Pennsylvania Legacies #196: Checking the Boxes (Part 2)

Josh Raulerson (0:00)

Today is Friday, July 21, 2023. I’m Josh Raulerson, and this is the Pennsylvania Legacies podcast from the Pennsylvania Environmental Council. Over the past few mots, several new reports have reinforced what we at PEC have been pointing out for some time now: participation in the Regional Greenhouse Gas Initiative, RGGI, will not only benefit Pennsylvania’s environment by reducing carbon emission, it can also reduce energy costs through investment in consumer and energy efficiency programs, among other things.  

On the last episode we took a top-down look at RGGI’s potential to cut emissions in a cost-effective way with the authors of a new report form the University of PA’s Kleinman Center for Energy Policy. That study came out in May and was followed just a few weeks later by another analysis, this one publish by Synapse Energy Economics on behalf of the Evergreen Collaborative. That second report examines RGGi’s economic impact in terms of the bottom line for utility customers, in particular residential ratepayers. 

RGGI opponents have speculated that joining the 12-state carbon markets would lead to higher elected bills, but the new modeling indicates that, if anything, for most Pennsylvanians, the opposite is true: energy costs are projected to decrease under RGGI, reversing the upward trend seen over the last three years and stabilizing a market roiled by fluctuating natural gas prices. The authors of that report identify $1.5 billion in reduced energy costs between 2025 and 2030 under RGGI with PA participating. That works out to an average saving of about $24 for the average Pennsylvania household. The Evergreen report goes on to say that failing to seize the opportunity could actually cost the Commonwealth close to a billion additional dollars in federal tax credits through the Inflation Reduction Act — funds that would have been used to create jobs in the clean energy sector, support communities affected by the retirement of coal-fired power plants, and further lower costs for consumers. 

Justin Balik of Evergreen and Alli Gold Roberts with the corporate sustainability nonprofit, Ceres, both had a hand in the project. They’re our guests on this episode to unpack the findings, closing out our two-part series on the latests economic modeling on the Regional Greenhouse Gas Initiative with and without Pennsylvania. 

Alli, Justin, welcome to the show. 

Alli Roberts (2:25)

Thanks for having us. 

Justin Balik (2:26)

Glad to be here. Thanks again, 

Josh Raulerson (2:27)

Justin. Let’s start with you. Give me some background on Evergreen Action, and I’ll ask you the same question in a moment, Ali, but what, what do your respective organizations do and what led you to this collaboration? 

Justin Balik (2:39)

Sure. So Evergreen is a climate policy and political nonprofit that is dedicated to advancing climate action a across the whole of government at the state and federal levels. We really are focused on supporting both at the federal level and at the state level at this particular moment where we have record federal investments, we want to make sure that all of the opportunity that’s before us is seized and that we’re implementing all these investments equitably and effectively, and that we’re in the state policymaker world pushing states to go further and faster on climate than they ever have before. And we’re excited about this moment that we’re in. And from our point of view, this study is really exciting, and we were really able, thrilled to be able to collaborate with Ceres on it because Pennsylvania is at this inflection point in its energy mix. The debate around the Regional Greenhouse Gas Initiative is a really important part of that. 

And from our perspective, we decided to work with Ceres on this study because we felt that there were some really important questions that needed to be aired out in terms of what does RGGI participation mean at the end of the day from a consumer cost perspective and from an ability to access more federal funds perspective. We know that those are issues that the administration and stakeholders across the Commonwealth are really focused on. And we were pleased with the results and really promising findings that show that RGGI is even more of a slam dunk than it was before. And so thrilled to be able to collaborate with Ceres, a really important voice in terms of the business and investor community. And it was great to be able to team up to commission this independent analysis from Synapse on RGGI.

Josh Raulerson (4:25)

And Alli, you’ve been here before, but quick refresher on Ceres, please. 

Alli Roberts (4:29)

Yeah. And thank you for having me again. Ceres, we are a national sustainability advocacy organization working with companies and investors to build a more sustainable global economy. And I have the great pleasure of leading our state policy program. We work in about 20 states across the country where we are really helping bring companies and investors into the debate about climate and clean energy and clean transportation, clean buildings, and how, um, can we really drive economic benefit and growth while, of course protecting the planet. And RGGI is a perfect example of the types of policies that businesses really support. That’s why we have engaged in this program, not just in the commonwealth of Pennsylvania, but we were thrilled to help Virginia join the program a few years ago. And we are working on fighting to keep Virginia in the program. We’ve been engaged with businesses through multiple program reviews, and in particular, we really see the benefits of market-based systems that reduce emissions while bringing in revenue that builds the clean economy. It’s that simple. And obviously we were thrilled when Evergreen came into the arena and was eager to really provide the, the support and the data to help, you know, provide clarity for, for rate payers and for lawmakers who are doing their due diligence, who are really looking at this policy and figuring out how do we actually get to our climate goals. And RGGI is a proven tool in the toolbox. 

Josh Raulerson (5:54)

So, Alli, can you just kind of outline, uh, the purpose of this study? What questions is it trying to answer? What gaps is it trying to fill? 

Alli Roberts (6:01)

Absolutely. Well, you know, the claim from RGGI opponents has been that the state can’t afford to enter the program, and there weren’t any, you know, many studies really kind of outlining what the impact to electric bills would be for rate payers. And in particular, the opportunities that we now have from the federal government through the Inflation Reduction Act, which puts significant tax programs and benefits on the table that states who are eager and thoughtful in doing the planning and investment can take advantage of. So the study was really aimed at putting all these pieces together and looking at what would be the impacts for rate payers, how quickly could we get clean energy on the grid? And we also knew that of course Governor Shapiro and his team was really taking a close look at RGGI, so this was a valuable time to kind of put out analysis like this. And we’re thrilled that Synapse was able to do that independent analysis. 

Josh Raulerson (6:57)

All right, well, let’s get into the meat of the analysis then. Justin, what did you, what did you find, or what did Synapse find? How does RGGI participation for Pennsylvania affect the cost of power generation here? 

Justin Balik (7:07)

Sure. So we, we asked Synapse to look at the whole picture. How did the allowance prices in the market interact with both electricity rates as well as rate payer bills at the end of the day? And we also looked across sectors at the, at the residential sector, the business community, and the industrial sector, and some really encouraging findings. So the Synapse analysis found that over a six year period, from 2025 to 2030, that RGGI generates on net a one and a half billion dollars in reduced energy cost, once you account for the benefits of the RGGI

 revenues and proceeds being invested. And that’s across the residential sector, again, the business sector and the industrial sector. And you’re really looking at the Commonwealth as a whole, benefiting from investing billions of dollars in auction revenues towards lowering electricity bills through energy efficiency and funding clean energy programs. 

And then what we really cared about and what we asked Synapse to take a close look at is what does this mean for the average person in the average household? At the end of the day, these big numbers can get kind of academic, and we found that on net, um, households can expect if Pennsylvania is able to fully implement RGGI a decrease in monthly utility costs by $24 a year for the average household. And I think that it’s, again, to Alli’s point, there’s been all these baseless accusations thrown around about, you know, this is going to increase your cost significantly, this is going to make energy unaffordable. And Synapse really found the opposite, that this has a negligible impact on utility bills at the end of the day, and if anything, there’s a modest net benefit to what the average household can expect to pay. And so we were really encouraged by that finding. 

Josh Raulerson (8:56)

Can you give me some more detail on, you know, why that is, if we’re assuming that there’s gonna be very little impact on the actual cost of producing this energy, and of course the supply cost is only part of the equation, but again, the assumption is minimal impact, if any, but at the same time, bottom line for customers is going to be your electric bill is probably gonna be a little lower. Why is that? How does that work? 

Justin Balik (9:18)

Yeah, so there’s a couple of things that are at play there. There’s a, a few factors that make up the core of the electricity bill at the end of the day. There’s supply costs and then there’s delivery costs. And really, Synapse focused their analysis on the supply cost. And one of the things that they found is because Pennsylvania’s already part of this regional PJM power market, and there’s many PJM states that are already participating in the Regional Greenhouse Gas Initiative in terms of what this means for electricity rates, most of the impact is baked in at the end of the day. There’s a lot of underlying dynamics in PJM that already account for RGGI in terms of what electricity supply costs are at the end of the day. And then you take a look at the investments, the opportunity to invest billions in proceeds and target that in specific ways at the residential sector, at the business community, and at the industrial sector. 

And we found that people can expect to see a net benefit. And that was based on taking a look at what the lived experience has been in other states. Obviously, there’s no public investment plan for exactly how Pennsylvania would target their RGGI revenues yet, and that would be up to state policymakers at the end of the day. But we looked at what is, how has New Jersey invested their money? How has, how have the other, neighboring states, how has Virginia taken, taken a look at the auction proceeds, how has New York done it? And we allocated the revenues based on similar assumptions and found out, found that these benefits would be there at the end of the day for on the utility bill that people can expect to see every month that there would be this net financial benefit. 

Josh Raulerson (10:57)

So the details of how this would work would have to be worked out, obviously by Pennsylvania. But when you look at those other models that other RGGI states have pursued, what are some of the, you know, possibilities on the table? 

Alli Roberts (11:07)

I think it’s really important that, what’s great about the program is that Pennsylvania gets to decide what they want to do with the revenues. And that’s the beauty of a market-based program that works across multiple states. Each state can really tailor the investments and programs to meet the geographic and cultural dynamics and needs of each state. And that’s really important and it gives legislators and opportunity in partnership with governors to really think about what are the state’s goals and priorities and how do they want to get there? And the Shapiro Administration has outlined a very ambitious climate goal, and RGGI can be a very effective tool when, you know, utilized in the right way to both bring down costs for everybody, but also to invest in the clean energy resources we want. And you know, I think that’s where we’ve seen some diversity in different states. 

So a lot of states have prioritized energy efficiency programs because that’s just an easy bang for the buck. You know, it’s, it’s often a dollar to dollar or a dollar to $2 of benefit ratio, which is just fantastic. We’ve seen, of course, investments in renewable energy upgrades to transmission, but all of these are just so important in looking at the energy mix of each state and kind of where the state is and what are resources we want to keep online and what are the more dynamic resources we need to, you know, bring on board to plan for the future, whether that’s storage, renewables, geothermal, hydrogen, etcetera. But Justin, I’ll let you add on. 

Justin Balik (12:37)

That’s great, Alli. And the other broad categories to think about when you’re talking about how the revenues might be invested, again, every state is going to make their own decision about how RGGI proceeds can best serve the local community, but there are all these broad categories that states have invested in. So, as Ally said, energy efficiency, some states have invested significant sums in R&D, research and development, municipal programs. So states re regranting funds and turns to local governments to lower their energy bills and invest in climate and sustainability initiatives at the local level. There’s also, we’ve seen huge investments in clean transportation, things like school bus electrification, investments in zero emission trucks and other types of public transportation to clean up air in underserved communities. And ORVI did a great report within the last couple of years around what the opportunities would be to invest in energy communities, which is a really important part of Pennsylvania. So there’s lots of things that could be done with the revenues. Synapse took a look and broad categories based on how other states have allocated their revenues and found that given this snapshot and roughly approximate Pennsylvania approximating the types of investments that other states have done, we can expect this one and a half billion dollars in economy-wide savings. 

Josh Raulerson (14:01)

So the, the report is pretty agnostic about, you know, what should be done, but regardless if there’s concern about consumer impacts or, or whatever else, the tools are there to address those concerns. 

Alli Roberts (14:13)

Exactly. And you can also prioritize, you know, support for low and moderate income. You can do all kinds of things and that’s where again, you know, states have an opportunity to really think about what are their values, what are their priorities, and, and align where the funding goes that way. 

Josh Raulerson (14:28)

When you look at the opposition to Pennsylvania participating in RGGI, a lot of the rhetoric has been about stability, reliability, those kinds of things. Are bills gonna fluctuate wildly as we’ve seen over the last couple of years, you know, under a situation where a lot of our powers being generated by natural gas that’s affected by global events like the invasion of Ukraine. When you fold RGGI into this analysis, how does RGGI perform in a scenario like what we’ve seen these last couple of years, these big increases in costs for consumers? 

Justin Balik (14:59)

Yeah, I, I, that’s a really great question, and glad to talk about that. I think just for a moment before getting to a future scenario, just dwelling on what we’ve just been through in terms of the impacts on gas prices, partially as a result of the invasion of Ukraine. And there’s all this, as you pointed out, concern around what is RGGI going to do to rates and is this going to be further exacerbating the situation? The Synapse analysis, just looking at the present moment for a moment, found that RGGI rate impacts would be really minimal relative to the fossil fuel driven price volatility that we’ve already experienced. So just looking at from 2021 to 2022, we’ve saw that residential electricity rates in Pennsylvania increased by 9% due in part to the volatile gas price situation that people have been experiencing. So the, that’s six times larger than any type of impact on rates than in terms of RGGI that synapses forecasting. 

So we just need to keep scale in mind, and you’re right, that recent events are, and the type of shock that people experience is far from what you would expect just from RGGI participating. And then the the exciting thing about that the, about the analysis is that these benefits are still preserved and even compounded further when you look at a, even a high gas price situation. If this were to happen again, the Synapse analysis took a look at the year 2030 and what would happen again if there was a huge gas price shock. The analysis found that the dollar bill savings would go up to $3 or $4 a month because you’re benefiting even more as a consumer from increased investment in clean energy and getting off of unreliable and expensive fossil fuel. So I think the benefits are there regardless. And the analysis high gas price scenario that Synapse took a look at really demonstrates the urgency of moving forward with this initiative and making energy, the energy mix in Pennsylvania more reliable and more durable from a consumer perspective. 

Alli Roberts (17:14)

Yeah, I couldn’t agree more. I think that the takeaway, the high level message is investments in energy security, energy efficiency and price. Stable energy sources like renewables, geothermal which could be supported by RGGI revenues would insulate Pennsylvania from volatile fossil fuel prices. So the more that we do this, the better we’re able to be more energy independent, which I think really aligns with Pennsylvania values. 

Josh Raulerson (17:40)

The other big development over the last year or so that’s kind of informs this conversation is a lot of new federal funding opportunities for states working to make this transition. And that really kind of changes the equation here because now we’re not just talking about what are the potential savings or protections for consumers, but now we’re also talking about a whole lot of money that’s on the table that Pennsylvania might not get the full benefit from, depending on, on how we proceed with RGGI. So I mean, Alli, what is the cost of non-participation according to this analysis? 

Alli Roberts (18:12)

Yeah, I mean just, you know, the Inflation Reduction Act creates a huge opportunity for states, for individuals, for power companies, for pretty much every sector of the economy. But in particular for this conversation for power companies to invest in Pennsylvania and shift towards clean energy, the IRA is an incredible tool. They will be able to capture huge tax credits. RGGI would add even more incentive in order to stay under the pollution cap. And it’s a complimentary set of policies. So not adopting to one could really lead to the benefit of the other. And that’s exactly what the study found. By not participating in RGGI, Pennsylvania would be leading nearly $1 billion in federal funding on the table. And this is because these are tax credits that people have to subscribe into, you know, making those investments to participate. And in particular, I think this is where the study is so helpful. Participation in RGGI brings $930 million of additional federal funding through IRA tax credits that would come to Pennsylvania if policymakers, you know, excuse me, would not come to Pennsylvania if policymakers withdraw from the compact. So this is money that’s on the table that if we join, we get to play with and if not, you know, is just out there. 

Justin Balik (19:29)

Just to hone in on that and really reinforce how important this is for folks tuning in and listening. Governors across the country and Governor Shapiro in particular have really emphasized the importance of securing as much federal investment as possible. And the governor’s done a great job looking at some of the competitive programs like Money for for Well Plugging and looking at the really being a leader in terms of implementing the Climate Pollution Reduction grants and using that money to look at opportunities to decarbonize Pennsylvania’s industrial sector. But as Alli gets at, the vast majority of funding from the Inflation Reduction Act are these clean energy tax credits from the investment tax credit and the production tax credit in particular. And the analysis that Synapse performed found that $2.2 billion overall in clean energy tax credits could be expected to come to Pennsylvania in the coming years; $930 million of that is contingent on RGGI participation. So that’s a huge percentage of federal investment that Pennsylvania could be expecting over the next few years, but they need to fully implement the Regional Greenhouse Gas Initiative to get that full $2.2 billion. That’s critical. And we thought that that was important information to get out there looking at how the state policy decisions that are before folks interact with the opportunities to capture federal investment. 

Josh Raulerson (20:59)

I understand that because of the way the Inflation Reduction Act is, is written some of the provisions in some ways Advantage Pennsylvania over other states, or at any rate, Pennsylvania seems to be in a good position to benefit from these tax credits. Could you explain how that works? 

Alli Roberts (21:14)

So there are additional tax credits available if utilities or states prioritized communities that have been most heavily impacted by emissions and in particular communities where there are coal fire power plants. So Pennsylvania is well positioned of course to take advantage of that given the current makeup of of energy in the state. And we’re really seeing projects being targeted in communities that have been kind of on the front lines of energy production. And we were already seeing that in about the 80 plus projects that have started across the country through IRA and we only expect that that trend to continue. So again, Pennsylvania is well, well positioned for sure. 

Just Balik (21:58)

And just to add to that and broaden the lens for a moment, in addition to the tax credits and all the bonuses that come from investment in energy communities that ally refers to, there’s also really important incentives to pay a prevailing wage and invest in an equitable workforce. And so Pennsylvania and you know, organized labor is a really important constituency in Pennsylvania and there’s a real opportunity to move forward with a just and equitable transition to an a clean energy investment under these provisions that Pennsylvania can really stand to benefit from. And then stepping back from RGGI and the tax credits in particular, there’s all kinds of other programs in the IRA that Pennsylvania can really benefit from. In particular, there’s a lot in there to move forward with industrial decarbonization, which is a really huge source of pollution in Pennsylvania and could benefit from additional investments. So across the board, whether it’s tax credits, competitive programs, some of the demonstration programs for innovative technologies at the Department of Energy loan programed office, there’s lots of opportunities kind of endless at the end of the day, to be honest for Pennsylvania when it comes to investing in a clean energy future, and the RGGI debate is one important part of that. 

Josh Raulerson (23:22)

So this report arrives at a time when there’s a lot of really interesting research coming out. Where does your report fit into that picture? How do the findings here complement other research on RGGI impacts? Either things that have already been published or, or things you might have heard of that are forthcoming? 

Alli Roberts (23:29)

Yeah, I mean this analysis winds up favorably with previous research, in particular the Kleinman Center for Energy policy at UPenn similarly found negligible impacts to rate payers. Their research confirmed what we’ve known for many years, which we just really talked about that coal plants in Pennsylvania will continue to close even without RGGI because of much broader economic and policy trends. And that RGGI provides the revenue to account for any negative impacts to workers or communities. Plus the IRA is another adder to that conversation as Justin just said. So, we’ve seen elsewhere that RGGI really creates great programs that consumers and businesses love. The states that have adopted RGGI have seen their electric bills increase more slowly than the national average, while emissions have fallen more significantly and their economies have grown more quickly. So that trend we see and expect to continue for Pennsylvania and that’s why it’s so important for policymakers and Pennsylvania to start to have the conversation about where RGGI revenues will go and how they want to invest those resources for the good of workers, environmental justice communities and energy consumers throughout the commonwealth. 

Josh Raulerson (24:49)

The report that was just published is, I, I understand kind of a teaser for what’s going to be a, a broader analysis that’s coming later this year. What can you tell me about that and will there be any new information to look forward to there? 

Justin Balik (25:01)

Sure. I would call it a slightly more than a teaser because it was a pretty in depth research project. But having said that, the other pieces, uh, that we’re interested in looking at o over the coming weeks and months are public health benefits from participation and also, you know, the, the governor has rightly said that the alternative energy portfolio standard is something that needs to be addressed and that’s something that a lot of stakeholders are also focused on. So we’re interested in taking a look at the combined benefits of all these policies: RGGI participation and an increase or modification to the alternative energy portfolio standard, and would expect that to be the focus of additional analysis. And as well as, you know, this analysis focused on the economic benefits, there’s obviously emissions, implications first and foremost at the end of the day. So those are some of the pieces that we’ll be looking at in the future as we go forward. 

Josh Raulerson (25:59)

As you know, obviously Governor Shapiro has made some commitments to decarbonization in Pennsylvania, but as we’re waiting to see what direction his administration is going to take specifically on RGGI, I think a lot of people are looking to these criteria that the administration has laid out and saying like, we, we need to get to net zero, but we need to do it the right way. And, and these are the important points. Could you summarize what those are and how this report addresses those questions? 

Alli Roberts (26:26)

Governor Shapiro has said that he’s concerned about rate payers, workers and the business environment. We think it’s clear that RGGI ultimately helps rate payers, brings in funds for, you know, clean energy programs, leverages additional federal dollars, which we know has already been a priority from the administration and ultimately creates jobs and grows the economy. I think we have an opportunity to really ensure that how the revenues are spent aligns with the goals that he’s outlined and ensures that we really do think about rate payers, workers and the business and environment. And I think this is where, you know, our work with the business community is crucial. We work with major food and beverage manufacturers in the Commonwealth who see RGGI as a key tool in the toolbox for them to decarbonize their electricity, a key tool for them to be supporting the communities where their employees live and work and play. 

We know that this is a program that has worked and will continue to work, but also I’ll just add, these businesses were engaged with us in advocating for the IRA as well because they knew more money needed to be on the table to incentivize this transition. And I think that’s where, um, we have this truly unprecedented opportunity. There has never been this much money on the table for clean energy investment and transition. And that’s where we want to see states put forward policies that put this on, you know, on steroids and just increase our ability and speed to really support communities and make the transition as quickly as possible. 

Justin Balik (28:03)

And just to add to that, the governor has rightly said that there’s a false choice between growing a strong economy and combating climate change in an aggressive way. And that’s something he said throughout his campaign and early in his term here. And we completely agree with that. And I think this is, this analysis is a proof point in that argument that uh, RGGI investment and implementation can proceed full steam ahead with folks hopefully with this analysis puts minds at ease that this is not something that is going to lead to any kind of dramatic cost increases. In fact, this is a net benefit at the end of the day, people can expect lower utility bills and there’s this huge opportunity that we’ve been talking about to capitalize on these federal funds. But the other thing that I just wanna emphasize before we wrap is, as Alli has said throughout, RGGI is proven. 

So this analysis looks at what Pennsylvanians can expect from implementation. But we already have these states that have been in RGGI for years and have seen very similar results as synapse projects for Pennsylvania. So what folks have seen in other states is that utility bills are going down on net when you account for the benefits of all of these auction proceeds being invested in an equitable clean energy transition. That’s what Pennsylvania can expect. We have this analysis as a proof point that the experience of other states is not a fluke or a one-off. It’s what Pennsylvania can expect, too. And we have this proven model that has worked successfully for years and it’s time for Pennsylvania to go full steam ahead with implementation. It’s now even more of a winner and a no-brainer thanks to the investments of the Inflation Reduction Act than it was a few years ago. 

Josh Raulerson (29:48)

Alli Gold Roberts with Ceres and Justin Balik with Evergreen Action. Thanks so much for being on the show today. I really appreciate your insights. 

Justin Balik (29:56)

Thanks for having us. Enjoyed it.

Alli Roberts (29:58)

Thank you.

Josh Raulerson (30:04)

As always, you’ll find links to the research we’ve been discussing on this episode in the post accompanying it at PECPA.org. That is the website of the PEC, where you can also listen to Part 1 in this series and find lots more on the RGGI, including PEC’s own analysis and recommendations for decarbonizing Pennsylvania’s power generation sector, one of the nation’s largest. Of course, in addition to energy policy, we are active in developing and promoting opportunities for outdoor recreation in the Commonwealth, something we view as good not only for the economy but also, if done the right way, for the environment. We also work on watershed protection and restoration, reforestation, and community economic development based on conservation and stewardship of natural resources. 

Learn about all those programs, as well as our events and activities, and stream past episodes of the Pennsylvania Legacies podcast, all on the website. Again it’s pecpa.org. That’s pecpa.org. We’ll be back in two weeks with a new episode of the podcast. Hope you can join us. Until then, for the Pennsylvania Environmental Council, I’m Josh Raulerson, and thanks for listening.