By Steve Haner

Grapevines sequester carbon dioxide so Virginia’s climate alarmism activists are pulling corks without guilt today, after learning that a Virginia circuit court judge will order Virginia to rejoin the Regional Greenhouse Gas Initiative (RGGI).

During the three years Virginia was part of the multi-state cap and tax compact, Virginia collected $828 million from electric power producers seeking permits to emit CO2. The largest of the payers in the state, Dominion Energy Virginia, simply passed its cost along to consumers dollar for dollar right on monthly bills. 

The final order from the judge has not been produced so the details of any relief he will order are not settled. But on Monday Floyd County Judge C. Randall Lowe circulated an opinion letter stating he agreed with RGGI’s boosters that only the Virginia General Assembly could pull the state out of the compact, based on his reading of 2020 legislation.

It was the position of Republican Governor Glenn Youngkin and Republican Attorney General Jason Miyares that the statute was permissive but not mandatory. Both issued brief statements today disagreeing with the judge’s order and promising to pursue an appeal to the Supreme Court of Virginia. Presumably they will also ask the upper court to stay the order, but that motion could be denied.

The case resided in rural Floyd County because that is the home base for an association of energy efficiency renovation contractors, the only one of the original plaintiffs in the case granted standing.

It was always likely that whoever prevailed at the circuit court level would face an appeal. And it is still true that the real decision on RGGI’s future in Virginia will hinge on the 2025 election, the next governor and future General Assembly. If this ruling stands and Virginia is in RGGI when the new governor arrives, only a Republican trifecta would overturn it again.

Getting out of RGGI was a promise the Governor made at the beginning of his term in 2021, but it took two years to accomplish. At the Governor’s urging, the Air Pollution Control Board voted in the summer of 2023 to exit RGGI at the end of that current contract period in December 2023.

The judge has stated that the board vote to repeal was void, illegal, without effect. The regulation remains in force. That means it was illegal for the state not to force its electricity generators to buy and expend RGGI credits for this year. He asked lawyers for the plaintiffs in the case to draft the final order that outlines what happens next. Could that include some compensation for the lost 2024 RGGI revenue, probably about $400-500 million?

Why not? The case was brought by a group of energy conservation contractors who were being paid to renovate homes for energy efficiency. They argued (correctly) that the decision to exit RGGI ended their meal ticket and would reduce their activity and revenue. Loss of money is the damage they suffered, and money is a logical part of any relief. That RGGI was hardly the only source of revenue for their programs didn’t seem to matter. The judge ruled they were illegally deprived of that money.

On the other side of the RGGI ledger, localities and contractors doing work to prevent or mitigate flooding also lost work and money. They got the other half of the RGGI tax dollars collected between 2021 and 2023. They did not join the case, but if financial reparations are ordered, they will get in line. 

RGGI’s agreement among the states runs on a three-year cycle, and Virginia missed the start of the 2024-2026 contract period. The other RGGI states will have a say in whether, when and under what conditions Virginia rejoins the confederation. Virginia getting back in will also have an impact on the price of allowances, the carbon tax.

RGGI has been a political yo-yo in Virginia for most of a decade.  Governor Terry McAuliffe started the process by asking his Air Board to impose a RGGI membership regulation.  There was no General Assembly action ordering Virginia into RGGI. On the contrary, Republican legislators at the time passed bills to require Assembly approval, and Democrat governors vetoed them. But Republicans were able to block RGGI by denying funds for its implementation.

The game flipped when Democrats obtained trifecta control of Virginia in 2020. Suddenly Assembly action was paramount after all.  It was the 2020 legislation that also dictated the use of RGGI funds for weatherization and flood control, creating a powerful constituency for maintaining the revenue stream.  It will soon be a revenue flood.

As reported by Bacon’s Rebellion before, in the months since Virginia exited the compact, the price for each ton of carbon emissions has risen dramatically. A new record could be set at the final 2024 auction in early December.  

In 2023 Dominion was charging each of its customers, residential and business, the same $4.43 per 1,000 kilowatt hours. A good guess would be that had the tax stayed on bills for 2024, it would have risen to at least $5 or more per 1,000 kwh for this year. Dominion used that 1000 kwh example as a “typical” bill but many, many of its residential customers use far more than that per month, and thus would see far more than a $5-6 increase in their power bills. Often those large bills accrue to fairly small, but poorly insulated, dwellings with lousy heating systems. 

As to what the tax would be for 2025, given the rising carbon price in the auctions, perhaps Dominion has an estimate if it wants to share that. Could it hit $7-8 per 1,000 kwh? In Virginia’s first auction in 2021 the carbon tax was $7.60 per ton and in the most recent auction – less than four years later – it had risen 240% to $25.75 per ton. 

None of the price projections in Dominion’s most recent integrated resource plan assumed the imposition of RGGI carbon tax on its hydrocarbon generation fleet in the next 15 years. And in the case of that IRP, it would be its growing hydrocarbon generation fleet, given the plan adds 6 gigawatts of natural gas generation. 

The old saying around Richmond is a statute means what a judge says it means. The first of what could be several judges has spoken.