Voters Should Say “No” to New Carbon Tax

Virginia should not join the Regional Greenhouse Gas Initiative. 

Virginia’s participation in the Regional Greenhouse Gas Initiative (RGGI) carbon tax is now fully authorized under a new state regulation, and the deadline to appeal that regulation has passed with no appeal filed.  Only the one-vote Republican margin in the two General Assembly chambers keeps Virginia out of RGGI at this time.

The text of the regulation is here. With full participation in RGGI a key Democratic campaign promise in the November elections, the Thomas Jefferson Institute for Public Policy has prepared a summary document providing additional information on just what that entails and how the RGGI process might work in Virginia.  You can read or download that here.

This is too important an issue to be decided by regulation. The Virginia General Assembly has acted correctly in voting on RGGI membership (voting no, so far).  It will be equally within the legislature’s purview to vote yes in 2020 for Virginia to move forward.  

Voting yes would be a mistake.  The stated goal of RGGI, reduced carbon emissions from electrical generation plants, is already being achieved.  There is little or no marginal benefit to Virginia from RGGI membership and the carbon taxes imposed will harm the economy.  It will just be one more General Assembly-initiated increase in homeowner and business electric bills. 

In fact, RGGI’s carbon taxes will be only one way a new Democratic legislature might boost your energy costs.  Probably the best reason to ignore RGGI is that the environmental activists have moved beyond it, with bigger plans and higher consumer costs in the making. A 2019 bill labeled “Clean Energy Mandates” represented Virginia’s version of the various Green New Deal proposals around the country, and would have prohibited:

  • All new fossil-fuel generation in Virginia (natural gas as well as coal)
  • New fossil fuel import or export facilities in Virginia (a coal exporting state)
  • Fossil fuel exploration or drilling in Virginia

The bill would have required that 80 percent of electricity generation be from clean sources by 2028 and 100 percent by 2036, a far more aggressive goal than RGGI.  Similar promises are appearing in 2019 Democratic campaign literature, here in Virginia and around the country. Some version of the 2019 clean energy bill will likely pass in 2020 if the legislature changes hands.  

New Jersey had been a RGGI member, dropped out, and is now back in as of June, with its stated goal being 100% carbon-free electricity by 2050.  Here is New Jersey Governor Phil Murphy’s announcement on returning to RGGI last month, decrying all the lost carbon tax revenue since former Governor Chris Christie withdrew from RGGI.  Yes, RGGI is about carbon, but it is also about taxes. 

Virginia is part of an interstate wholesale electricity marketplace, PJM Interconnection LLC, which does not overlap with the RGGI states.  RGGI will not force Virginia utilities to buy power only from other RGGI states, and in fact the non-RGGI states will often be the source. The carbon emissions may merely migrate to those other states, a process called “leakage.”

The Virginia Manufacturers Association and the Virginia Coal and Energy Alliance had opposed the regulation during its adoption and filed notices of intent to appeal it to the Richmond Circuit Court. Both groups confirmed in late July that no appeals would be filed after all.  The next signal will come from the voters. 

Virginia coal and natural gas-fired power plants are the target of the regulation, which seeks to rapidly reduce the reliance of Virginia’s electricity generation plants on fossil fuels.  Virginia’s participation in RGGI starts with a cap of 28 million tons of CO2 emissions from the covered facilities, to be reduced by 30 percent over ten years. All electric customers large and small would feel the higher prices which some (but not all) expect RGGI to cause

The most recent RGGI auction was held June 5, with a price for CO2 allowances set at $5.62 per ton, up slightly from the previous auction and the highest price since $7.50 at the end of 2012.  Virginia’s regulation calls for the revenue from the purchase of allowances to return to utilities and eventually back to ratepayers, but another new provision in the state budget designates it as state general fund revenue.  Most other RGGI states spend the money on various programs, cementing its status as a carbon tax. 

Many in the Virginia General Assembly have similar plans.  Both the House and Senate considered and rejected 2019 bills to take the funds away from ratepayers and spend them on environmental priorities.  Those bills will also return and likely pass with a Democratic takeover. 

The General Assembly votes which inserted and then sustained the RGGI roadblock in the budget were straight party line, as were the votes on two other, vetoed bills that would have prevented any participation in RGGI without direct legislative approval.  Election rhetoric from both sides since indicates no softening of the positions. 

Virginia voters should tell legislative candidates that Virginia should not join RGGI. 

  • The carbon reduction goals are being achieved without it, in response to market demand. If carbon emission is a problem, the problem is shrinking in the electricity industry. 
  • Because not all the PJM Interconnect LLC states are also part of RGGI, carbon emissions will just move from Virginia to other nearby states (leakage).
  • The carbon tax will be paid by consumers, raising the cost of electricity.
  • Capital costs for early retirement of fossil-fuel plants and their replacement with non-carbon plants will be paid by consumers, raising the cost of electricity. 
  • The carbon-reduction goals of environmental activists are far more stringent than the reductions under RGGI. Their goal in joining RGGI is the tax revenue. 


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About Stephen D. Haner

Steve Haner is Senior Fellow for State and Local Tax Policy for the Thomas Jefferson Institute for Public Policy. He is a former reporter, lobbyist, state employee and political advisor, with an emphasis on tax and business issues. He may be reached at blackwalnut140@live.com.
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