Virginia Joins the Regional Greenhouse Gas Initiative, Finally

In a tweet this July, Governor Ralph Northam announced Virginia’s determination to tackle climate change by officially joining the Regional Greenhouse Gas Initiative (RGGI), a cap-and-invest program in the Northeast and Mid-Atlantic that places a limit on electricity sector emissions.

As the newest member and the first southern state to join #RGGI, our Commonwealth is sending a powerful signal that we’re ready to lead the climate change fight — and we’re committed to securing a clean energy future for all Virginians,” his tweet read.

Not only is Virginia the first Southern state to join RGGI, but it is also the first Southern state to implement major climate policy aimed at reducing the carbon footprint of the entire state. The Commonwealth is surrounded by coal-producing states like West Virginia, Kentucky and others that have been slow to acknowledge and address climate change. Virginia has established itself as a leader among Southern states by implementing emission reduction policies such as those listed in the Virginia Clean Economy Act that mandates a zero-emission electricity sector by 2050. It should be noted that joining RGGI is not the end of addressing emissions in Virginia as politicians and advocacy groups acknowledge that the transportation sector accounts for nearly half of the state’s carbon emissions.

Learn more about Cap and Invest in the Us on our Regional Initiatives Page

This momentous occasion did not come without a fight. Virginia has been working to join RGGI for years now, and has faced many setbacks in its journey to take decisive climate action.

In 2019, Virginia’s then GOP-controlled General Assembly included a provision in the state budget that prohibited the use of state funds “to support membership or participation in the Regional Greenhouse Gas Initiative (RGGI),” and also kept the state from using any potential revenue generated through RGGI. Governor Northam chose to sign the budget without vetoing this provision, further delaying the state’s efforts to join the program.

Why did Governor Northam choose not to veto the provision?

Former House Speaker Kirk Cox released a statement saying that he believed the governor recognized “the constitutional authority of the General Assembly to set conditions and restrictions on appropriations,” explaining the governor’s reasoning behind signing a budget including such a provision.

In a letter to the General Assembly, Governor Northam expressed his disappointment in the General Assembly’s choice to restrict the state from joining RGGI and directed “the Department of Environmental Quality to identify ways to implement the regulation and achieve our pollution reduction goals.” Virginia’s Department of Environmental Quality (DEQ) made a plan to implement a consignment auction, a program where utilities are granted allowances for free, and can then sell them to other companies that exceed their pollution cap. But now, this program will not need to be implemented.

While disappointed with the governor’s move not to veto the provision, Virginia legislators and advocacy groups did not accept defeat. Tackling climate change was a priority for Democratic lawmakers going into the 2020 legislative session after securing a majority in both the state House and Senate. As a result, the General Assembly passed a slew of legislation in order to build a carbon-free electricity sector and energy efficiency improvements this year. The most notable piece of legislation was the Virginia Clean Economy Act, which requires state utilities to be carbon-free by 2050 and instructs Virginia to join RGGI — the state will be able to fully participate in RGGI starting on January 1, 2021, leaving no use for the DEQ’s consignment auction plan.

What’s happening now?

The ban on spending state dollars to participate in RGGI ended July 1, 2020 — the first day of the new fiscal year — and the new budget places no restrictions on RGGI spending. Governor Northam is very supportive of joining the program, stating “that a clean environment and a strong economy go hand-in-hand.” Virginians hope that this proves true as the pandemic is estimated to cost the state about $3 billion over the next two years, but there is much optimism about the expansion of the clean energy market in Virginia and the job growth it will spur in the state.

The Clean Energy and Community Flood Preparedness Act, one of the bills passed during the 2020 session, authorizes Virginia’s Department of Environmental Quality (DEQ) to design, implement, and regulate a CO2 allowance auction program consistent with RGGI. On July 8, 2020, RGGI, Inc. officially welcomed Virginia as a participant in the regional initiative. The Commonwealth will now sell 100% of allowances issued each year through the DEQ program.

Where will the money go?

It is estimated that the RGGI program will bring the state between $104 million and $109 million annually for the next six fiscal years.

In a presentation given to the State Air Pollution Control Board in mid-July, the Department of Environmental Quality reported that 45% of RGGI profits will go to the Virginia Community Flood Preparedness Fund. The fund, a continuation of the Virginia Shoreline Resiliency Fund, is a loan and grant program that will “assist localities affected by recurrent flooding, sea level rise, and flooding from severe weather events.” The money will allow coastal areas to finance “flood prevention and protection projects and studies,” and 25% of the 45% of allocated funds are required to “be used for projects in low-income geographic areas.”

The state also specifies that 50% of RGGI revenue will fund energy efficiency programs for low-income residents. Energy efficiency, done through projects like switching to LED light bulbs or installing better insulation, is a very effective first step in reducing a household’s carbon footprint. These programs also reduce utility costs, particularly important for low-income homes, which spend higher percentages of income on energy costs.

The remaining 5% of RGGI revenue will cover administrative costs for both the Department of Environmental Quality, which will “carry out statewide climate planning and mitigation activities,” and the Department of Housing and Community Development, which will work with the Department of Mines, Minerals, and Energy to implement the energy efficiency programs. 

Read more about RGGI in our report on Cap and Trade in the US

What happens next?

In the near future, Virginia will appoint two agency heads to the RGGI Board of Directors. It is possible that someone from the State Corporation Commission, Virginia’s utility regulatory body, will be appointed since oftentimes those appointed to the RGGI Board of Directors represent the state’s environmental agency or the state’s energy regulatory body. The board makes decisions that will help maximize the success of the program, including ensuring the design and operation of the auctions is satisfactory.

The DEQ will finalize program rules and regulations with approval from the governor’s office this fall. 

Starting in 2021, Virginian electric utilities will participate in RGGI’s quarterly allowance auctions. Dominion Energy, Virginia’s largest electricity provider, has already created an account with the RGGI CO2 Allowance Tracking System (COATS), allowing the utility company to purchase, transfer, and hold allowances. When utilities like Dominion begin participating in the 2021 auctions, Virginia’s rules allow them to pass on the added costs directly to consumers

Bill Murray, Dominion’s Senior Vice President of Corporate Affairs and Communication, reported that “the average customer’s monthly bill is likely to increase by $1.22 over the next five years.” While customers are not too happy with the expected increase, Dominion’s status as a regulated utility allows it to recover its cost. 

In the long run, however, clean energy and energy efficiency are projected to save consumers money. Electricity generated from clean and renewable sources will be cheaper than electricity generated from coal and natural gas by 2030, and will also bring along climate and health co-benefits that will save consumers tens of billions of dollars by that same year. These co-benefits include the improvement of “national air quality and [avoidance of] future climate-related costs such as property damage, declining agricultural production, and water shortages.”

After years of effort and setbacks, Virginia is finally a member of the Regional Greenhouse Gas Initiative. The state’s participation in the program will bring millions of dollars into Virginia annually, which will fund a number of programs that will help curb emissions and help protect the state from the effects of climate change. The work is not done yet, but by joining RGGI, Virginia has taken up arms in the climate change fight.

Featured Image: Richmond, Virginia. Photo by Derrick Brooks on Unsplash