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Governor Wolf’s administration is moving ahead this holiday season with a proposal to bring Pennsylvania into the Regional Greenhouse Gas Initiative (RGGI), a coalition of northeastern states that caps and taxes CO2 emissions from powerplants that use fossil fuels. This proposal will result in a tax of about 17% for PA electricity consumers, for unclear benefit. Though the General Assembly passed a bill requiring legislative approval before Pennsylvania joins RGGI, the Governor vetoed HB 2025 and is moving ahead through executive action.
Because of their size, small business owners are particularly sensitive to energy cost increases and will therefore be disproportionately impacted by the RGGI tax. This is especially true of energy-intensive small businesses like laundromats, car dealerships, convenience stores, and small manufacturers. Tight margins make it difficult to adjust the price of their goods and services or to change business practices quickly enough to manage steep increases. For example, small business owners usually can’t afford to buy new, more energy-efficient equipment if current equipment still has a useful life. And unlike many big businesses, they are typically much too small to negotiate reduced rates from electric suppliers.
Even if they aren’t big energy users, every business depends on services and materials that are impacted by energy prices. Higher energy costs stack along each step of the supply chain, increasing the price of services and supplies businesses need to produce, and as a result, inflating the cost of final products. And in today’s marketplace, even slightly higher costs will make it more difficult for Pennsylvania products to compete.
In this way, RGGI’s energy cost increases will in effect be a hidden tax throughout the economy that will put Pennsylvania businesses and jobs at risk.
Currently, energy costs are lower in Pennsylvania than in every other RGGI state. This will be a critical advantage it needs to maintain as small businesses seek to recover from the COVID-19 crisis.
Pennsylvania’s comparative energy advantages also make it the nation’s largest net exporter of electricity, producing more than twice the energy it consumes. This export capacity brings needed capital into the state, creates thousands of jobs, and also ensures energy prices continue to stay competitive. As a result, joining RGGI will affect the commonwealth to a much greater degree than it has other RGGI states, squandering the comparative advantage that Pennsylvania has and losing energy market share to non-RGGI states, where energy production is cheaper.
Cost increases on coal and natural gas electric generators, which make up 57% of Pennsylvania’s energy mix, will force many power plants out of business. Jobs will be lost in communities where power plants close—not just the jobs in these plants and their supply businesses, but jobs with contractors, garages, retailers, small grocery stores, and countless other small businesses serving those communities. With the staggering unemployment rate in Pennsylvania brought about by COVID-19 business closures, the timing could not be worse.
Given these exorbitant costs, NFIB believes it is proper to ask what the benefit of RGGI would be. After all, Pennsylvania is already ahead of the game with CO2 reduction. Between 2010 and 2017, Pennsylvania’s energy sector reduced CO2 emissions by 36%. In fact, DEP has stated that to have the desired impact on climate change models, Pennsylvania’s commitment to RGGI would not be enough. All states would need to commit to similar greenhouse gas reductions, and all nations would have to meet comparable goals. DEP’s own modeling has found that CO2 reduction and climate benefits of RGGI would be negligible. It is expected that many energy producers will move to site plants in Ohio and West Virginia, which are not RGGI members, moving jobs out-of-state for no environmental benefit.
The significant downsides and questionable benefits may be why majorities of three DEP committees, including the Small Business Compliance Advisory Committee, refused to support the RGGI proposal. These advisory groups heard heart-wrenching testimony from union workers, manufacturers, community members, and small business owners concerned that the downsides of RGGI are not being considered.
Pennsylvania’s small business owners support a clean environment and healthy communities. In fact, many of them make their living from natural resources, from whitewater rafting operators to farm-to-table restaurants, to solar panel installers. But they also understand that balance is key, and they know that responsible decision-making involves considering all factors before making a choice.