On 11 February 2020, both chambers of the Virginia General Assembly adopted legislation paving the way for a power sector ETS and participation in the Regional Greenhouse Gas Initiative (RGGI) by late 2020 or 2021.

The Virginia Clean Economy Act (HB-1526, SB-851) focuses on ETS and other power-sector regulation, while the Clean Energy and Community Flood Preparedness Act (HB-981, SB-1027) determines how revenue from ETS will be used. Because the Virginia House and Senate passed slightly different versions, the bills had to be reconciled into a single piece of legislation, which was completed on 5 March 2020. Governor Ralph Northam, who supports an ETS for the state, is expected to sign the legislation for it to take effect. 

The Clean Economy Act directs Virginia’s Department of Environmental Quality (DEQ) to implement a cap-and-trade program that largely aligns with regulation already approved by the DEQ in 2019, which is consistent with the RGGI 2017 Model Rule. It includes a cap of 27.16 million short tons CO2e that would decline by three percent per year. The Act differs from the 2019 regulation in that it distributes all allowances through RGGI auctions, while the 2019 regulation would have used consignment allowances. The Act also includes additional power-sector measures, including: a 100% clean energy target by 2045; an energy-efficiency standard for utilities; a fossil-fuel moratorium; a mandatory renewable portfolio standard in place of a voluntary one; and the removal of a 16 MW limit on offshore wind facilities.

The Clean Energy and Community Flood Preparedness Act outlines the activities that would benefit from the revenues accrued through the initiative and incorporates the contents of a similar bill (HB-20).

The introduction of an ETS in Virginia in conjunction with RGGI participation was originally planned for 2020, following approval of ETS regulations by the DEQ in April 2019. However, the implementation of the regulations was delayed due to restrictions added to the 2019 budget bill passed by the then Republican-controlled legislature. The 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.