By Duggan Flanakin, Heartland Institute
Recently inaugurated Virginia Gov. Glenn Youngkin has taken steps to fulfill a campaign promise to remove Virginia from the Regional Greenhouse Gas Initiative (RGGI).
Youngkin issued executive order No. 9 (EO) on his first day in office directing state officials to reevaluate the state’s participation in RGGI, and to immediately begin regulatory processes to end that participation.
RGGI’s Goals and History
Ten Mid-Atlantic and New England states formed RGGI in 2009, with a goal of capping and reducing carbon dioxide emissions from the power sector.
One state, New Jersey, joined RGGI, withdrew from it and subsequently rejoined it.
RGGI imposes limits on how much carbon dioxide is allowed to be emitted by each state and provides means by which emitting entities can purchase the right to emit excess carbon dioxide, for a fee, or trade these emission allowances among power sources within and among states.
These emission coupons, or credits, have a value and are traded, with the costs passed on from purchasing companies to their customers.
RGGI Comes to Virginia
Virginia’s participation in the RGGI came after a multi-year political battle.
Former Gov. Ralph Northam’s efforts to join RGGI through administrative rules was thwarted in 2019 when Republicans, then in control of the legislature, added language to the state budget forbidding Virginia’s Department of Environmental Quality (DEQ) from spending any money to support RGGI absent General Assembly approval.
After the 2020 elections, with Democrats newly in control of both houses of the state general assembly, the legislature passed the Clean Energy and Community Flood Preparedness Act in 2020, authorizing the DEQ to design, implement, and regulate a carbon dioxide allowance auction program consistent with RGGI. The DEQ embraced the opportunity and imposed regulations allowing Virginia to become the first and to date only Southern state to join RGGI.
The promised benefits of the RGGI have not materialized. Because of RGGI, however, energy costs and the costs of energy intensive goods and services have skyrocketed, said Youngkin in his EO.
“Reliable and affordable access to electricity is imperative to the health and safety of all Virginians … and the unpredictable and rising cost of electricity poses a significant and immediate threat to our Commonwealth and its citizens,” Youngkin said. “Virginia’s utilities have sold over $227 million in allowances in 2021 during the RGGI auctions, doubling the initial estimates.
“Those utilities are allowed to pass on the costs of purchasing those allowances to their customers,” said Youngkin. “In a filing before the state corporation commission, Dominion Energy stated that RGGI will cost ratepayers between $1 billion and $1.2 billion over the next 4 years.”
A recent Mason-Dixon poll found 73 percent of Virginians surveyed, including 59 percent of self-identified Democrats, oppose the carbon tax imposed by the 2020 General Assembly in conjunction with RGGI participation. The poll question had described the RGGI as costing residential consumers between $25 and $30 in 2021, based on actual charges, and between $50 and $60, based on a proposed Dominion Energy rate increase for late 2022, and typical household usage.
Four Pronged Withdrawal Strategy
Youngkin outlined a four-pronged strategy to remove the state from RGGI, via contract, regulation, legislation, and the state budget.
Youngkin’s EO included a directive for the DEQ to notify RGGI of the “governor’s intent to withdraw from RGGI, whether by legislative or regulatory action.” It also calls for an emergency regulation to repeal the current rules, which could be blocked by the Northam-appointed majority on the state’s Air Pollution Control Board.
Democrats and environmental groups argue Virginia cannot exit the RGGI without a legislative repeal of the existing law that authorized its entry into the compact.
Although Republicans regained control of the state’s House of Representatives in 2021 and swept all the top statewide offices, Democrats retain control of the state Senate, by a two member margin. It remains uncertain whether any Virginia Democrats would vote to repeal the RGGI legislation, even given the recent poll results showing lack of support for the program among the populace.
Youngkin has proposed a budget amendment ordering all state agencies, boards, and offices to stop participating in any auction program to sell allowances into an RGGI-related, market-based trading program, and to stop enforcing and to rescind any regulation connecting them to the RGGI. Even if this provision is adopted by Virginia’s House, it will also require state Senate approval.
‘Authorized … Did Not Mandate’
Gov. Youngkin has a tough row to hoe if he is to succeed in quickly removing Virginia from RGGI, says Stephen D. Haner, senior fellow of State and Local Tax Policy at the Thomas Jefferson Institute for Public Policy.
“A simple executive order will not work,” said Haner. “RGGI participation is imposed by a regulation, and has already been tested in court once.
“The simplest path is to repeal the regulation, and he intends to follow that path, but it may also require a change in the membership of the appointed Air Pollution Control Board, since the current board voted to impose the rule,” Haner said. “I think the path with the best chance is through the regulatory process, arguing that the earlier General Assembly ‘authorized’ the regulation but did not mandate that Virginia join RGGI.”
Alternatively, Youngkin can seek and end to RGGI membership through the budget, says Haner.
“[Youngkin] recently opened another front: an amendment to the state budget,” Haner said. “If he can get it buried in the budget bill, which will take some Democratic legislators, at least in the state senate, allowing it to go forward, that would override the regulation.”
Duggan Flanakin (firstname.lastname@example.org) writes from San Marcos, Texas.