Pennsylvania Governor Supports Study of Cap-and-Trade Petition

On Friday, April 5th, Pennsylvania Gov. Tom Wolf (D) announced he supports his administration further studying a petition, which  calls for the state to implement an economy-wide cap-and-trade program on greenhouse gas emissions.

The petition was filed by the Clean Air Council, a nonprofit air quality organization in Pennsylvania, and has been co-signed by more than 100 municipalities, businesses, universities, environmental organizations, and religious groups.

While no other state has tried to achieve carbon pricing through a rule-making petition like Pennsylvania, lawyers involved in the process have emphasized there is significant legal basis to do so.

“Under Pennsylvania law, groups and individuals can file rule-making petition with our state Environmental Quality Board, an independent board that puts forward and adopts our state environmental regulations,” said Robert Routh, a staff attorney for the Clean Air Council.

What’s in the Petition?

The proposed regulation will establish a multi-sector cap-and-trade program that could potentially link to the Western Climate Initiative. The specific details of the program will be worked out once the petition is accepted, but the 407-page document delineates key components of the legislation, including:

  • A gradually-declining cap on GHG emissions, decreasing by 3% annually
  • Permits to pollute, more formally known as allowances, that are distributed via quarterly auctions.
  • A reserve price — a price floor for allowance — of $10 in 2020 that increases by 10% each year plus inflation.
  • Free allowances that are provided to compliance entities based on past production, decreasing by 5% annually
  • A provision allowing the banking of allowances for future use

One of the regulatory program’s ultimate objectives is for the Keystone State to achieve carbon neutrality by 2052.

What’s the Legal Basis?

The Council’s petition didn’t come out of thin air. It’s rooted in Pennsylvania’s Environmental Rights Amendment, which was ratified in 1971 with nearly 80% voter approval. The Amendment, Article 1, Section 27, provides: “the people have a right to clean air, pure water, and to the preservation of the natural, scenic, historic and esthetic values of the environment. Pennsylvania’s public natural resources are the common property of all the people, including generations yet to come.” While other states have versions of this amendment, advocates say PA’s provision is especially powerful because it is a part of the Constitution’s enumerated Declaration of Rights.

This amendment is not toothless. In June, 2017, Pennsylvania’s Supreme Court ruled that the state’s branches and levels of government in the state were constitutionally bound to act as trustees over the state public natural lands and enforce the state’s Environmental Rights Amendment.

“Our argument is that the state DEP already has considerable legal authority and flexibility to promulgate such a regulation, such a cap-and-trade program,” Routh said. “The petition has been deemed administratively complete.”

The Air Pollution Control Act grants the EQB the power to “adopt rules and regulations for the prevention, control, reduction and abatement of air pollution… which shall be applicable to all air contamination sources” and to “establish and publish maximum quantities of air contaminants.”

Looking Ahead

The petition was filed in November of 2018, and is scheduled for an April 16th vote before the 20-member Environmental Quality Board. If it is denied, the Clean Air Council could challenge it in court, Routh said. But if a majority of EQB members support the petition, the Department of Environmental Protection will study it further.

After the study, the EQB will vote again, this time on whether or not they recommend a rule-making process. The rule-making process would conservatively take 1.5-2 years, according to Routh.

The petition process is imperfect and long-winded — even if all goes according to plan, the Commonwealth could still be two to three years away from seeing actual cap-and-trade legislation in effect. But the last couple of years have shown that passing carbon pricing legislation at the state level is political challenging. If there’s a way to do so that doesn’t primarily rely on the legislature, it’s worth investigating, and Pennsylvania is paving the way in that regard.