Virginia To Become Newest And The Southernmost Member of RGGI

July 13, 2020

by Peter Maloney
Posted July 13, 2020

Virginia is set to become the newest member of the Regional Greenhouse Gas Initiative (RGGI) cap-and-trade program.

An announcement on Wednesday by Ralph Northam, the state’s governor, hailed Virginia as the southernmost state to join RGGI. Joining the group sends “a powerful signal that our Commonwealth is committed to fighting climate change and securing a clean energy future,” Northam said in a statement.

Current RGGI members are Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island, and Vermont.

The groundwork for joining RGGI was set as far back as 2017 when Virginia regulators unanimously approved draft power plant emissions trading regulations that established an initial 2020 carbon dioxide emissions cap at either 33 million tons or 32 million tons. The cap then falls by 3 percent a year for a decade.

On April 12, Northam signed the Virginia Clean Economy Act and amending the Clean Energy and Community Flood Preparedness Act that requires the state to join RGGI.

The Clean Economy Act also replaced the state’s voluntary Renewable Portfolio Standard with a mandatory RPS under which Dominion Energy’s Virginia operations will have to produce electricity from 100 percent renewable energy by 2045, and American Electric Power’s Virginia operations will have to produce electricity from 100 percent renewable energy by 2050.

On June 25, David Paylor, director of the state’s Department of Environmental Quality, signed the final Virginia Carbon Rule. The rule became effective July 1, and Virginia becomes a full participant in RGGI on Jan. 1, 2021.

RGGI is composed of individual carbon dioxide trading programs that each participating state draws up based on the RGGI Model Rule. Within each RGGI state, fossil-fuel generating plants with a capacity of 25 megawatts (MW) or greater are required to hold allowances equal to their CO2 emissions over a three-year control period.

One allowance represents authorization to emit one short ton of CO2. Regulated power plants can use a CO2 allowance to demonstrate compliance in any RGGI state.

Generators may acquire allowances by purchasing them at regional auctions or through secondary markets.

RGGI’s regional cap, as set forth in its model rule amendments, is 75,147,784 tons of CO2 in 2021, which is set to decline by 2.275 million tons of CO2 per year thereafter, resulting in a total 30% reduction in the regional cap from 2020 to 2030.

Virginia’s CO2 Budget Trading Program base budget for 2021 is 27.16 million tons of CO2, falling to 19.6 million tons in 2030. For 2031 and each succeeding year, Virginia’s CO2 base budget is 19.60 million tons unless modified as a result of a program review and future regulatory action.

States sell nearly all emission allowances through auctions and invest proceeds in energy efficiency, renewable energy, and other programs. Under the law passed in April, Virginia will use its RGGI proceeds for community flood preparedness, coastal resilience, and energy efficiency programs benefitting low-income residents of the state.

The Department of Housing and Community Development, in coordination with the Department of Mines, Minerals and Energy, will administer approximately 45 percent of the proceeds to community flood prevention and coastal resilience programs, and three percent will be used by the Department of Environmental Quality to further statewide climate planning efforts.

In October, Pennsylvania Gov. Tom Wolf (D) signed an executive order directing the state’s Department of Environmental Protection to join RGGI.

Pennsylvania House lawmakers last week approved legislation that would require legislative authorization before the state could enter RGGI, but Wolf is expected to veto the measure.