Virginia introduces legislation for cap-and-trade program

In early January 2020, legislators in the Democrat controlled Virginia General Assembly submitted several bills (HB-981, HB-110, HB-20, SB-992) for consideration during the 2020 legislative session that would implement a power sector cap-and-trade program linking to the Regional Greenhouse Gas Initiative (RGGI) starting 2021.

The introduction of an ETS in Virginia in conjunction with RGGI participation was originally planned for 2020, following the adoption of ETS regulation by the Virginia Department of Environmental Quality (DEQ) in April 2019. However, the implementation of the regulation was delayed due to restrictions added to the 2019 budget bill passed by the then Republican-controlled legislature. The bills come after Democrats won a majority in both chambers of the General Assembly during elections in November 2019, opening a legislative route to state-level ETS with participation in RGGI.

HB-981 and HB-20 would largely implement DEQ’s final ETS regulation, which includes the provisions required to comply with the RGGI Model Rule. They also outline the activities that would benefit from the revenues accrued through the initiative, primarily flood preparedness, low-income energy efficiency programs, and state-wide climate change mitigation planning (HB-981, HB-20), as well as renewable energy projects, economic development, and workforce transition (HB-20).

All but SB-992 explicitly aim to join RGGI. SB-992 details three-year free allocation to newly permitted facilities and requires an accounting comparison to actual emissions at the end of the three-year period. HB-110 foresees the creation of a reserve account for producers with long term power purchase agreements, along with free allocation for the duration of the agreement. A proposal with free allocation would differ from RGGI’s auction-based approach.

The DEQ was tasked with the program’s implementation under the 2019 regulation, and both HB-981 and HB-20 would maintain the agency’s role in program implementation and management. The bills have been assigned to subcommittees for further review before any voting takes place.