On 2 May 2019, Virginia Governor Ralph Northam signed a budget bill that contains restrictions on the state’s participation in the Regional Greenhouse Gas Initiative (RGGI) and in the Transportation Climate Initiative (TCI). This may affect the state’s implementation of its ETS.

While the regulation for Virginia’s ETS envisages joining RGGI, the Republican majority in the Virginia legislature added two key provisions to the budget bill. The first provision requires approval from the legislature for any state funding to support Virginia’s participation in RGGI. The second provision restricts the use of any revenues stemming from membership in RGGI or the TCI.

As Virginia’s ETS regulation was explicitly designed for the state’s ETS to join RGGI, the restrictions make the implementation of the regulation difficult. Despite the budget law, the state’s Department of Environmental Quality (DEQ) on 1 May 2019 finalized the ETS regulation, which will be published in the Virginia Register of Regulations on 27 May 2019 and take effect 30 days after.

Northam, a Democrat, had vetoed previous bills from the state’s legislature that attempted to block linkage with RGGI. While Northam did not challenge the two provisions mentioned above, he expressed his disapproval in a letter to the legislature and said he is directing the DEQ to identify ways to implement the state’s regulation. It is yet unclear how Virginia will proceed given the constraints of the budget law and the regulation’s original vision of relying on RGGI for implementation.

Elections to the Virginia legislature coming up in November 2019 could reshuffle majorities and have an impact on the approval of Virginia’s ETS to join RGGI.