Sparks Fly Over Creating a Carbon Tax in Pa.

Walk outs, tin foil hats, and shouts from the audience characterized a tense House Energy and Environmental Resources hearing on Governor Wolf’s executive order to join the Regional Greenhouse Gas Initiative (RGGI). The goal of this program is to limit the carbon dioxide emissions of the participating states in order to reduce the impacts of climate change. It seeks to do this by capping emissions and then allowing for producers to buy and sell unused caps at auction—aka trade.

RGGI states experienced a 64% increase in electricity prices—and there is evidence these higher costs cause job losses in downstream industries.

 

The value of cap and trade models to reduce carbon dioxide emissions is clouded by studies that point in opposite directions. Even basic questions, such as will RGGI cost electricity consumers more, are met with contradicting answers.

A recent report from Resources for the Future (RFF), claimed that the RGGI would not dramatically increase the cost of electricity in Pennsylvania.[1] However, CF Senior Fellow Gordon Tomb pointed out research from David T. Stevenson, Director of the Center for Energy Competitiveness at the Caesar Rodney Institute, which found that the price for electricity could increase by $412 million a year.[2]

It is unclear precisely how RFF reached their conclusions. At least in some scenarios, they assumed revenues from the trade of allowances would be used to offset prices increases for consumers and producers. That’s a dubious assumption given the actual experience of RGGI states. In Delaware, more than half of the $100 million from RGGI revenue is unspent and $22 million went to administrative costs.[3]

In other words, RGGI could give the governor a new pot of money to spend with little oversight.

Other reports—like this one from the Analysis Group—argue that investments in energy efficiency reduce the demand for electricity and therefore result in lower bills for consumers.[4] But in other RGGI states, investments using allowance revenues have fallen flat. In Maryland, most of the funded projects would have taken place without the credits, which further minimizes RGGI’s impact on energy efficiency.[5]

Alternatively, the estimate from Stevenson predicts that costs will increase, and is calculated by taking the current allowance price and multiplying it by previous production levels. Granted, it is impossible to predict just how much of this will be absorbed by consumers. RGGI states experienced a 64% faster increase in electricity prices—and there is evidence these higher costs cause job losses in downstream industries.

If Pennsylvania joins the RGGI, residents will experience the same costs increases and job losses as other states.

Read Gordon’s entire testimony below:

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