Pennsylvania EQB Advances a Cap and Trade Petition to Reduce Greenhouse Gas Emissions

Firm Alert

(by Jean Mosites and Kevin Garber)

On April 16, 2019, the Pennsylvania Environmental Quality Board, in a vote of 14-5, directed the Pennsylvania Department of Environmental Protection to develop a report and recommendation on a petition for a cap and trade regulation.  The Clean Air Council, Widener Commonwealth Law School Environmental Law and Sustainability Center, and others submitted the Petition on February 28, 2019 asking EQB to promulgate a regulation that would create a multi-sector cap and trade system to reduce greenhouse gas (GHG) emissions to achieve carbon neutrality in Pennsylvania by 2052.

The Petition

The Petition includes a fully drafted regulation that establishes a cap on covered GHG emissions, based on a 2016 base year, and reduces GHG emissions to carbon neutrality by 2052.  The regulation borrows heavily from the California cap and trade regulation, which is a multi-sector program that includes Ontario and Quebec.  The California regulation, however, does not require a reduction of all GHG emissions to net zero.

Citing a goal set by the United Nations Framework Convention on Climate Change and the Paris Agreement, the regulation proposes a cap on Pennsylvania GHG emissions to begin at 91 percent of 2016 emissions and thereafter decline by three percent each year until reaching net zero emissions by 2052.  Covered entities would be required to obtain allowances, by auction or allocation, for each metric ton of reportable GHG emissions per year attributable to their operations in Pennsylvania.  Allowances would cost a minimum of $10 each in 2020, with the price increasing by 10 percent plus the rate of inflation each year.  Any person may buy from the available allowances regardless of whether that person must surrender allowances for GHG emissions or not.

The petitioners cite the Pennsylvania Air Pollution Control Act and the Environmental Rights Amendment, Article I, Section 27 of the Pennsylvania Constitution, as legal authority for their Petition.  The only express Pennsylvania legislation related to climate change and greenhouse gases is the Pennsylvania Climate Change Act, Act 70 of 2008, which simply provides for a report on potential climate change impacts, the duties of DEP, establishment of a Climate Change Advisory Committee, and a voluntary registry of GHG emissions.  Neither the Air Pollution Control Act nor the Climate Change Act provides express authority to regulate GHG emissions or establish a cap and trade system.  The Petition bypasses legislative consideration of this issue by asking EQB as an administrative body to promulgate a climate change regulation.

Next Steps

DEP will prepare a report and recommendation within 60 days (or longer if the report cannot be completed within 60 days) on whether EQB should promulgate a cap and trade regulation.  The report should comprehensively evaluate the social, environmental and economic impacts of the proposed regulation, a task that will require significant inquiry as well as sweeping speculation.  EQB members asked for updates and status reports from DEP if the report is not completed by its next meeting in June.  If EQB decides to promulgate a GHG regulation, EQB policy directs DEP to prepare a proposed rulemaking for EQB’s consideration within six months after mailing the report to the petitioners.

This Petition and its proposed regulation present a dramatic departure from any current regulation in Pennsylvania and are intended to affect every aspect of the economy of this Commonwealth.  Whether or not such a program in Pennsylvania would have any effect on the global climate is a question that no one can answer.  Babst Calland will continue to track and report on this and related issues as they develop in the coming months.

If you have questions about the petition for cap and trade regulation, please contact Jean M. Mosites at (412) 394-6468 or jmosites@babstcalland.com or Kevin J. Garber at (412) 394-5404 or kgarber@babstcalland.com.

Click here for PDF.