Copyright Baltimore Sun
Maryland, Delaware and New Jersey tax carbon emissions from in-state fossil fuel generators while neighboring states in the same electricity marketplace do not. The result is regional havoc: failed wholesale markets, soaring retail prices, eroding reliability, blackouts and higher regional greenhouse gas emissions. The policy culprit is the Regional Greenhouse Gas Initiative (RGGI) — a cooperative agreement among 11 northeastern states that caps CO2 emissions from power plants. In practice, RGGI functions as a carbon tax: Fossil fuel plants in member states must buy allowances in proportion to their emissions. A carbon tax can be an effective policy when applied evenly across a single market. But that’s not the case here. Maryland, Delaware and New Jersey are part of the regional power market that includes 10 other states without the RGGI tax. This mismatch pits taxed generators against untaxed competitors, breaking the PJM market design. (PJM, the regional operator responsible for keeping the lights on, is now struggling to do just that.) The numbers tell the story. Maryland’s RGGI revenue over the past four quarters was $257 million. Spread across the 16.7 terawatt-hours of electricity produced by Maryland’s fossil plants, that’s a $16 per megawatt-hour tax. By comparison, PJM’s average electricity wholesale price in 2024 was $36 per megawatt-hour. RGGI is imposing a 44% tax on gross revenue! And that tax is increasing at 7% per year. The consequences are everywhere. Over the past decade, Maryland’s coal plants fell like dominoes, taxed into bankruptcy. For years, no one noticed until the Brandon Shores plant filed for early deactivation in April 2023. By 2023, the capacity cushion was gone. The RGGI tax began cutting into muscle — threatening reliability. PJM intervened and pushed Brandon Shores’ closure to 2029. But will that really be the end? By 2024, roughly 10 Maryland natural gas units had filed for early retirement — another big red flag. Natural gas is the cleanest fossil option in PJM. A well-designed carbon tax would allow these plants to pass costs to ratepayers, increasing wholesale prices until cleaner, more costly technologies can compete. Instead, inept state policy is driving them out of business. When PJM held its July 2024 capacity auction, BGE prices cleared at $19 per megawatt-hour ($466/MW-dy). A fair market found a price that was just big enough to offset the $16 RGGI tax. All of Maryland’s natural gas units rescinded their retirement notices. But the July 2025 auction was politically capped, preventing the market from finding its natural balance. A study published in February by consulting firm TCR confirmed what engineers already knew: PJM would deliver both lower costs and lower emissions if no PJM states participated in RGGI. RGGI suppresses relatively clean in-state gas generation while encouraging imports from dirtier out-of-state coal plants. In short, Maryland’s participation in RGGI isn’t sound climate policy — it’s a regressive tax that increases regional emissions. The warning signs are multiplying. In August, a substation outage caused a 30-minute blackout for 4,000 Howard County residents. That’s not supposed to happen. A resilient grid should withstand the loss of any one element. The blackout was another red flag — evidence of a fragile, overstressed system. Yet Maryland remains in stubborn denial. The Maryland Energy Administration assures us that RGGI is working just fine. In one sense, it is — it’s working exactly as planned and is generating hundreds of millions in revenue. Officials claim generators are closing for “economic reasons.” That’s also true — the economics of paying a 44% tax don’t work. This leaves two big questions: How does Maryland finance its climate programs? Has RGGI ruined the PJM capacity market in PJM-RGGI states? RGGI is the primary source of funds for the Maryland Strategic Energy Investment Fund (SEIF). The September 2025 SEIF advisory board reported a cash balance of over $1 billion. This should be enough to support prudent climate programs for years, at least until another revenue source is established. The deeper issue is state interference with regional markets — whether through carbon taxes or subsidies. Maryland’s Next Generation Energy Act (NGEA) invited natural gas baseload plants to submit proposals by Oct. 31 for expedited approval. The response was disappointing. There were two low-cost proposals from Constellation that are essentially peaker uprates, repurposing secondhand generators. There was no substantial investment in new base load generators. NGEA provides further evidence that RGGI has corrupted the PJM market. Businessmen will no longer invest in Maryland’s natural gas plants without guarantees. The fix is simple — cancel Maryland’s participation in RGGI with guarantees that new natural gas infrastructure will not be taxed into oblivion. Maryland should not need to subsidize natural gas baseload; just get out of the way and let the PJM markets work.
