Virginia’s RGGI re-entry

Virginia’s new Governor Abigail Spanberger (D) approved a bill of the state legislature (House Bill 29) requiring the Virginia Department of Environmental Quality (DEQ) to rejoin the Regional Greenhouse Gas Initiative (RGGI) by the end of May. This reverses the state’s exit from the power sector carbon market in late 2023 under its previous governor. Since Virginia’s allowance budget had to be recalculated in line with reforms to RGGI that were made during the time the state was not part of the program, stakeholders had largely assumed the re-entry process would take up to a year, with Virginia participating in quarterly allowance auctions in early 2027. However, the DEC will instead establish a cap for the second half of 2026 already, aiming for participation in the September and December auctions. This quick timeline reflects the Spanberger administration’s increased decarbonization ambition, which is all the more challenging given expectations of rising power sector emissions driven by data center expansion in the state. Bullish emissions forecasts paired with decreasing allowance budgets are set to increase RGGI allowance prices in the short and long term.