The Commonwealth Court ruled on Wednesday that Pennsylvania cannot enter into the Regional Greenhouse Gas Initiative (RGGI), a multi-state initiative to limit carbon emissions, saying it violates the state Constitution.
In its decision, the appellate court said that Pennsylvania’s participation in RGGI must be approved through the General Assembly and that the Pennsylvania Department of Environmental Protection does not have the authority to impose a tax.
“Stated simply, to pass constitutional muster, the Commonwealth’s 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”, the 18-page ruling reads.
During oral arguments in November 2022, the question of whether auction credits purchased under RGGI constitute a tax or fee was a chief concern for the Court’s judges.
RGGI’s challengers argued then that DEP, which would have overseen the Commonwealth’s participation in the program, could impose a fee, but not a tax.
Judge Ellen Ceisler dissented from the Commonwealth Court’s majority opinion, writing that “there is still a persuasive argument to be made that the emissions allowance auction process does not establish a tax,” as opponents of Pennsylvania’s participation in RGGI have claimed.
“Based upon the record before us, it does not seem that the emissions allowance auction process would impose what could be deemed fees in the traditional sense, but, by the same token, it is not entirely clear that the proceeds raised thereby would constitute a tax,” Ceisler said. “Given this, there is a genuine issue of material fact regarding the question of whether the Rulemaking establishes a tax or a fee.”
The commonwealth entered the interstate compact under former Gov. Tom Wolf’s administration in April 2022 when the final regulation was published in the Pennsylvania Bulletin as required by state law.
Pennsylvania joined neighboring states New York, New Jersey, Maryland, and Delaware in RGGI more than three years after the regulatory process first began and after considerable bipartisan pushback from opponents who said Democratic Gov. Tom Wolf’s decision to join the multi-state agreement was an example of executive overreach.
The published regulation was soon met with legal challenges. And in July 2022, the Commonwealth Court issued an order, blocking the state from continuing its efforts to join RGGI until the court ruled on its constitutionality.
In a statement, the Natural Resource Defense Council (NRDC) said the ruling was “misguided” and called on Gov. Josh Shapiro to appeal the Court’s decision.
“This is not the final word on Pennsylvania’s participation in RGGI or the vast benefits it confers on the people of this state,” Manish Bapna, president and CEO of the NRDC, said. “For nearly 20 years, Governor Shapiro has been a champion for clean air, climate action and a prosperous Pennsylvania. He should appeal this misguided decision at once and make the case before the state Supreme Court for a program that’s already proven itself across the Northeast and Mid-Atlantic.”
Republican state lawmakers celebrated the ruling, calling Pennsylvania’s entrance into RGGI a “slap in the face.”
“Today’s decision by the Commonwealth Court is a positive development in ensuring that RGGI will not add to increasing energy costs on Pennsylvania families,” state Rep. Bryan Cutler (R-Lancaster) said. “I encourage the Shapiro administration, which has thus far refused to completely embrace RGGI and its associated energy tax, to not appeal today’s Commonwealth Court decision and give Pennsylvanians the certainty that this program will not add to the increasing costs they face.”
Cutler added that the House Republican Caucus “remains ready, willing and able to work with all interested parties to find a sound path forward for Pennsylvania’s energy development in a way that respects the pocketbook issues of our families who are already facing increasing energy prices and the overall economic health of our Commonwealth.”
Senate Majority Leader Joe Pittman echoed Cutler’s comments, calling it a “victory for Pennsylvanians.”
“With this decision, we have the opportunity to finally close a tumultuous chapter and move forward to determine the best legislative solution to foster greater energy independence, while ensuring the responsible development of our God-given natural resources,” Pittman said in a statement.