By Jon O’Brien
The pandemic taught us about the domino effect of supply chains in our global economy, where one minor disruption can reverberate globally and significantly impact business costs everywhere. Pennsylvania can expect similar economic disruptions if our commonwealth joins the Regional Greenhouse Gas Initiative (RGGI).
When the price of business increases, we, as consumers, will bear the brunt of these costly changes. As somebody who works closely with businesses and contractors, I’ve witnessed firsthand how recent inflation and tight labor markets have impacted business costs. In turn, these businesses must pass those increases on to consumers. We all literally pay the price.
RGGI offers a similar lesson in supply and demand: By raising the cost of energy production costs, this cap-and-tax proposal raises business costs and, as a result, consumer costs.
Put simply, RGGI imposes a carbon tax on energy producers. By taxing energy producers, power plants and other producers will have no choice but to either increase costs or shutter operations, reducing the overall energy supply and increasing electricity bills.
RGGI proponents will claim that their coveted cap-and-tax program “adds” millions of dollars of revenue to the state. But taxation doesn’t generate revenue; it only extracts it. And that’s precisely what RGGI will do. According to the nonpartisan Independent Fiscal Office, RGGI will extract nearly $800 million in tax revenue.
Energy producers will transmit these costs downline to households and businesses through our utility bills. Energy consumers can expect about $2 billion in increased utility bills over a nine-year period — about $400 per household.
RGGI also threatens Pennsylvania’s position as a global energy leader. Pivoting away from cost-efficient energy sources, RGGI will likely cost the jobs of those working in those industries. One estimate suggests Pennsylvania will lose 22,000 jobs and $7.7 billion in economic productivity.
RGGI isn’t necessary. Pennsylvania had already cut emissions by 40 percent between 2007 and 2019 — all without RGGI. While reducing emissions, Pennsylvania also increased energy production.
And what caused the significant decline in emissions for Pennsylvania? Natural gas, that’s what. The market shift toward natural gas not only significantly reduced carbon emissions but also generated hundreds of thousands of high-paying jobs and billions of dollars in economic activity in Pennsylvania.
RGGI states don’t reduce their emissions; they export them. Comparatively, RGGI member states reduced their emissions at a lower rate than Pennsylvania by outsourcing their energy production to non-RGGI states. Rather than deal with the added costs of the RGGI carbon tax, many producers are moving their operations to non-RGGI states. Experts refer to this pattern as “leakage.”
Pennsylvania is already suffering from a different form of leakage. Workers and businesses have been steadily leaving our state, searching for greener pastures where taxes are lower and regulatory burden is less onerous.
Pennsylvania already has a reputation for a less-than-friendly business environment. RGGI will only double down on this reputation, speeding up this mass exodus by business and labor.
RGGI represented a lost opportunity for bipartisanship. The RGGI Working Group — a committee convened by Gov. Josh Shapiro and comprised diverse representation from businesses, labor, and conservation organizations — disagreed about RGGI being the right fit for Pennsylvania. By moving forward with RGGI, Pennsylvania political leaders ignore the insight of industry leaders who encouraged them to pump the brakes on the program.
Pennsylvania’s entry into RGGI started with one man: Gov. Tom Wolf. Through his executive order, Wolf ignored the legislature and singlehandedly entered our commonwealth into RGGI.
As an alternative, the RGGI Working Group’s memorandum encouraged developing policies through a “bipartisan process” — namely, through Pennsylvania’s legislature. Maintaining the governor’s authority to impose a carbon tax without legislative input threatens the democratic process.
RGGI threatens Pennsylvania’s economy and democratic norms. Rather than export our production, Pennsylvania should continue its long-standing tradition as a global leader in energy. By avoiding RGGI, Pennsylvania can continue to generate low-cost energy, make our air cleaner, and pass along those savings to consumers.
Jon O’Brien is the executive director of the Keystone Contractors Association.
This originally appeared on Broad + Liberty on January 24, 2024.
The views expressed are those of the author and not necessarily those of The Susquehanna Valley Center.
Nothing contained here should be considered as an attempt to aid or hinder the passage of any legislation before the General Assembly.