December 6, 2022

Bill to lower some carbon credit costs passes Virginia House

Legislation that would reduce some of the carbon credit costs for pre-existing power contracts passed the Virginia House of Delegates and will be considered by the Senate.

House Bill 892, sponsored by House Majority Leader Terry Kilgore, R-Scott, narrowly passed the chamber along party lines, 51-48 with one Republican not voting. The legislation could fall flat in the Senate, which has a narrow 21-19 Democratic majority. Senate Democratic leaders have vowed to stick by the energy compact that established the carbon credit purchases.

Virginia joined the Regional Greenhouse Gas Initiative under the previous administration, which requires companies to purchase allowances related to the amount of carbon they emit. The majority of carbon credits are purchased by the state’s power utilities. In the program’s first year of implementation, companies bought $228 million worth of carbon credits. According to the State Corporations commissions, RGGI will cost the state about $5.9 billion between 2019 and 2043 and eventually lead to power rate increases between $84 and $144 annually for residential consumers.

The House-passed legislation would seek to reduce the economic burden of RGGI by granting discounts on carbon credit costs to power utilities for contracts that they entered into on or before May 16, 2017 and are still in effect on July 1, 2020 through Dec. 31, 2025. If the utility buys the credits at a discounted rate, the utility would not be able to pass on the costs to consumers through rate increases.

Stephen Haner, a senior fellow for state and local tax policy at the free-market Thomas Jefferson Institute, told The Center Square the legislation would not have a major impact on the state’s revenue. The revenue the state would lose would have a minor impact on flood mitigation funding and money for low-income weatherization. He said the legislation would basically only have an effect on one company: LS Power.

“Since it is for one company, apparently, it won’t have that much impact, but unfortunately that one company is not the only one in a bind because of the RGGI tax,” Haner said. “The tax needs to go away for everybody.”

Gov. Glenn Youngkin has expressed his desire to end Virginia’s participation in RGGI entirely. He signed an executive order that directs the director of the Department of Environmental Quality to re-evaluate the costs and benefits of the program and to indicate his intention of leaving the program.

The governor has said he will consider ending Virginia’s participation through the executive branch’s regulatory authority or getting legislative approval. The governor and many Republicans have argued that the governor can leave the compact without the legislature, but many Democrats and some environmental groups have argued that the governor would need legislative approval to leave the compact.

This article was originally posted on Bill to lower some carbon credit costs passes Virginia House

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