Shapiro’s budget proposal includes changes to energy tax breaks, and a board designed to speed up permit reviews

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A central goal of Pennsylvania Gov. Josh Shapiro’s budget proposal is lowering costs for families — including energy costs.

As part of his more than $51 billion proposal, he’s asking lawmakers to pass an energy agenda he unveiled last week called the “Lightning Plan.”

“It takes concrete, direct steps to cut energy costs, create jobs, hold down electric bills for families and increase generation in our commonwealth,” Shapiro said during his budget address Tuesday.

Shapiro’s plan focuses on subsidizing and speeding energy development, including both renewables and fossil fuels, while capping planet-warming carbon emissions from power plants and helping families pay electricity bills and install energy-efficient appliances. Some parts of the plan were already introduced in the legislature last year, but failed to make it through.

Most of the proposals would be unfunded policies. Shapiro’s budget documents only provide fiscal details for the tax breaks.

Shapiro’s plan would convert a tax credit that subsidizes petrochemical and fertilizer producers’  purchase of natural gas, which he says has gone unused since it was created in 2022, into a new tax credit offering up to $100 million per year for companies bringing “new, reliable energy sources” onto the grid. The governor’s plan does not specify which types of energy sources would qualify.

Shapiro’s proposal would lower the thresholds companies need to meet in order to qualify for another unused tax credit for purchasing “clean hydrogen” and natural gas for use in manufacturing, offering qualifying companies up to $7 million each per year, for a total of $49 million annually. It would also create a new tax credit of up to $15 million per year for companies producing sustainable aviation fuel that hit certain investment and job creation thresholds.

Shapiro is proposing creation of a new board to speed up siting and permitting decisions for energy projects, called the Pennsylvania Reliable Energy Siting and Electric Transition Board (RESET Board).

In a press release, Shapiro’s office said his budget will also “introduce the concept of community energy,” helping communities jointly share energy resources. Officials gave the example of a group of farmers coming together to invest in methane digesters which could supply them electricity, rather than an electric utility — but offered few other details about how the program would work. Legislation to enable community solar in Pennsylvania has repeatedly failed to make it through the legislature.

Shapiro is also urging lawmakers to update several energy-related laws. One requires electric distribution companies to reduce energy use in their territories, including through incentives for energy efficient appliances and lighting. Another requires electric utilities to source a certain amount of their energy from renewable sources like wind, solar, hydropower and biogas.

Shapiro’s proposal would raise the requirements for the cleanest sources and expand the types of sources that can be used to meet requirements, including nuclear and natural gas blended with hydrogen. Legislation to do this was introduced to the General Assembly last year and failed to pass.

Perhaps the most controversial aspect of Shapiro’s plan is a proposal to create a cap-and-trade program for carbon emissions from power plants, called the Pennsylvania Climate Emissions Reduction Act. It would be a state-level version of the Regional Greenhouse Gas Initiative, which previous Pennsylvania Gov. Tom Wolf attempted to join, before a court halted the program. Shapiro appealed that ruling, then announced his idea for the state-level replacement last spring. The governor’s state-level program would return 70% of its revenue to Pennsylvania households through rebates on their electric bills, according to Shapiro’s office. A study found that the Pennsylvania Climate Emissions Reduction Act combined with Shapiro’s plan to update the energy source requirements for electric utilities would lower households’ electric bills and reduce planet-warming emissions.

Shapiro, a Democrat, will need to get his budget through the Republican-controlled state Senate and an equally split state House.

Republican Senate President Pro Tempore Kim Ward (R-Westmoreland) has criticized Shapiro’s state-level carbon cap idea, calling it “just a rebranded carbon tax.”

“If he cared about Pennsylvanians’ wallets, he’d drop the utility-hiking #RGGI lawsuit and stop the word charade,” she wrote on X last week.

After Shapiro’s budget address Tuesday, Senate Republican leadership attacked the proposal as inflated. In a press release, they said his budget plan does not include any new revenues or expenditures for the “Lightning Plan,” “leaving Pennsylvanians in the dark about how it would impact their household budgets, grid reliability or the state’s finances.”

“With one stroke of a pen, [he] could repeal his appeal to maintain his power to implement an $800 million carbon tax on Pennsylvanians and encourage investment to bring more certainty to our environment and to push down energy bills,” Senate Appropriations Committee Chair Scott Martin (R-Strasburg) said. “Instead, you keep hearing him talk about more bureaucracy and things that government can do. That’s part of the problem. That’s why we’re sputtering.”

The state Senate passed a bill repealing PA’s RGGI law, known as the CO2 Budget Trading Program, Tuesday.

Shapiro said as the second-biggest energy producer in the country, Pennsylvania has an opportunity.

“We are powerful enough to develop common-sense policy that will lower costs, protect and create jobs and take meaningful action to address climate change,” Shapiro said.

Organized labor representatives praised Shapiro’s energy proposals.

“Gov. Shapiro’s commitment to creating more good-paying union jobs in a clean energy economy is in alignment with our Union Energy campaign,” said Pennsylvania AFL-CIO President Angela Ferritto. “We are dedicated to creating an energy economy that allows all Pennsylvania residents to work in union jobs with union benefits.”

But some environmental and climate advocates see Shapiro’s plan as a mixed bag.

“There is much to like in Governor Shapiro’s ambitious energy plan, such as its support for renewable energy development and modernizing energy standards,” said Clean Air Council Executive Director Alex Bomstein in a written statement following the release of Shapiro’s “Lightning Plan” last week. “At the same time, fossil fuels compete with renewables, and the details of some of these proposals will be critical to ensure they help more than they harm.

Better Path Coalition, a group of environmental organizations dedicated to boosting renewable energy over fossil fuels in Pennsylvania, released a statement panning Shapiro’s plan, saying it lacks environmental justice considerations.

“Any plan to continue and even expand fossil fuel production in Pennsylvania is absolutely unacceptable,” said Better Path Coalition cofounder Karen Feridun.