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Carbon taxes face growing state battle

Carbon taxes face growing state battle

While President Joe Biden continues to pursue anti-energy initiatives at the national level, those same policies appear to be unraveling at the state level.

The proposed restrictions on oil and gas use that sit at the heart of Biden’s “Build Back Better” agenda would only further accelerate rising consumer costs. The House version of the bill, for instance, is overloaded with new fees and taxes that would greatly increase the cost of domestic energy production. What will this mean for people who need to heat their homes, buy groceries, fill their tanks, and pay utility bills?

The answer comes in the form of a multistate climate change agreement that reflects in microcosm what Team Biden is attempting to do nationally. Recent developments in key states suggest the agreement may be in the early stages of collapse for the same reasons Build Back Better has stalled federally.

In Virginia, Republican Gov.-elect Glenn Youngkin has made it clear that he intends to pull his state out of the Regional Greenhouse Gas Initiative, a “cap and trade” regulatory scheme widely known as RGGI. Youngkin aptly described the initiative as a “carbon tax” that will raise energy costs during his remarks before the Hampton Roads Chamber of Commerce in December. Dominion Energy, the state’s largest electric utility, is poised to nearly double the carbon surcharge it passes along to consumers for participating in RGGI. Government figures show this charge will boost the average residential customer’s monthly bill by $4.37 beginning in September. The surcharge is estimated to be $2.39 a month. 

There are 11 RGGI states in the New England and mid-Atlantic regions that require power plants to purchase carbon allowances at quarterly auctions whenever those plants exceed the cap on emissions established under the climate change compact. Emissions prices for credits hit a record high of $13 per ton in the most recent auction, which will translate into more carbon taxes for consumers. This would help to explain why new member states have been holding out. 

In Pennsylvania, Gov. Tom Wolf, a Democrat, had planned on having his state join RGGI this week. But he is running into opposition from lawmakers in both parties. Wolf had issued an executive order in 2019 directing his Department of Environmental Protection to develop regulations limiting carbon dioxide emissions in anticipation of joining the initiative. But in December, the Pennsylvania House passed a concurrent resolution disapproving of Wolf’s carbon dioxide budget trading program, which means the regulations cannot be published in the state registry. The state Senate passed the resolution in October. 

Assuming Wolf exercises his veto, the resolution will return to the Pennsylvania Senate, which will then have 10 legislative days or 30 calendar days to override the veto. If that effort is successful, the resolution will then go back to the House, which also needs to muster a two-thirds vote. That seems a tall order, but Wolf is drawing opposition from some of his own Democrats, putting a veto override within reach. Rep. Pam Snyder, who represents Greene, Fayette, and Washington counties, is among the Democrats who voted in favor of the resolution. 

“RGGI is nothing but an unfair tax on the fossil fuel industry that will devastate the communities I represent,” she said in a statement. “RGGI will artificially and prematurely shut down coal-fired power plants across Pennsylvania, the same ones that light our lamps and heat our homes.”

There is some debate about how much executive authority Youngkin has in Virginia to end his state’s participation in RGGI. But since state law authorized RGGI participation without mandating it, Youngkin has good cause to believe he has the upper hand. 

In Pennsylvania, the proponents of affordable energy have a heavier lift since the governor is not in their corner. RGGI participation hinges in part on how many members of Wolf’s party want to run for office while advocating carbon taxes. Attorney General Josh Shapiro, the Democratic candidate for governor, clearly does not. He’s publicly expressed misgivings about RGGI despite the fact that his office has approved the rule enabling Pennsylvania to join. That’s a politician trying to have it both ways. But that’s not so easy to do with Biden pursuing energy taxes at the federal level while Wolf makes a final push to join RGGI in the run-up to the midterm elections.

Interesting times await.

Kevin Mooney (@KevinMooneyDC) is a contributor to the Washington Examiner’s Beltway Confidential blog. He is an investigative reporter in Washington, D.C., who writes for several national publications.

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