[USA] Pennsylvania court rules against plan to join RGGI

On November 1, 2023, the Pennsylvania Commonwealth Court ruled in a 4-1 decision that former Governor Tom Wolf’s (D) move to join the Regional Greenhouse Gas Initiative (RGGI) through executive action was an illegal tax.[1] RGGI is the longest-running mandatory greenhouse reduction program in the U.S. and includes eleven states, though Virginia Governor Glenn Youngkin (R) is attempting to leave the program. Pennsylvania would be the first major fossil-fuel-producing state to join the initiative. Former Governor Wolf sought to join RGGI in 2019 but was opposed by the Republican majority General Assembly. The state’s participation in RGGI had been on pause for over a year as Judge Michael Wojcik (D) had issued a preliminary injunction. According to the court, without authorization from the state legislature, RGGI is an unlawful tax. Judge Wojcik wrote in the majority opinion, “Stated simply, to pass constitutional muster, the Commonwealth’s participation in RGGI may only be achieved through legislation duly enacted by the Pennsylvania General Assembly, and not merely through the Rulemaking promulgated by" Pennsylvania regulators.

[1] https://cases.justia.com/pennsylvania/commonwealth-court/2023-247-m-d-2022.pdf?ts=1698852322

[USA] Report: Carbon tax could reduce emissions from federal fossil fuel leasing

In March 2021, the National Bureau of Economic Research (NBER) released a new working paper titled “Climate Royalty Surcharges.” The paper proposes potential carbon fees that could be added onto existing royalty rates to increase revenue from the federal fossil fuel leasing program and lower greenhouse gas emissions.[1] On January 27, 2021, President Biden issued Executive Order 14008, which paused new oil and gas leases on federal lands and waters while the administration reviews the environmental impacts of the federal leasing program. This review includes considering “whether to adjust royalties associated with coal, oil, and gas resources extracted from public lands and offshore waters, or take other appropriate action, to account for corresponding climate costs.”

Set in 1920 when the leasing program was established, the royalty rate on revenue generated from onshore oil and gas leases is 12.5% (18.75% offshore). Half of the revenues are allocated to the state the lease is in. According to the report, the program is projected to generate an average of $9.6 billion/year from 2020 to 2050 under the current rates, assuming the pause is lifted. However, a "climate surcharge" for fossil fuel leases of $22 per ton of CO2 equivalent would generate an estimated $14.2 billion/year on average from 2020 to 2050. It would also reduce emissions by about 32 million metric tons of CO2 equivalent. While $22 per ton of CO2 equivalent generated the most revenue, the report found that higher climate surcharges would further reduce emissions while still generating more revenue than current rates. In total, the paper’s proposed surcharges would bring royalties to approximately 39% to 51.5%.

[1] https://www.nber.org/system/files/working_papers/w28564/w28564.pdf

[USA] FERC issues policy proposal statement on carbon pricing

On October 15, 2020, the Federal Energy Regulatory Commission (FERC) issued a proposed policy statement saying the Commission is willing to consider grid operator’s requests to set a carbon price.[1] The proposed policy statement also asserts that FERC has authority over regional market rules incorporating a state-determined carbon price because it fits under FERC’s jurisdiction over wholesale rates under the Federal Power Act (FPA). However, FERC acknowledged that whether the carbon pricing rules proposed in any particular FPA section 205 filing fall under FERC jurisdiction will be based on the specifics of that filing. Stakeholders now have 30 days to comment on the proposal.

FERC’s proposed policy statement—led by Republican FERC Chairman Neil Chatterjee and Democratic Commissioner Richard Glick—follows the September 30, 2020 technical conference where expert panelists identified a diverse range of benefits from state-determined carbon pricing including the development of technology-neutral, transparent price signals within the markets and providing market certainty to support investment. The panelists also largely defended FERC’s authority to address carbon pricing proposals from grid operators. Currently, states are leading in efforts to address climate change by adopting policies to reduce their greenhouse gas emissions. 11 states have some version of carbon pricing, and other entities like regional market operators are examining the benefits of this approach.

[1] https://www.ferc.gov/news-events/news/ferc-proposes-policy-statement-state-determined-carbon-pricing-wholesale-markets

[Japan] Keidanren Provides Comments on Japan’s Long-Term Growth Strategy under the Paris Agreement

Japan’s Ministry of Environment released a draft Long-Term Growth Strategy under the Paris Agreement on April 25, 2019. The released plan sets goals for industry and transportation sector to reduce CO2 emissions and achieve carbon neutral society. It aims to expedite the research and development of innovative renewable energy; promote novel financing of Environmental, Social, and Governance (ESG) and green investment; and facilitate international cooperation on green policies.[1] The Ministry sought public comments on the draft strategy from April 25th to May 16th, 2019[2].

On May 16, 2019, Japan Business Federation released its comments on the strategy. Japan Business Federation, also known as Keidanren, is an economic organization that represents a membership comprised of 1,376 domestic companies, 109 nationwide industrial associations and 47 of Japan’s regional economic organizations.[3]

Keidanren’s recommendations for the Long-Term Growth Strategy are for Japan to take a flexible approach toward its carbon reduction goal of 80% by 2050, which Keidanren views as an ambitious, long-term goal. Keidanren agreed with the Long-Term Growth Strategy on the importance of facilitating energy transformation through ensuring a balance of ‘Safety + Energy Security, Economy, and Environment (S+3E)’. However, Keidanren emphasized that it hopes that Japan will continue to use nuclear power and high efficiency thermal power alongside the development of next-generation transmission and distribution networks.  

In its comments, Keidanren opposes the implementation of carbon pricing, such as carbon taxes and emission trading, arguing that it is necessary to hold professional and technical discussions regarding carbon pricing, based on the impact on the industry. Keidanren is concerned that carbon pricing will weaken Japan’s competitiveness due to the higher energy costs, and that carbon pricing may disrupt innovation by diverting investments from R&D.[4]

[1] https://www.env.go.jp/press/files/jp/111437.pdf

[2] https://www.env.go.jp/press/106752.html

[3] https://www.keidanren.or.jp/profile/pro001.html

[4] http://www.keidanren.or.jp/policy/2019/043.html