Virginia is set to rejoin the Regional Greenhouse Gas Initiative on Wednesday.
It caps off a yearslong off-and-on relationship with the program — from Gov. Ralph Northam trying and failing to enter the program in 2019, then succeeding the following year; to Gov. Glenn Youngkin railing against it on the campaign trail and successfully leaving by 2023; to a circuit court ruling that deemed the exit illegal in 2024.
On Tuesday, Gov. Abigail Spanberger commemorated the next step in the saga by signing House Majority Leader Charniele Herring’s (D-Alexandria) bill ensuring Virginia reenters RGGI into law.
“The bottom line is rejoining RGGI will save Virginia money, period.” Spanberger said. “It’s a charge on polluters and it comes back to the people of our commonwealth.”
Now, all the state has to do is cross the t’s and dot the i’s in preparation for the next auction in September.
What is RGGI?
RGGI — pronounced “Reggie” — is a multi-state carbon cap and trade program.
The program was formed by a group of Northeastern states in the late aughts. Its first auction was held in 2008.
The states agreed to create a limited pot of carbon allowances — one allowance for one ton of carbon dioxide, the globe-warming gas that’s been most associated with climate change driven by human activity since the Industrial Revolution. Power plant operators in those states would buy the carbon allowances needed to cover their operations in quarterly auctions, plus more if they chose to trade in the future.
Over time, that pot of allowances shrinks, causing the price of each ton of CO2 to rise. Bill Shobe, a University of Virginia professor emeritus, environmental economist and member of the team that designed the RGGI market, said that creates an incentive for utilities and states to generate less CO2.
“We’re essentially building an asset that reflects the value of the atmosphere as the disposal service for carbon dioxide,” Shobe explained. “And, well, that asset is really valuable.”
In other words, RGGI sets a price on emissions in an attempt to tie an economic force to the long-term, global impacts of greenhouse gases.
“That’s what I would think of as the main function of the market, but we also get income from selling this asset that reflects this huge value,” Shobe said.
When Virginia first joined RGGI, legislators decided to use the income it generated to fund flood resilience and home weatherization programs.
Flood resilience funding — 45% of RGGI auction proceeds — is available to all localities in the state, not just those on the coast.
Flooding is one of the most significant expected impacts of climate change in Virginia. Sea level rise and land subsidence are major issues on the coast — but the entire state is already dealing with the effects of increasingly torrential downpours.
A summer storm is nothing new for the commonwealth. But as the atmosphere warms, it holds onto more water before the rain starts. That means storms drop more rain over a shorter time period — the perfect recipe for flash floods.
In its first stint, Virginia raised $372.5 million for the Community Flood Preparedness Fund. The funds have been deployed around the commonwealth for planning, studies and infrastructure work.
And $413.9 million — about 50% of RGGI auction proceeds — was directed to the Weatherization Deferral Repair program, which targeted efficiency improvements for homeowners unable to pay for the improvements themselves. Specifically, the funding helped cover deferred maintenance work not covered by existing federal efficiency programs.
That piecemeal approach reduces monthly bills for homeowners receiving repairs and gradually reduces overall generation needs on the electric grid as a whole — in theory, easing the transition away from existing fossil fuel infrastructure.
A price hike — and a last-minute change
RGGI is popular among state Democrats for incentivizing clean energy and for the programs it funds.
But that fundraising is done by increasing monthly electric bills, a key aspect of Youngkin’s opposition to the program.
Dominion Energy is legally obligated to recover the cost of generating energy from the customers it sells to — and because RGGI adds a carbon cost to that power generation, it is also passed on to customers.
The political focus on affordability in recent years has driven that issue back to the forefront of discussions on RGGI. That, and Dominion’s recent proposal for its RGGI rider — the monthly bill charge calculated to cover the costs of carbon credits.
Before Virginia left RGGI in 2023, that cost was roughly $4.43 per month for a Dominion Energy customer using 1,000 kWh. In June 2026, Dominion proposed a new rider of $13 for that 1,000 kWh/month customer — or $10.36, if costs are spread over two years.
“I was disturbed and deeply concerned when I saw the news of the $13 per month cost to the average household consumer for reentry of Virginia into RGGI and the impact on affordability,” said state Sen. Mark Obenshain (R–Rockingham) in a June 9 meeting of the Commission on Electric Utility Regulation.
Less than a month later, state lawmakers had passed a budget with a measure seeking to reduce the impact on households, small businesses and places of worship. Under the amendment, 45% of all auction proceeds will go to customer bill credits — with the remaining 55% split between state flood preparedness and weatherization programs as before.
Shobe described it as a way to shift electricity costs from smaller ratepayers to the biggest on the market — data centers — which are driving most infrastructure work to meet new demand.
“Data centers are the biggest sector of electricity demand of Virginia — beyond residential, beyond other commercial demand — and so when data centers buy a lot of electricity, they’re also buying the allowances that go with the generation of that electricity,” Shobe said.
As recently as the 2026 session, legislative leaders on both sides of the aisle said they were not discussing the possibility of shifting some RGGI proceeds into a bill credit.
Josephus Allmond, the state’s chief energy officer, said at Tuesday’s bill signing event that the change puts ratepayers first.
“We have built guardrails into this legislation,” Allmond said. “The RGGI credit will insulate our families and small businesses while leaving record levels of investment to energy efficiency and resilience funding.”
But for some environmental advocates, the rebate takes too many funds away from necessary climate resilience programs.
“We know that the need for resilience and adaptation in our cities and localities throughout the state is many billions of dollars,” said Jay Ford, Virginia policy manager for the Chesapeake Bay Foundation.
He argued that the funding levels in Virginia’s first RGGI stint were insufficient to keep up with needs, and that any delay in resilience investments results in multiplied costs down the line due to inflationary pressures and repair costs when disasters strike.
Ford also noted that the decision to shift proceeds is being made, at least in part, based on Dominion’s rider proposal. The State Corporation Commission has not yet spoken on that filing, so it is not clear what the final cost for ratepayers will be.
“We are making major policy decisions without full information,” Ford said.
Does it work?
Former Gov. Youngkin made the cost — which he referred to as the “RGGI tax” — the key point in his push to leave the program.
He said the effect of passing costs directly onto consumers was to effectively eliminate any incentive for power companies to shift away from fossil fuels. If Dominion doesn’t cover the costs, why should it be convinced to produce less CO2?
Shobe disagreed with that reasoning. The impacts of costs are not felt just by customers, but by the utility in the broader electricity market.
Dominion is a member of PJM Interconnection, a multi-state grid overseer that manages the electricity market in much of the Eastern US.
PJM runs an energy auction (not to be confused with RGGI’s carbon allowance auction) in which generation capacity is sold in order of cost and availability. Lower-cost generation facilities, usually renewables, are the first to sell their generation on the market. More expensive ones, such as coal plants, are pushed down the line.
RGGI costs are included in that market, making it less likely for carbon-producing power plants in the program to run.
“So any generator that has carbon-intensive generation has to add that RGGI price,” Shobe said. “That is, right now, $35 per megawatt-hour of coal generation.”
But that mechanism isn’t without its consequences, Shobe noted. In Virginia’s last stint in RGGI, the state experienced some “generation leakage.”
Just because a natural gas plant here will cost an extra $16 or so to run each hour does not mean renewable energy will replace it. More likely, because renewable buildout in PJM is not substantial enough to cover generation needs, the generation will go to a gas plant in a non-RGGI PJM state, like Ohio.
“The emissions are going to come from Ohio that would have come from here,” Shobe said, adding that a nationwide carbon market could alleviate that concern.
Virginia’s own CO2 emissions from the power sector fell during the commonwealth’s time in RGGI, and rose again following the state’s exit. But it’s not clear how that translated to changes in other states’ power plant emissions.
Overall emissions from RGGI states have also risen since 2023, but remain 43% lower than a 2006–08 baseline.
In a statement to VPM News, Dominion spokesperson Jeremy Slayton said the utility is committed to carrying out its renewed program responsibilities.
“Virginia’s re-entry into RGGI is a policy decision by the Commonwealth of Virginia, and we are following the law as required,” Slayton wrote. “Like fuel costs, RGGI allowances are a pass-through cost, meaning we do not mark them up or earn a profit.”
The next RGGI auction is scheduled for September 2026.
Disclosure: Dominion Energy is a VPM sponsor.
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