals manufacturing left the initiative’s states.
Taking Pennsylvania out of RGGI “reduces unnecessary financial burdens on businesses in Pennsylvania, promoting a more competitive business environment, and fostering economic growth,” the Pennsylvania Chamber of Business and Industry wrote in a memo to lawmakers last month.
Influential trade unions whose members build and maintain fossil fuel infrastructure, like power plants, have also opposed the initiative. These unions are key political funders, particularly of Shapiro and legislative Democrats.
This divide is apparent when RGGI is put to a vote. Six Democratic senators joined all Republicans to pass the bill in October to remove Pennsylvania from the program.