RGGI’s Brought In $43 Million So Far This Year. Where Will The Money Go?

With the passage of the Clean Energy and Community Flood Preparedness Act in 2020, Virginia joined eleven other states in participating in the Regional Greenhouse Gas Initiative, or RGGI. A cap-and-trade program, RGGI aims to reduce carbon emissions by putting a price on each ton of carbon emitted from power generators. In order to emit carbon, power generators must purchase carbon allowances from the state. Each year, the number of carbon allowances permitted decreases. 

Joining RGGI makes a lot of sense for a state like Virginia, which, through the passage of the Clean Economy Act in 2020, committed to transitioning to a clean energy grid by 2050. Participation in RGGI assists the state in reducing carbon emissions until then, all the while bringing in extra revenue. 

Last month saw Virginia’s first carbon allowance auction since joining RGGI. The first of four auctions scheduled for this year, the auction brought in a total of $43,589,868.40 in revenue for the state. Initial estimates projected the state would pull in around $106 million after all four auctions. But if the remaining auctions are comparable to the first, Virginia could raise roughly $174 million in just this year through its participation in RGGI. 

Participation in RGGI clearly enables the state to generate significant new revenue. Where will all the money be going?

The Clean Energy and Community Flood Preparedness Act, the law authorizing Virginia to participate in RGGI, spelled out how most of the funds should be used. The law mandates that RGGI funds be used to promote energy efficiency and mitigate the effects of climate change. 

The bulk of the RGGI funds will be going toward three specific programs. 50% of the funds are to be allocated to the Department of Housing and Community Development, where it will be used for low-income energy efficiency programs. In March, an advisory group recommended that most of the department’s funds be used for weatherization, which is the process of making structural improvements to a building with the goal of reducing energy waste. The advisory group recommended the remainder of the funds be used for increasing energy efficiency in affordable housing throughout the state. 

45% of the RGGI funds will go to the Department of Conservation and Recreation, which will use the money to protect against flooding and help coastal areas recover from floods, as mandated by the Clean Energy and Community Flood Preparedness Act. At least 25% of these funds must be used in low-income areas.

Finally, 3% of RGGI funds will be allocated to the Department of Environmental Quality, which will use the money to oversee Virginia’s participation in the regional initiative and carry out planning to prepare for the effects of climate change. 

With over $170 million in revenue likely to come in this year alone, RGGI is poised to help reduce Virginia’s dependence on nonrenewable energy sources while addressing the needs caused by a changing climate.