Youngkin to Withdraw From RGGI, End Carbon Tax

The RGGI member states.

By Steve Haner

First published by the Thomas Jefferson Institute for Public Policy.

Governor-elect Glenn Youngkin told a business audience Wednesday afternoon that he intends to withdraw Virginia from the Regional Greenhouse Gas Initiative. His decision came two days after Dominion Energy Virginia filed a petition to increase the RGGI tax on its bills by 83% next year.

“RGGI describes itself as a regional market for carbon,” Youngkin told a meeting of the Hampton Roads Chamber of Commerce. “But it is really a carbon tax that is fully passed on to ratepayers. It is a bad deal for Virginians. It is a bad deal for business and as governor, I will withdraw us from RGGI by executive action. I promised to lower the cost of living in Virginia and this is just the beginning.”

The Thomas Jefferson Institute for Public Policy sought to dissuade the state from joining RGGI and imposing this carbon tax and has reported often on the development and imposition of Dominion’s bill adder to collect it. We applaud this decision, knowing that Youngkin may face a struggle to implement it.

Virginia has been part of the interstate tax, cap and trade compact for a year now. Every large electrical generating facility in the state must buy allowances in a multi-state auction equal to the number of tons of carbon dioxide its operations will emit. With the only large fleet of Virginia coal and gas generators, this is basically about Dominion Energy Virginia and its 2.6 million customer accounts.

During the four RGGI allowance auctions held in 2021, Virginia collected about $228 million from the sale of CO2 allowances. Dominion has been buying them since 2020, but in September of this year added a cost line to all of its customer bills to collect that money back from customers, with interest and even some profit.

The State Corporation Commission reviewed and approved an initial charge of $2.39 per 1,000 kilowatt hours of usage, starting this past September, but that was always a backward-looking figure. Allowance costs have been far higher than originally projected by the Governor Ralph Northam administration when it peddled this idea to the General Assembly. The knowing underestimate is also something the Jefferson Institute warned about years ago.

Looking at the 2021 RGGI allowance costs, on December 6 Dominion sent the SCC its first annual update for the special charge on its bills. It wants to increase that $2.39 per 1,000 kWh to $4.37, an 83% jump in just one cycle. Even that may not be enough for Dominion to have fully recovered the cost of RGGI allowances it will have used in its first two years.

The first auction in 2021 set a price of $7.60 per ton of CO2 emitted, and by the fourth and final 2021 auction last week that has risen to $13 per ton. Dominion’s new request is based on a projected $10.53 per ton. That won’t cover the full tab going forward and they know it.

All customers pay this tax, of course, not just residential users. All customers of any size pay the same amount, with no volume discount. So $4.37 per kWh represents an even higher percentage of the typical bill for a large industrial or commercial user. The SCC’s process for reviewing this request will have to proceed despite Youngkin’s announcement, which at this point is just a proposal. If he succeeds with the withdrawal, Dominion will likely still recover its costs to that point.

The previous governor, Democrat Terry McAuliffe, started the process of requiring electric utilities to pay for carbon allowances as a proposed air pollution regulation. The General Assembly split on partisan lines on the proposal with Republicans throwing up roadblocks when they had the votes. Once the Democrats won full control in the 2019 election, RGGI proceeded.

The 2020 Virginia Clean Economy Act and other bills “authorized” the executive branch to participate in RGGI and implement the regulation, but no law mandates that Virginia remain in RGGI and continue to require the allowances. The Memorandum of Understanding behind the interstate compact allows for withdrawal by member states upon notice. Regulations can be amended or repealed within the executive branch.

Youngkin’s exact plan or timetable for extraction was not detailed. Other laws passed under Governor Northam create broad goals for reducing or eliminating the use of fossil fuels throughout the Virginia economy, including for power production, and if those transformations take place as planned those higher costs are also coming the way of Virginia consumers.

First out of the box with a comment today was future Speaker of the House Todd Gilbert, R-Shenandoah, praising Youngkin’s decision while also pointing out that Virginia was already reducing its CO2 emissions before any RGGI tax was created.

“When a policy costs the public a significant amount of money for no tangible benefit, that policy should be examined carefully, and if practical, rolled back. Governor-elect Youngkin’s announcement is a perfect example of the common-sense decision making we’ve been missing for the past 8 years,” Gilbert wrote.

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24 responses to “Youngkin to Withdraw From RGGI, End Carbon Tax”

  1. James Wyatt Whitehead Avatar
    James Wyatt Whitehead

    Wow! Sounds great. Youngkin seems promising. I like winning. Been awhile.

  2. Stephen Haner Avatar
    Stephen Haner

    Probably a low estimate that withdrawing from RGGI, coupled with the state’s refusal to move forward on the TCI gasoline tax (now dead everywhere), will/would save Virginia consumers a half-billion dollars per year. And guess what, the CO2 emissions will not be one ton higher or lower than they otherwise would be. These were just new T…A…X…E…S.

    I may have to keep writing….

    1. Nancy Naive Avatar
      Nancy Naive

      Are you Grover Norqvist’s grandfather, or something?

  3. energyNOW_Fan Avatar

    I never liked RGGI for Virginia because we are in a different situation. The other RGGI states depend on more natural gas as home heat, so it is not as hard for them. Many of them import cheap electric from Canada.

    Just means this is a political football with Dems wanting to join pacts like this, and Repubs do not want to. New Jersey I believe left RGGI under Chris Christie and then came back.

    1. how_it_works Avatar

      They also don’t have the hot summers we do here, and are mostly in climate zone 5 or 6.. Virginia is in climate zone 4.

    2. Stephen Haner Avatar
      Stephen Haner

      Yes. NJ did. Now Pennsylvania is fighting about it again. That latest auction price may quell the passion there.

      There are other companies buying credits to operate in Virginia. Not all of them can pass the cost on as smoothly as Dominion or other utilities. Then of course there are firms that would like to build new plants and would need to join the market and drive up the credit price for all. Suspending or repealing the RGGI regulations solves all their problems, too.

    3. how_it_works Avatar

      I used to live in climate zone 5. 3pm on a August day there is like 9am on an August day here in Virginia.

  4. disqus_VYLI8FviCA Avatar

    Look at the state in the RGGI. All high tax, non-right to work states. Why would Virginia want to join with those state whose most notable accomplishment is failed leadership? Oh, wait, this was done under the Northam administration. Never mind.

  5. tmtfairfax Avatar

    RGGI is one more plan to transfer money from the middle class to more wealthy people, power companies, other big “woke” corporations and nonprofits. When the government proposes to mitigate future “damages” from climate change by stopping future development or redevelopment in the areas likely to be flooded, I will believe in carbon taxes and fees. But that’s not going to happen.

    It would be interesting to learn how many high-level executives from these organizations, wealthy contributors to environmental groups and crusading journalists own or have ownership interests in beachfront property.

    1. Stephen Haner Avatar
      Stephen Haner

      And fly on private jets. 🙂

      1. Nancy Naive Avatar
        Nancy Naive

        But, they use Sustainable Av Gas.

        1. energyNOW_Fan Avatar

          Never heard of sustainable Av Gas, but jet fuel can be partially made from hydrogenated veggie oils. Would think the amount being actually used is very small. Lots of hype, I agree. I had a prior BR article recommending Virginia get in on the green veggie oil craze. Do I think it helps the enviro? Nope. Do I think the public perception is that it helps? Yes, like corn ethanol.

          1. Nancy Naive Avatar
            Nancy Naive

            Well, no excuse not to google it. One airline recently announced 100% use of SAF (fuel, not gas).

            But just how, or why, do you think it doesn’t help?

            I suspect your answer will show you don’t understand the closed system that is the biosphere and the fossil carbon source bound to dirt.

          2. Matt Adams Avatar

            It’s all smoke and mirrors, it’s still combusted carbon. It has to be blended with Jet A.

      2. tmtfairfax Avatar

        I have no problem with the President of the United States flying in Air Force 1 to go to the conference. But why are these self-important billionaires and entertainers attending in person via personal jet? They wouldn’t need to offset their carbon footprints if they didn’t make them in the first place.

  6. Nancy Naive Avatar
    Nancy Naive

    “The typical residential customer would save $4.37 a month on electric bills, or $52.44 per year, if Virginia pulled out, Youngkin’s transition office said.”

    C’mon Steve, I’ll buy you a Starbucks.

    1. Stephen Haner Avatar
      Stephen Haner

      Extrapolate an 83% annual increase out a decade. C’mon Nancy Boy, you can do the math.

      1. Nancy Naive Avatar
        Nancy Naive

        One increase of 83%. Not annual increases of 83%.

        Okay, you can get a scone too.

        1. Stephen Haner Avatar
          Stephen Haner

          The official EPA “social cost of carbon” is above $50 a ton. When the RGGI tax gets to that level will you care? (No.) When the lights go out on a windless day, will you care? (No.)

          1. Nancy Naive Avatar
            Nancy Naive

            When the Moon crashes into the Eath will you care? (Only if there isn’t a tax cut.)
            Given to hyperbole much?

  7. Good news.

  8. Merchantseamen Avatar

    “Dominion has been buying them since 2020, but in September of this year
    added a cost line to all of its customer bills to collect that money
    back from customers, with interest and even some profit.” I wonder how much kickback to Al Gore. It is a scam…always follow the money.

  9. William O'Keefe Avatar
    William O’Keefe

    It’s questionable whether he can withdraw by Executive Order but he can direct DEQ to begin the process of rescinding the implementing regulation. As this post points out participation involves a tax on consumers, a regressive one at that. Virginia can pursue emission reductions that reflects its best interests and those of its citizens.

  10. John Martin Avatar
    John Martin

    good job , youngkin…….shows right off the bat how stupid you are

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