How Virginia’s Carbon Pricing Plan Aims to Lower Power Bills Amid Data Center Boom

Virginia Governor Abigail Spanberger won a landslide victory in the state’s gubernatorial race last November by promising to curb rising electricity costs. Her platform focused on making power bills more affordable for Virginia families. Yet, in a move that may seem contradictory, Spanberger recently signed a bill to return Virginia to the Regional Greenhouse Gas Initiative (RGGI), a carbon pricing program that sets limits on carbon emissions from power plants.

Virginia’s decision to rejoin RGGI reverses a 2022 withdrawal by former Republican Governor Glenn Youngkin. The program, often called “cap-and-trade,” requires utilities to pay for every ton of carbon they emit below a declining cap. These costs are typically passed on to consumers, raising concerns about affordability amid inflation pressures.

Why Virginia Is Rejoining RGGI Despite Rising Costs

Virginia is home to the world’s largest concentration of artificial-intelligence data centers, and its biggest utility, Dominion Energy, is struggling to meet the surging power demand. Supporters of RGGI argue that the program’s revenues could help offset these costs by funding clean energy projects and rebates for low-income households.

“Of course [RGGI] imposes costs on ratepayers, because we’re trying to internalize the costs that pollution is causing on everyone else,” said William Shobe, an original architect of the RGGI program and emeritus professor of public policy at the University of Virginia. “But it’s really important to make sure we don’t make a good environmental policy regressive. If you design it right, it’s another tool for reallocating the costs that data centers are imposing on ratepayers.”

How RGGI Works and Its Impact on Virginia

The RGGI program, launched in 2009, includes 10 Northeastern and mid-Atlantic states that agree by consensus to lower emissions caps every few years. This encourages utilities to transition to cleaner energy sources like solar and wind. Since its inception, utilities in RGGI states have reduced emissions primarily by replacing coal with natural gas.

In Virginia, Dominion Energy has historically passed RGGI costs to customers through a per-watt surcharge, amounting to around $5 per month for the average household. However, supporters argue that the program’s revenues could eventually lower bills by accelerating the shift away from fossil fuels and funding energy efficiency programs.

National Trends: States Reevaluate Carbon Pricing Amid Inflation

Virginia’s decision contrasts with other states where Democrats are reconsidering carbon pricing due to affordability concerns. In California, lawmakers have called for relaxing the state’s cap-and-trade system this year. Meanwhile, New York Governor Kathy Hochul, a Democrat, has delayed plans to expand cap-and-trade to emissions from cars and buildings, despite the state’s existing membership in RGGI.

As states grapple with balancing environmental goals and economic pressures, Virginia’s approach highlights the ongoing debate over whether carbon pricing can both reduce emissions and lower power bills in the long term.