By Steve Haner,

The Regional Greenhouse Gas Initiative (RGGI) held its second 2026 carbon allowance auction last week and the bidding cleared at $35 per ton, the group announced Friday.  That price was a 40 percent increase over the $25 per ton set for the carbon tax just three months earlier and was 78 percent higher than an allowance had cost a year earlier. 

Should that price hold for the September and December 2026 auctions, Virginia will collect more than $400 million in tax revenue before the end of this year.  Over the course of a full year, the state is likely to collect $800 million or more from electricity producers using natural gas, coal or oil for fuel.  Of course, future auctions could (and likely will) set even higher prices, as the record shows.  

A legislative panel, finally getting touchy about RGGI’s impact on customer bills, on Tuesday will discuss whether to give some of that money directly to customers.  Dominion Energy Virginia is the largest user of the allowances and is expected to announce soon how much it will ask the State Corporation Commission to increase our bills to cover it (the betting is $7-8 per 1,000 kilowatt hours.)

The $35 per ton was lower than the allowance prices seen in recent weeks on the secondary market, where futures prices for an allowance to emit one ton of carbon dioxide passed $40 and had reached over $50 per ton for a 2026 “vintage” allowance.  The futures market has dropped back to levels closer to that June auction result but bears watching.  The speculators haven’t lost their money yet.

Virginia will not rejoin the other ten states in RGGI until July 1, so it had no allowances for sale in the June auction.  But with Virginia power producers needing to have allowances to retire as of July 1, several of them were listed as bidders for allowances last week.  Whatever they paid will be tax revenue to other states, not Virginia. 

Virginia’s return to RGGI will probably be a major boost to revenue for those other states.  With fewer than 23 million allowances to sell per year, and Virginia plants emitting up to 29 million tons in a recent year, Virginia’s supply likely will not be adequate for the power plants within its borders.  They will be buying the excess from other states, which is the underlying supply and demand dynamic designed to raise the cost over time. 

RGGI auction prices started at about $3 per ton in 2008. For a long time they were under $2 per ton.  In the first auction of 2020, before Virginia had joined the compact, the price of an allowance or carbon tax had reached only $5.65 per ton.  Now it is $35 per ton.  Virginia Democrats can point to this table and say, we did that (with more to come)!

The former Commission on Electric Utility Regulation (CEUR), now called the Energy Commission of Virginia under new legislation, has the future of RGGI in Virginia on its agenda next week.  The eager-for-action ECV staff has proposed that, with the revenue from RGGI growing, and the impact on customer bills now painfully obvious, perhaps it is time to rebate some of the money. (Not to the utilities, of course, but to their customers.)

This is a commission dominated by Democrats, so one possible outcome would be to help only some of the customers lower their costs, not all of them.  All business customers (yes, including data centers) will also pay Dominion’s special RGGI bill addition, but the pre-meeting background document mentions residential rebates.  (Will paying for your RGGI rebates count toward a data center paying its “fair share”?)

The tax revenue by law has been split between energy efficiency and weatherization projects for low-income homes, and grants for flood control or mitigation projects.  The weatherization contractors are the ones who got standing in court to fight against former Governor Glenn Youngkin’s repeal of RGGI.  They might not be willing to share now.  But other states do use RGGI tax receipts to provide bill subsidies, and the idea will prove powerful with voters.

If implemented, such a rebate program will just increase the chances the RGGI program becomes a permanent part of Virginia’s energy cost structure, as much a political third rail as another individual entitlement.  Given Virginia remains part of the coal and natural gas-dependent PJM Interconnect regional electricity marketplace and faces record demand, those fuels are not going anywhere soon.

The dirty non-secret of the RGGI compact is that most RGGI states, Virginia most of all, depend on imported power.  Under PJM’s system, the power plants that must pay the RGGI tax are at a disadvantage to those in other non-RGGI states, such as Pennsylvania and West Virginia.  Even Virginia’s two largest investor-owned producers own coal plants in West Virginia exempt from RGGI.  With RGGI, Virginia imports more. RGGI is a joke. 

But read the six pages of background on RGGI in the pre-meeting documents (see Appendix C at this link) and it is better fiction than what I was reading at Duck last week. “Why RGGI is an effective mechanism to reduce greenhouse gas emissions,” is one fantasy headline, and the text below just brushes off how importing coal and gas power from other states undermines the whole concept:

Reducing Carbon Leakage: By participating in RGGI the risk of “carbon leakage” — the relocation of carbon-intensive production from jurisdictions with strict emission-reduction regulations to those with laxer ones — is reduced compared to a Virginia-only policy. This is because RGGI’s cap covers multiple states simultaneously, so there are fewer “uncapped” jurisdictions within the grid to absorb leakage. It should be noted that the full implications of leakage within the RGGI compact are still unclear. (Emphasis added.)

It is unclear only to those who will not see.