After years of political and legal wrangling, Virginia is back in the Regional Greenhouse Gas Initiative.
On Tuesday, Gov. Abigail Spanberger signed a law passed by state lawmakers to rejoin the carbon market.
“Today is a good day. Virginia is moving forward — for our environment, for our families, and for the Commonwealth we are building together,” Spanberger said. “We’re investing in energy that is cleaner, more affordable, more reliable, and homegrown.”
Virginia’s participation in the initiative, known as RGGI, started in 2021 under Gov. Ralph Northam. Gov. Glenn Youngkin made withdrawing from RGGI a centerpiece of his campaign, citing impacts to electricity bills, and followed through with a vote by the Air Pollution Control Board in 2023.
This time around, Virginians will notice some differences re-entering the market. Dominion Energy is proposing higher fees to pay for it, and lawmakers approved rebates to help households offset these costs.
Here’s what you should know:
Putting a price on pollution
The Regional Greenhouse Gas Initiative is the nation’s first mandatory cap-and-trade program to cut climate-warming emissions of carbon dioxide.
It launched in 2008 with 10 states in the Northeast, which signed a memorandum of understanding to reduce gases emitted by the power sector.
“Carbon pollution from power plants is one of the biggest sources of climate change, so RGGI is designed to go after that,” said Nate Benforado, a senior attorney with the Southern Environmental Law Center. “It does not ban burning fossil fuels, but it puts a price on it.”
Power operators in RGGI states, such as Dominion Energy, must participate in quarterly auctions, where they bid to buy credits for their carbon emissions.
“For every ton of carbon dioxide that comes out of your smokestack, a power plant owner now has to buy an allowance,” Benforado said.
The goal is to incentivize shifting to clean, cheaper sources of electricity, such as solar and wind.
Over time, the allowances get more expensive and harder to come by, reinforcing the supply-and-demand mechanism, Benforado said.
He said it’s similar to the way the U.S. solved problems with acid rain several decades ago.
The Clean Air Act in 1990 created a cap-and-trade approach to cutting sulfur pollution. By 2007, annual emissions had declined below the program’s original goal, according to the Harvard Kennedy School.
Under Northam, the General Assembly voted in 2020 to join RGGI, and the state participated in its first auction the following year.
The Commonwealth stayed in for three years before the Youngkin administration’s withdrawal.
Environmental groups sued, including the Southern Environmental Law Center, and eventually a judge ruled the move to withdraw was unlawful because it was the legislature that opted in. Youngkin’s government appealed the ruling, but the appeal was dropped by Attorney General Jay Jones.
During Virginia’s three-year participation in RGGI, the state’s power plant emissions fell by 22%.
“As one would expect, when Virginia exited the market, those emissions started to rise again,” director Carrie Hearne said at a meeting of the Virginia Energy Commission last month.
Virginia brought in $827 million in proceeds from the auctions from 2021 to 2023.
Half of the money went to energy efficiency programs, such as helping people with lower incomes weatherize their homes.
Most of the remaining revenue funded the Community Flood Preparedness Fund, which doles out grants for flood protection projects. That has included money for Norfolk’s floodwall; resilience programs in Hampton; Virginia Beach’s repurposing of the Bow Creek golf course into a stormwater park; and helping rural areas such as the Middle Peninsula, which have fewer resources, develop resilience plans.
What will it cost?
Electric utilities in Virginia are allowed to pass on the costs of generating power and buying fuel to customers, and that includes participating in RGGI auctions.
Previously, Dominion charged households an average of $4.40 per month through a line item, or rider, on electric bills.
This year, the utility has proposed a monthly rider of up to $13 for the average customer. The State Corporation Commission will have to approve the proposal.
At the General Assembly this session, lawmakers expressed concerns about impacts to Virginians already struggling with high energy bills.
The state’s budget finalized this week redirects 45% of Virginia’s revenue from RGGI to give ratepayers a monthly rebate, estimated to be about $3.
The remaining 55% is divided between the flood preparedness and energy efficiency programs. Some environmental groups are concerned about cutting funding for those initiatives.
“It’s shortsighted to shift almost half of all RGGI proceeds away from vital resilience programs to accommodate scare tactics from the power industry,” Jay Ford, Virginia policy manager for the Chesapeake Bay Foundation, said in a statement. “Before pulling from underfunded programs that protect our communities and permanently lower electricity costs for low-income Virginians, we should look first to hold the industry accountable.”
Benforado noted that electricity bills did not go down after Virginia withdrew from RGGI. They’ve risen by nearly 25% for the average Dominion customer over the past few years, largely because of demand from data centers that increases reliance on expensive fossil fuels.
The carbon market should drive prices down in the long-term, he said.
“RGGI is the tool that helps us really secure energy independence, where we don't have to worry about our bills skyrocketing every year, every winter, every time there's some conflict that affects fuel prices.”
He said the state should incentivize utilities to reduce costs, rather than shifting them to customers.
Virginia’s first auction back in RGGI will be in September.
