Overview

Description

In October 2019, Pennsylvania’s Governor Tom Wolf signed an executive order directing the state’s Department of Environmental Protection (DEP) to develop and present to the Environmental Quality Board (EQB) a proposal for an ETS covering CO2 emissions from the electric power sector and its linkage to the Regional Greenhouse Gas Initiative (RGGI). In April 2022, the final regulation to establish an ETS in Pennsylvania and to participate in RGGI was published. It set a base cap of 78 million short tons (70.8 MtCO2) if Pennsylvania was a participating state of RGGI as of 1 January 2022. The cap decreases by 3% annually to 58.1 million short tons (52.7 MtCO2) in 2030. Before the regulation took effect, it faced legal challenge, and in November 2023 the Commonwealth Court ruled it unconstitutional on the grounds that RGGI-related revenues constituted a tax requiring legislative approval. Governor Josh Shapiro's administration appealed the ruling. The regulation includes the implementation of both emissions containment and cost containment reserves, as well as quarterly auctions to allocate allowances. It includes additional features such as set-aside accounts (accounts from which allowances may be transferred to the accounts of regulated units or retired on their behalf) for waste coal and cogeneration units (including combined heat and power systems), and a limited exemption for cogeneration units that supply less than 15% of their total energy to the electricity grid.

Recent Developments

In June 2025, Pennsylvania formally ended its RGGI participation through the 2025–2026 budget legislation (House Bill 416). In April 2025, the Pennsylvania Climate Emissions Reduction Act (PACER) was reintroduced in both chambers as House Bill 503 and Senate Bill 503. As of the end of 2025, PACER was under legislative consideration.

Coverage

Not Specified

Pricing and Allocation Approaches

Not Specified

Compliance Approaches

Not Specified

Relation to Other Compliance CPIs

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Covered Sectors

No eligible activities specified for this instrument.