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State air board votes to leave Regional Greenhouse Gas Initiative

Protesters display signs supporting the Regional Greenhouse Gas Initiative during a demonstration before the Air Pollution Control Board vote at Reynolds Community College on June 5, 2023 in Richmond. (Photo: Ryan M. Kelly/VPM)
Protesters display signs supporting the Regional Greenhouse Gas Initiative during a demonstration before the Air Pollution Control Board vote at Reynolds Community College on June 5, 2023 in Richmond. (Photo: Ryan M. Kelly/VPM)

The State Air Pollution Control Board voted 4–3 on Wednesday to take Virginia out of the Regional Greenhouse Gas Initiative.

The move is a culmination of efforts by Gov. Glenn Youngkin to leave RGGI (commonly pronounced Reggie), which he calls a tax on Virginia ratepayers, specifically those getting electricity from Dominion Energy. It’s also a response to a Youngkin executive order, “Protecting Ratepayers From The Rising Cost Of Living Due To The Regional Greenhouse Gas Initiative,” which required the state to leave the program by regulation.

RGGI is a cap-and-trade program — a market-based scheme to reduce carbon emissions by assigning a cost to each ton of CO2 expelled by power plants. It gives generators a choice: Invest in cleaner energy or pay to emit carbon by buying into a pool of allowances, which grow more scarce and more expensive over time. RGGI is based in part on the successes of the federal Enivornmental Protection Agency’s Acid Rain Program.

Youngkin’s argument is that for Dominion Energy, the incentive does not exist. He sent out a press release celebrating the vote Wednesday afternoon.

“Today’s commonsense decision by the Air Board to repeal RGGI protects Virginians from the failed program that is not only a regressive tax on families and businesses across the Commonwealth, but also does nothing to reduce pollution,” Youngkin wrote.

Travis Voyles, secretary of natural and historic resources, reiterated the administration’s case against RGGI at the board’s Wednesday meeting.

“Virginia is different than any other state in RGGI,” he said.

The commonwealth is the only RGGI member that requires its investor-owned utilities, Dominion and Appalachian Power Company, to pass the cost of carbon allowances purchased in RGGI auctions on to their ratepayers.

For Dominion customers using 1,000 kilowatt-hours in a month, that was a $2.39 charge on monthly residential bills in place until June 2022. The company recently moved to reinstate the charge.

The state Department of Planning and Budget’s economic impact analysis on the proposed repeal reiterates that Dominion’s requirement to pass through costs to consumers limits the effectiveness of CO2 credits, unless they’re in short supply.

But for other generators, who sell their power into a regional energy market instead of directly to consumers, the report says that cost to emit carbon is a real monetary incentive to invest in low- or no-emissions energy.

In Youngkin's order, the administration wrote, “the benefits of RGGI have not materialized, while costs have skyrocketed.”

Voyles framed the repeal as part of a wider administration project to lower energy bills, plan for the state’s energy future and address environmental concerns.

Industrial customers’ bills also rose considerably — Voyles said $1,500 per month for some small industrial customers. He predicted the program would cost ratepayers about $1 billion over the next four years, based on the current cost of allowances.

Proponents of RGGI say the money raised is essential. Roughly 85% of public comments on the matter are in favor of remaining in the initiative, according to numbers Voyles presented.

RGGI states are allowed to use auction proceeds how they see fit. In Virginia, half goes to low-income energy efficiency programs that seek to lower energy bills for those who spend the largest percentage of their paychecks on keeping the lights and heat on. For them, new insulation, heat pumps, low-energy light bulbs and more are all on the table.

45% is earmarked for the Virginia Community Flood Preparedness Fund, which assists localities and residents affected by recurrent flooding, sea level rise and extreme weather flooding.

Virginia has pulled in $590 million from auction proceeds since becoming a full RGGI member in January 2021. About $265 million of that went to the CFPF. More than $400,000 has gone to Buchanan County, which has been hit with flash flooding due to short, heavy downpours.

Richmond has received $1.25 million from the fund for staffing and studies on flooding plans — plus another $7.5 million to acquire Mayo Island, with the goal of restoring its natural shoreline.

And $294 million has been set aside for low-income energy efficiency programs administered by the Department of Housing and Community Development.

Advocates say those funding pots are extremely important for Virginia, which is dealing with worsening floods and extreme heat statewide due to the impacts of climate change. Extreme downpours and dangerously hot days have both become more common. Researchers expect that trend to continue.

“These are the only current, dedicated funding sources for resiliency in the Commonwealth,” said Patrick Fanning, an attorney for the Chesapeake Bay Foundation.

Voyles argued that other routes of covering flood and energy efficiency projects would be more appropriate, as “they are not the goals RGGI is intended to achieve.”

Youngkin previously funded the Resilient Virginia Revolving Loan Fund with $25 million. Localities can receive loans for major flood-prep projects and pay them back over time, in theory maintaining funds for use statewide. He’s also proposed an additional $100 million for the revolving fund in this year’s update to the state budget, which lawmakers have not yet finalized.

Other RGGI supporters reiterated concerns over the legality of the move, including state Sen. Ghazala Hashmi (D–Chesterfield), who said the General Assembly alone has the power to leave RGGI.

“We have a legislature that is determined to protect our efforts through RGGI, so now [Youngkin]'s trying to do it illegally,” Hashmi said. Two state attorneys general have offered differing opinions on that. Democrat Mark Herring issued an advisory opinion against the move before leaving office in January 2022. Republican Jason Miyares did the opposite after he took office. The Youngkin administration contends the GA “authorized but did not mandate” joining the program.

Business groups like the Virginia Manufacturing Association and Chamber of Commerce supported the repeal, saying cost increases are particularly harshly felt by small industrial companies. Brett Vassey of VMA also reiterated some administration arguments that the Virginia Clean Economy Act is Virginia’s key legislation requiring power producers to draw down emissions.

“VCEA mandates utilities comply with their reductions to zero carbon, not RGGI,” Vassey said.

Staci Rijal, a board member appointed by former Gov. Ralph Northam, questioned whether the administration could provide air quality data to back its assertions about the programs efficacy, even though Virginia’s participated in auctions for fewer than three years.

"How do we have enough data in two years’ time ... to make a decision and to say affirmatively that this program has had no impact on Virginia air quality?" Rijal asked.

Rijal asked about a reported drop in emissions from Virginia power plants. Mike Dowd, director of DEQ’s air and renewable energy division, confirmed that those emissions have fallen. However, Dowd said the state’s increased demand for imported energy (produced in other states) resulted in a net increase of 3.7 million tons of CO2.

Rijal followed up by asking about air quality — including irritants like nitrous oxide and ozone, not CO2.

“I don’t think there’s the data on that,” Voyles said.

DEQ wrote in its March 2022 report to Youngkin that “there is little correlation [with Virginia’s RGGI membership] to emissions reductions.” It also acknowledged in public comment responses that an 18-month period is not sufficient to show a correlation between membership in RGGI and a growth in renewable energy in the commonwealth.

The department also noted that higher costs to consumers could be avoided by funneling some RGGI proceeds into direct consumer rebates. Bill Shobe, a UVA economist who helped design RGGI’s allowance market in 2007, said this could be accomplished by amending the enabling legislation — though it would require diverting funds from the flooding and energy efficiency programs.

Voyles commented on what could come next, highlighting Youngkin’s Virginia Energy Plan. That plan is critical of the VCEA — saying it threatens electric reliability — and emphasizes an “all-of-the-above" approach that includes nuclear, natural gas and renewables.

He also noted Youngkin’s involvement in a blockbuster utility regulation bill this year, which will return regulatory power to the State Corporation Commission following this summer’s rate review.

DEQ’s webpage on carbon trading has been taken down. According to the Internet Archive, the page was up as recently as May 26, 2023.

Litigation on the issue is expected to follow the board’s vote. Walton Shepherd of the Natural Resources Defense Council said during public comment on Wednesday that “the legal case for repeal is wobblier than an inebriated bowling pin.”

The state has to conduct an executive review of the action and publish it in the Virginia Register of Regulations. The repeal will be in effect 30 days after that publication, although a DEQ spokesperson couldn’t give a specific deadline.

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