Virginia Lawmakers Try to Use Budget to Rejoin RGGI – But Success Is Questionable

Closed-door negotiations during Virginia’s budget process may have undercut lawmakers’ plans to rejoin a regional emissions reduction program.

State lawmakers on Saturday approved a $65.5 billion budget proposal that includes an amendment demanding state agencies “immediately take all actions necessary to rejoin the Regional Greenhouse Gas Initiative,” or RGGI. The proposal bars the use of budget funds to impede that effort.

That budget is now before Gov. Glenn Youngkin, who may well veto the amendment. Youngkin has opposed Virginia’s inclusion in RGGI, a two-decade old effort to reduce emissions among a group of eastern states. Shortly after taking office, he issued an executive order in 2022 to begin withdrawing from the agreement and the State Air Pollution Control Board last year voted 4-3 to repeal Virginia’s participation. Virginia officially left RGGI in December. 

Lawmakers pursued the RGGI amendment in their budget draft, including it in the first House version. House members said the amendment’s language effectively restrained Youngkin’s ability to use a line-item veto to eliminate it.

But key language changed in the past few days between the proposed budget in the House, and the final proposal approved by the General Assembly. An Inside Climate News review indicates the change may mean the amendment is more vulnerable to a veto.

“It will probably be a bargaining chip,” said Republican Del. Rob Bloxom Jr., one of the conferees who  worked on the final budget.

RGGI is an agreement to charge power companies for the emissions they release. The program establishes a collective cap on power sector emissions that declines over time. Fossil fuel power plants with a capacity of 25 megawatts or more are then required to buy “allowances” for their emissions at periodic auctions. The proceeds from those auctions—to date, more than $7 billion—revert to the states, which often invest the revenue in climate and clean energy programs. 

Twelve states have participated in RGGI since it was first established in 2005 and officially took effect in 2009, following its first auction. Ten states are still part of the program as of the start of this year. According to RGGI analysis, since the start of the agreement those 10 states have cut power sector emissions in half. The emissions drop may have been even larger if Virginia and Pennsylvania, two states that once were part of RGGI, had stayed the course.

Virginia joined RGGI in 2020 under the Clean Energy and Community Flood Preparedness Act, becoming the first southern state to do so, and like Pennsylvania, it soon faced division over its participation. Pennsylvania paused its RGGI effort amid a legal challenge in 2022, and state courts struck down its membership last year. Gov. Josh Shapiro, who has appealed those rulings, said on Wednesday that he would stop pursuing RGGI membership if the legislature passed his own cap-and-invest program for Pennsylvania. But until then, he said he would press on with  his appeal of a court ruling that has effectively blocked RGGI membership. with a legal appeal.

 New Jersey, an original RGGI participant, also withdrew from the agreement in 2011 under Republican Gov. Chris Christie, but the state resumed participation in 2020.

Before leaving RGGI, Virginia had generated more than $827 million through the program’s carbon auctions. State law specifically earmarked the funds for low-income energy efficiency and flood resiliency programs. It was the only state in the agreement to designate its RGGI revenue in this way.

“RGGI is, and should be, a really important source of funding for key resiliency efforts,” said Del. David Bulova, a Democrat and member of the House appropriations committee, in an interview before the release of the compromise budget. “The purpose of this was to make sure the legislature was retaking ownership of whether we are members or not.”

Sen. Creigh Deeds, a Democrat on the Senate Finance and Appropriations Committee and a supporter of RGGI, is skeptical of the amendment surviving a potential veto. Overturning a line-item veto requires a two-thirds majority vote. If it comes down to party lines, Democrats hold the majority by only one seat in both the House of Delegates and the Senate. “I think you can [rejoin RGGI] through the budget, if you’ve done it the right way, and I don’t know if we’ve done it the right way,” Deeds said.

That sentiment was echoed in interviews with several advocates as well, including Mary-Carson Stiff, executive director of Wetlands Watch. She said she was glad the legislature added the amendment to the budget, but was uncertain about whether it would succeed.

Virginia’s constitution puts some restrictions on the governor’s use of a line-item veto. While the governor can use a veto to eliminate an amendment, the veto must apply to the entire amendment. If there is specific funding tied to a specific action, both pieces have to stay or go. 

The original amendment, as it appeared in the House budget proposal, tied the entire state budget to the demand that Virginia rejoin RGGI. The idea was that Youngkin would not be able to veto the RGGI measure without killing the entire budget, which he may not have been willing to do. 

“There’s certainly precedent” for that strategy, said Nate Benforado, an attorney with the Southern Environmental Law Center, which has gone to court to challenge Virginia’s withdrawal from RGGI. In 2016 and 2017, gubernatorial vetoes were rejected because they tried to eliminate budget language without removing the corresponding funding. And in 2019, Republican lawmakers used a similar strategy, adding an amendment that blocked Virginia from participating in RGGI and using any auction proceeds unless approved by the general assembly. Then Gov. Ralph Northam did not veto that amendment even though he wanted the state to join RGGI. It was reported then he did not think he had legal standing for a veto, though environmental groups disagreed with that assessment. 

However, language in the final budget does not contain the same “conditions” that were laid out in the House version.

The language change—removing the tie between RGGI and all appropriations—undermines the argument that Youngkin could not veto the amendment without tanking the entire budget.

“The way it was written the first time was tied up so tight, you had no latitude to move,” said Bloxom. “The governor has his chance now to do what he wants.”

Youngkin did not respond to requests from Inside Climate News about whether he intends to veto the amendment. He is widely expected to do so, according to interviews with lawmakers and advocates.

The conversations that led to the change in RGGI language are unclear. According to Bloxom, the RGGI negotiations happened at the chairman level among the conferees, which was “above [his] paygrade.” The original Senate version of the budget never included a RGGI demand. Neither conference chair from the House or Senate responded to multiple requests to discuss the language change. 

“The budget process is maybe not as transparent as it needs to be,” Deeds said, before the release of the compromise budget, “but the more transparent, the longer it takes, and the more difficult it is to make tough decisions.”

A Disputed Program 

Legal experts and lawmakers have disputed Youngkin’s authority to end participation in RGGI. The Southern Environmental Law Center is arguing in court that only legislation—not executive action—can remove Virginia from the program.

Though the SELC initially brought the lawsuit on behalf of several plaintiffs, the courts have determined that only the Association of Energy Conservation Professionals, an energy trade and education nonprofit,  has legal standing. Final arguments are expected later this year.

“I think it’s great to see the general assembly sticking up for the policy decision they made,” said Benforado, who is spearheading that lawsuit, about the budget amendment.

Many Republican lawmakers supported Youngkin’s call to end the state’s RGGI participation. Bloxom said RGGI amounted to a tax, and that if a tax was desired, it should have been done in a different way.

Youngkin laid out a similar reason in his executive order, which contended that “the benefits of RGGI have not materialized, while the costs have skyrocketed,” in a specific reference to rising Dominion Power energy bills for households and businesses.

Stiff said RGGI should not be a platform for political debate. “We’re trying to make everyone see this is not a partisan issue,” she said. “It brings so many resources into the state, and it’s exhausting it has become such a political issue. And unfortunately the community flood preparedness fund has gotten caught up in the quagmire.”

Stiff and other advocates pushed back on Youngkin’s claim that RGGI has not provided benefits to the state.

“That it somehow places a burden on ratepayers is disingenuous,” said Sunshine Mathon, executive director at the Piedmont Housing Alliance, about Youngkin’s critique that RGGI has contributed to an increase in utility bills in the state. “Fundamentally, the benefits that accrue to the most vulnerable households from RGGI dollars are so significant, it is 100 percent worth [staying in].”

Virginia law splits RGGI funding between energy efficiency programs for low-income households, including the Weatherization Deferral Repair Program, and flood resiliency projects, through grants from the Community Flood Preparedness Fund. 

“The funds were a godsend for us,” said Bryan Burris, vice president of energy conservation programs at project:HOMES, a nonprofit that offers energy conservation and safety repairs for low income households. Before RGGI, he said his organization was turning away between 50 and 70 percent of people seeking energy efficiency improvements because their homes were too damaged to support the work. 

With RGGI funding, Burris said project:HOMES was able to dramatically expand both repairs and efficiency upgrades, often including full roof replacements, and reduce a backlog of deferrals. 

Additionally, federal Environmental Protection Agency data show climate-warming carbon emissions from Virginia’s power sector have dropped since 2020. The Youngkin administration contends that this is not linked to RGGI participation.

Unless Virginia rejoins RGGI, Burris expects the remaining revenue from the already-conducted allowance auctions to last another year or two before his organization can no longer offer the same scale of help to low-income residents. The Community Flood Preparedness Fund is unlikely to be immediately affected—Youngkin has proposed allocating $100 million to the fund this budget cycle—but advocates are concerned that without RGGI, the pipeline for flood protection will suffer. Grant awards for flooding will be irregular, inconsistent and would last only as long as there is available state funding, advocates said. 

“There’s no replacement for that money,” said Lena Lewis, climate and energy policy director at The Nature Conservancy’s Virginia branch. Lewis contends that the patchwork of other flood, weatherization and energy efficiency funds, even from private and existing federal programs, comes nowhere close to the hundreds of millions of dollars generated through RGGI.

RGGI is not the only budget dispute between the governor and state lawmakers. The legislative compromise approved over the weekend is an amendment to Youngkin’s initial budget proposal filed last year. 

Youngkin’s proposal included a 12 percent income tax cut and an increase in the state sales tax from 4.3 percent to 5.2 percent. Legislative proposals in both chambers eliminated the income tax cut. 

Youngkin also wanted to see funding for a new multibillion-dollar sports stadium in Alexandria for the Washington Wizards and Washington Capitals, a project that requires legislative approval. Sen. Louise Lucas, a Democrat and chair of the senate finance and appropriations committee, opposes the project, and stadium funding was not included in the budget sent to the governor. 

Youngkin criticized the snub toward the stadium proposal.  “I believe that is…a monumental mistake for the commonwealth,” he said at a press conference on the day the compromise budget was released. He has 30 days to respond to the budget plan—the general assembly then votes on that response in April, before the governor signs the budget.