Virginia regulators propose cap-and-trade regulations

In a move that sets the stage for Virginia to join the Regional Greenhouse Gas Initiative cap-and-trade program, state air regulators on Nov. 16 unanimously approved draft power plant emissions trading regulations.

The proposal released by the Virginia Air Pollution Control Board for public comment establishes an initial carbon dioxide emissions cap in 2020 at either 33 million tons or 32 million tons. The cap then falls by 3 percent a year for a decade.

Virginia’s power plants released about 34 million tons of carbon dioxide in 2016, up from 30.9 million tons the year before, according to the Virginia Department of Environmental Quality.

The proposal affects fossil-fueled units larger than 25 megawatts. Industrial combined heat-and-power units are exempt from the proposal.

Under the plan, each year Virginia would allocate 95 percent of the carbon allowances to power plant owners based on the average of their three previous years’ worth of emissions as well as the reduced cap. Five percent of the credits would go to the Virginia Department of Mines, Minerals and Energy.

The allowances would then be sold during RGGI auctions. The generators would be required to buy enough allowances to cover their emissions.

The plan is in response to an executive order from Virginia Gov. Terry McAuliffe issued in May directing the Virginia DEQ to develop a proposal through a stakeholder process to cut carbon dioxide emissions from power plants using a regional trading program such as RGGI.

“With these regulations, we will significantly cut carbon emissions, continue our state’s explosive growth in the clean energy sector, and set an example for leadership in Washington, other states, and the entire world,” McAuliffe said Nov. 16.

Linking to RGGI will allow Virginia to cut carbon emissions in the “most innovative and cost-effective way possible” with minimal effect on customer bills, McAuliffe said.

RGGI uses a cap-and-trade approach to reduce greenhouse gas emissions from power plants. The cap is set at 84.3 million tons this year and falls 2.5 percent a year through 2020. The states in RGGI are Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New York, Rhode Island and Vermont.

In August, RGGI’s participating states proposed cutting the cap by 30 percent by 2030.

Virginia’s plan works under RGGI's framework, according to the regional organization, which has been in talks with Virginia regulators about the state's proposed regulations.

The Virginia proposal and RGGI's planned changes both include a cap that falls by 30 percent between 2020 and 2030. The plans include a cost containment reserve to prevent emission credit price spikes as well as an emissions containment reserve to enhance market stability, according to RGGI.

Expanding RGGI would produce more consumer savings, according to the organization. States typically use revenue raised through RGGI to invest in energy efficiency and renewable energy programs.

The RGGI states have 47,415 MW of fossil-fueled capacity and Virginia has 18,725 MW, according to the Energy Information Administration.

The Virginia DEQ will take public comments on the emissions trading proposal for 60 days after it appears in the Virginia Register. After reviewing the comments, the air board is expected to vote on a final rule in the summer.

Virginia isn’t the only state looking to join RGGI. New Jersey Gov.-elect Phil Murphy, a Democrat, intends to bring the Garden State back into RGGI. Democrats control the state Legislature.

Outgoing Republican Gov. Chris Christie withdrew New Jersey from RGGI six years ago, saying it amounted to a tax on electricity and did little to lower carbon emissions. Christie vetoed several bills that would have brought the state back into RGGI.