In a landmark decision last week, Virginia passed the Clean Economy Act in both the House and Senate. The legislation sets the state to join the Regional Greenhouse Gas Initiative (RGGI), a regional cap-and-invest program for the electric sector in the Northeast and Mid-Atlantic.
This is a massive step forward for the state, which has been struggling to join the program for years. The move doesn’t only show Virginia’s willingness to collaborate with other states on climate initiatives, but it also indicates the state’s commitment to passing bold climate legislation this session.
How does RGGI work?
RGGI began in 2009, and currently regulates electric emissions in ten states: Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island, and Vermont. Virginia will be the eleventh state to join.
RGGI is a cap-and-invest program, which means it sets an annual cap on all electric-sector emissions in the region that cannot be exceeded by the states involved. This cap declines each year to ensure fossil fuel emissions decrease over time.
Every quarter, states auction off a fixed amount of allowances that are given to power plants, which are required to have an allowance for each ton of fossil fuels they emit. After the auction, they can trade these allowances depending on their actual emissions, incentivizing power plants to emit less.
The price of allowances is controlled by the market, and fluctuates depending on demand. However, there are price control mechanisms that either withhold allowances or put more into circulation depending on the circumstances. As of December 2019, the price of allowances was set at $5.61 per short ton CO₂.
The revenue generated through RGGI is reinvested into the states through energy efficiency mechanisms and bill savings, renewable energy markets, and other initiatives to benefit the community and reduce emissions.
Why does Virginia’s bill matter?
Virginia produces more energy than any other state in RGGI, and would be a major purchaser of RGGI allowances, therefore increasing the price per allowance. This would not only help Virginia reduce its emissions, but would also help to incentivize greater emission reduction for all RGGI states.
RGGI has already amassed tremendous benefits for states involved. Since 2009, the program has resulted in more than 45,000 jobs and added $4.3 billion in economic value; saved consumers $773 million in energy costs; and retained $5.7 billion in health benefits. Adding more states to the program increases the potential for greater benefits.
Big energy at the table
The process of creating the Clean Economy Act and allowing Virginia to join RGGI was not easy, and involved hundreds of hours of negotiations. The intensity of these efforts was due to the broad range of organizations who were brought to the table, which allowed the bill to have widespread support.
One of these negotiators was Dominion Energy, Virginia’s largest energy provider and currently the predominant source of non-renewable fuels. Dominion has repeatedly been criticized for its influence on prohibiting climate legislation from passing.
Including them in these negotiations was essential in the bill’s passage, considering it results in massive changes for the utility, and lays out ambitious renewable energy benchmarks that Dominion will be mandated to reach. Dominion has pledged to do so through the expansion of wind and solar energy development, which will not only benefit the environment, but will create a large amount of clean energy jobs in Virginia. The utility also announced a goal to have net zero emissions by 2050 last week, proving that the utility is on the same page as the legislation.
Environmental advocates, members of the executive branch, renewable energy companies, and other energy utilities were all a part of the negotiations to create the Clean Economy Act. Including such a wide array of groups was what allowed the bill to be so successful.
Before the legislation moves to the Governor’s desk and Virginia can officially join RGGI, some discrepancies between the House and Senate versions of the bill will have to be remedied. The House version would mandate 100% renewable energy be met by 2045, while the Senate version sets the goal for 2050, in line with Governor Northam’s executive order.
Once these differences are ironed out, Virginia utilities are expected to begin trading RGGI allowances as soon as spring 2021.
“The warming climate poses significant threats to our economic and environmental stability and if we don’t act now these effects will only become increasingly harmful, intractable, and irreversible,” Senator Dave Marsden, who voted in favor of the Senate version of the bill, told Climate XChange.
Passing the Clean Economy Act and joining RGGI is the next step to take Virginia into a brighter, cleaner future.
What could this mean for TCI?
The Clean Economy Act sets Virginia to turn its focus onto the Transportation and Climate Initiative (TCI), a regional cap-and-invest program modeled after RGGI that focuses on the transportation sector.
The Final Memorandum of Understanding for the program will be signed this spring, which means Virginia will have the chance to join both regional initiatives at once. While the state’s executive branch has been hesitant to commit to the program just yet, Democratic majorities in both legislative houses mean that joining TCI may be politically feasible.
As the southernmost state to join RGGI and consider joining TCI, Virginia is becoming a leader in climate policy in its region, and is a symbol to other states considering similar policies that strong action can be taken no matter where a state is located.