Virginia netted more than $43 million from the first carbon allowance auction the state has participated in since joining the Regional Greenhouse Gas Initiative, an 11-state carbon market that aims to reduce greenhouse gas emissions from power plants by putting a price on them.
In total, Virginia’s proceeds from the March 5 auction amounted to $43,589,868.40. If the three other auctions scheduled to occur this year — at three-month intervals — pull in comparable proceeds, Virginia’s revenues could be more than $174 million — far above the state’s estimate of $106 to $109 million.
David Paylor, director of the Virginia Department of Environmental Quality, said in a news release that the state’s participation in the RGGI market “signals our commitment to addressing climate change while creating economic and health benefits for communities across the commonwealth.”
The proceeds, he said, “will help defend Virginia against the risks of climate change and advance an equitable transition to a clean energy future.”
RGGI has been holding carbon allowance auctions for participating New England and Mid-Atlantic states since 2008.
Each year a cap is set on the number of allowances (with every allowance covering one short ton of carbon dioxide emissions) available to the states, which decreases annually. Those allowances are auctioned off to fossil fuel plants with a capacity of 25 megawatts or more at quarterly competitive auctions, and the proceeds are distributed back to the states where the plants are located.
Virginia’s 2020 Clean Energy and Community Flood Preparedness Act — the same law that authorized the state’s participation in RGGI — laid out how auction revenues should be distributed. Half will go to the Department of Housing and Community Development for low-income energy efficiency programs, and 45 percent will go to the new Community Flood Preparedness Fund “for the purpose of assisting localities and their residents affected by recurrent flooding, sea level rise, and flooding from severe weather events.”
The remaining 5 percent will go toward administrative costs, with 3 percent, about $1.3 million, earmarked for DEQ.
In Virginia, lawmakers have allowed electric utilities to pass the costs of complying with the RGGI auctions onto customers, with no extra return for investors.
Dominion spokesman Rayhan Daudani said the amount of revenue from the recent auction that can be attributed to Dominion Energy Virginia allowance purchases isn’t a public number. “The best look at the potential customer impact,” he said, comes from the company’s Dec. 4 filing with state regulators for a rider that would be added to customer bills to cover the costs of purchasing carbon allowances. If approved, that rider would add $2.39 to the typical residential customer’s monthly bill.