Virginia’s Governor-elect Youngkin has announced his intention to pull the state out of the alarmist Regional Greenhouse Gas Initiative (RGGI). Reports in the evergreen mainstream press say he can’t do it by executive action, because Virginia’s membership is a matter of law. As it turns out, this claim is false!
Here is a major example of the misleading reports, from the great Associated Press no less. Note the last sentence:
“RICHMOND, Va. (AP) — Republican Virginia Gov.-elect Glenn Youngkin announced Wednesday that he would seek to use his executive powers to withdraw the commonwealth from a multistate carbon cap-and-trade program he said has overburdened ratepayers and businesses. Environmental attorneys and other advocates quickly shot back that Virginia’s participation, approved through legislation last year, could not be undone by the governor alone.”
In contrast, here is what the Virginia law actually says (the Director is of the Department of Environmental Quality):
“The Director is hereby authorized to establish, implement, and manage an auction program to sell allowances into a market-based trading program consistent with the RGGI program and this article. The Director shall seek to sell 100 percent of all allowances issued each year through the allowance auction, unless the Department finds that doing so will have a negative impact on the value of allowances and result in a net loss of consumer benefit or is otherwise inconsistent with the RGGI program.”
Simply put this is an authorization, not a mandate. Authorization is something an agency can do if it wants to, and is able to. It is not something it must do. This distinction is fundamental to administrative law, and many programs are authorized but never enacted.
One common reason for this inaction is that the authorized program is not funded. For example, at one point the US Flood Control Program had over a hundred authorized major projects that were never built. (Maybe it is time to build them, but I digress.)
Mind you the Virginia RGGI is a carbon tax program, so funding is not an issue. And the DEQ Director did promptly issue regulations implementing the RGGI. The point is that these regulations can be changed without changing the law and the DEQ is under the Governor. So, Youngkin may well have all the authority he needs in order to quit the RGGI.
Senior Fellow and tax policy analyst Stephen Haner at Virginia’s prestigious Thomas Jefferson Institute puts it succinctly: “The key to me is to amend, suspend or repeal the regulation. No law mandates RGGI membership, it just authorizes.”
In fact Haner has an excellent article overviewing the RGGI issue, especially the wacky tax aspects. See his article here. His is the kind of report the press missed. But, Franklin has been active in critiquing the RGGI venture.
The RGGI allowance auction tax program (where electric power ratepayers have to pay for the allowances) is especially nasty because the tax is unpredictable and can become very volatile. This will be especially true as Virginia rapidly increases its reliance on intermittent renewables, which is mandated by the so-called Virginia Clean Economy Act (VCEA). The implication that Virginia currently has a dirty economy is amusing, but the law is dangerously serious. For example, Europe is suffering from renewables driven electricity price volatility, and so might Virginia under the RGGI.
Here is a lengthy, telling quote from Haner’s analysis:
“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 percent 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.” (End of quote.)
That is a lot of price volatility in just one year. Imagine what it might be like when the unpredictable intermittency of rapidly increasing wind and solar power really hits home. Utility bills will become completely unpredictable and potentially ruinous, as we see in Europe today.
Here’s hoping Governor Youngkin can get Virginia out of the dangerous RGGI carbon tax scheme, before it’s too late.