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Democrats propose budget language to return Virginia to carbon market

Courtesy - Getty Images via The Virginia Mercury
Courtesy - Getty Images via The Virginia Mercury

Two Democratic party leaders have introduced budget amendments that would require Virginia to rejoin a regional carbon market, despite the continued push by Republican Governor Glenn Youngkin to withdraw from it.

The amendments requested by  House Majority Leader Charniele Herring, D-Alexandria, and  Senate Majority Leader Scott Surovell, D-Fairfax, state that no funds “shall be used to take any action that impedes or otherwise interferes with Virginia’s rejoining of the Regional Greenhouse Gas Initiative or continued participation.”

This story was reported and written by our media partner The Virginia Mercury

“As a further condition,” the amendments also say, the Virginia Department of Environmental Quality “must immediately take all actions necessary to rejoin the Regional Greenhouse Gas Initiative and continue participating.”

Virginia joined RGGI under the Clean Energy and Community Flood Preparedness Act that passed in 2020 when Democrats had control of all three branches of government.

RGGI is a carbon market that requires electricity producers to purchase allowances to emit carbon. The number of allowances shrinks every year, incentivizing producers to emit less carbon or pay more to do so.

In Virginia, the revenues from the allowances are returned to the state for flood resilience and energy efficiency programs. Prior to Virginia’s withdrawal from RGGI on Dec. 31, less than a month after the last round of allowance auctions, the state had received over $700 million from the market, which was split roughly evenly between the two programs.

Republicans, however, have opposed the state’s membership in the market for years. In 2019, the party used budget  amendments to prevent the state from joining RGGI by prohibiting the use of state funds “to support membership or participation in the Regional Greenhouse Gas Initiative until such time as the General Assembly has approved such membership.”

Youngkin pledged to withdraw Virginia from RGGI even before he took office, saying the market was a “hidden tax” on Virginians because the state law authorizing participation allows utilities to recover the costs of the allowances from ratepayers. 

For Dominion customers, that initially meant residential ratepayers saw an average $2.39 fee on their monthly bill. After Youngkin’s election, the utility suspended the fee in anticipation of Virginia leaving RGGI but then  reinstated and increased it this September to make up for the costs the company incurred during the suspension. The new charge, which will be imposed through the end of August 2024, is roughly $4.44 per month for residential customers.

The Youngkin administration introduced regulatory changes last year that withdrew Virginia from the market at the end of 2023, when the state’s three-year contract for participation also expired. 

Democrats and environmental groups, however, say Youngkin doesn’t have the authority to pull Virginia out of RGGI alone and legislation would be required to end its participation. Surovell and Herring’s budget amendments would repeal Youngkin’s regulation that withdrew Virginia from RGGI while also reinstating the earlier regulation created in response to the 2020 law that put the state in the market.

“We left RGGI 10 days ago on December 31, illegally,” said Surovell at the start of the session during a Democratic press conference. “Our caucus’s intention is to get the governor to put us back in RGGI so we can get those tens of millions of dollars that we were getting, that are sitting there waiting to be spent and invested in remediating our flood problems all around the state.”

But even though Democrats hold narrow control of both the House and the Senate this session, top House Republican budget negotiator Del. Barry Knight, R-Virginia Beach, noted getting the amendments fully approved will be a “hard push.”

Virginia’s budget process allows the governor to veto line items. And while the legislature can override his vetoes, doing so requires a two-thirds vote by the legislature, a majority that Democrats do not have.

Asked about the amendments, Youngkin’s office indicated it remains opposed to RGGI.

“Virginia needs to continue to lead, rather than subjecting Virginians to RGGI, which functions as an unnecessary regressive tax and does not do anything to incentivize the reduction of emissions in the commonwealth,” said Youngkin spokesman Christian Martinez. “Virginians will see lower energy bills in due time because of our withdrawal from RGGI and our focus should be in furthering Virginians’ access to a reliable, affordable, clean, and growing supply of power.”