The Virginia State Air Pollution Control Board on Thursday unanimously approved a draft regulation to cut carbon dioxide emissions from power plants and link Virginia to a carbon-trading network of nine other states.
The draft rule was the product of months of study by an advisory group of industry, environmental and government representatives convened in 2016 by Gov. Terry McAuliffe and a string of meetings earlier this year by a regulatory panel who worked with the state Department of Environmental Quality to hammer out the regulation.
If the rule is adopted, Virginia would become the 10th state to trade carbon allowances through the Regional Greenhouse Gas Initiative and the 12th state to impose carbon pricing regulations on the power sector, according to the Center for Climate and Energy Solutions, a nonprofit, nonpartisan group in Arlington.
The Virginia Conservation Network, a partnership of more than 100 environmental groups, called the draft regulation “a critical first step in addressing the threat of climate change and spurring investments in clean energy in Virginia.”
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“Climate change is one of the most pressing issues of our time, especially when it comes to its devastating impacts on Virginia’s most vulnerable communities” the group said in a statement. “It is imperative that every level of government steps up to be a part of the solution.”
Though the air board’s vote was unanimous, board members did wrangle with a provision that exempts fossil-fuel fired generating units “owned by an individual facility and located at that individual facility that generates electricity and heat ... for the primary use of operation of the facility.” Co-generation plants at large industrial plants, such as a paper mill, would fall into that category, said Michael Dowd, the director of the DEQ’s air division.
Air board member Samuel A. Bleicher, a Georgetown University law professor and former deputy director of the Ohio Environmental Protection Agency, unsuccessfully led a push to strike the exemption from the draft rule.
“If we don’t remove it, we’re essentially encouraging industrials to build new facilities like that,” he said after the vote. “We don’t want to skew the incentive.”
Most RGGI states, a group that includes Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New York, Rhode Island and Vermont, do not have the exemption, Dowd said. He said representatives of large industrial operations, especially paper companies, pushed for it in Virginia’s rule, without generating much opposition from other members of the regulatory panel.
Such facilities, Dowd noted, represent a small fraction of Virginia’s total carbon emissions. Though carbon dioxide emissions from Virginia’s electric-generating units fell by 21 percent between 2005 and 2014, they still account for about 30 percent of the state’s overall CO2 emissions, according to a report by the working group convened by McAuliffe’s executive order last year.
Virginia’s power plants put out nearly 34 million tons of carbon dioxide in 2016, up from 31 million in 2011, according to the DEQ.
The draft rule, which DEQ hopes to finalize and present to the air board for final approval next year, sets forth two starting levels for the state’s carbon cap: 33 million or 34 million tons, starting in 2020. That cap then decreases by 3 percent each year.
Under the rule, fossil-fuel power plants that generate more than 25 megawatts would receive state allowances that cover up to a certain level of carbon emissions. The power generators then “consign” those allowances to the RGGI auction, getting in revenue in return. But they still have to buy all the allowances they need to cover their carbon emissions from the auction.
The complex structure of the Virginia rule are intended to avoid a situation in which the state is directly collecting revenue from the sale of the allowances, which would require the approval of the General Assembly. Some Republicans have called the regulation an overreach by McAuliffe, a Democrat. And some legal observers, despite a favorable opinion from Virginia Attorney General Mark Herring, another Democrat who won re-election this month, have said the rule is on shaky legal footing.
If it stands, Virginia would join New York as the only other state to link with RGGI via executive action and not legislative approval, Dowd said.
The program also can be tweaked if the auction price of allowances falls too low or rises too high.
The incentive to reduce emissions is the expense of purchasing allowances and the potential to make money on allowances the generators may not need.
Modelling conducted on behalf of DEQ shows that joining the RGGI market will increase average residential bills by about 1 percent, commercial bills by 1.1 to 1.4 percent, and industrial bills by 1.3 to 1.7 percent by 2031. Dowd said the intent of the rule is for the revenue generated by the sale of allowances to “flow back to ratepayers” and be subject to review by the State Corporation Commission, which regulates Virginia utilities.
Proponents also expect the rule to deliver a boost for renewable energy and energy efficiency in the state.
“Virginia is uniquely vulnerable to the threat of climate change and many of our residents are already experiencing its impacts,” McAuliffe said in a statement, referencing President Donald Trump’s attempts to unwind federal carbon regulation and disengage from international climate accords. “I am proud that Virginia is joining states around the nation that are filling the void of leadership that President Trump has left on transforming the energy sector and protecting our environment. With these regulations, we will significantly cut carbon emissions, continue our state’s explosive growth in the clean energy sector, and set an example for leadership in Washington, other states, and the entire world.”
In a statement Thursday afternoon, Republican leaders in the House of Delegates bashed the rule as a job-killing end-run around the legislative process and certain to drive up electric costs. The critics included Del. M. Kirkland Cox, the speaker designee if the GOP majority holds, Del. C. Todd Gilbert, R-Shenandoah, the majority leader designee, Del. Timothy D. Hugo, R-Fairfax, the caucus chairman, and Del. Terry G. Kilgore, R-Scott, the House Commerce and Labor Committee chairman.
“The Air Pollution Control Board does not have the authority to promulgate regulations at the state level that exceed those at the federal level,” Kilgore said. “Today’s action is clearly inconsistent with Virginia law and a gross example of bureaucratic overreach.”
Hugo said the push to adopt the rule means McAuliffe, who has not said whether he will run for president, is more focused on his “political future.”
Gilbert said the rule will “directly hurt people already anxious about making ends meet and getting through a cold winter but it sure will please Gov.-elect Northam’s California-billionaire donors.”
However, in a 2016 report, the Acadia Center, a clean energy nonprofit research and advocacy group, says RGGI states have seen 3.6 percent more economic growth than others since the program began.