Virginia's Youngkin Didn't Major in Environmental Economics

Virginia Gov. Glenn Youngkin (R) recently made a statement bashing the Regional Greenhouse Gas Initiative (RGGI), the East Coast's regional cap-and-trade program intended to reduce climate pollution and energy costs for low-income households. In attacking the program, Youngkin repeated questionable claims about its costs, impacts, and benefits and made clear his desire to move the Commonwealth backwards on climate policy and the clean energy transition.

Virginia joined RGGI to meet the goals outlined in the Virginia Clean Economy Act (VCEA) and Environmental Justice Act (EJA), which were passed in 2020. Funds generated through RGGI are directed toward critical energy efficiency programs for low-income households and flood prevention.

Youngkin has long expressed interest in removing Virginia from RGGI and, through his recent executive order, began his attempt to officially leave the program. The order requires the Virginia Department of Environmental Quality (DEQ) to conduct an analysis of the initiative's effectiveness in meeting its goals, namely, emissions reductions and cost savings.

Despite the resulting report's frequent warning that "there is insufficient data to determine the impact of the … RGGI in reducing CO2 emissions," Youngkin remains adamant that it will fail to do so because it was "unnecessary" in the first place. The trend on which he bases his specious argument is a steady climate emissions level in Virginia despite a 30 percent increase in energy production over the past 10 years. This trend is the result of a shift toward natural gas and away from coal, which the report notes will continue as a result of RGGI and VCEA mandates. However, Youngkin fails to mention this key fact.

Data aside, Youngkin's primary argument against RGGI is its cost to Virginians. In both the DEQ report and its accompanying press release, the costs associated with the RGGI program are described as a "direct carbon tax" on families. Using the term "tax" to describe cap-and-trade costs is a tired scare tactic that pro-polluter groups in states like California exploit to gin up opposition to sensible policy. While it does resonate to some extent, it does not undermine the basic logic of RGGI — and stands only as a reminder of Youngkin's willingness to obscure the fuller picture to achieve his deregulatory agenda.

Environmental Economics Basics

Every environmental economics class at one point or another introduces students to the concept of externalities — byproducts of markets that impact third parties. Consider a classic example of a negative externality: pollution. The costs of pollution are largely borne by people and communities, not polluters themselves, and are usually not reflected in the price tag of what's produced. This leads to overconsumption and overproduction of products that harm others. The solution: make polluters pay.

In a cap-and-trade program like RGGI, polluters must pay to pollute. Electricity producers like LS Power already face these growing costs and are demanding a special carve-out. But the rising cost to pollute is precisely the point. Without increasing the cost of producing energy in an environmentally and socially harmful manner, we can't hope to minimize such practices.

The larger issue, however, is the monopoly power enjoyed by a few major energy providers like Dominion Energy. The DEQ report notes that because of monopolization and the Commonwealth's permissive attitude toward allowing providers to pass costs on to ratepayers, these companies have fewer incentives to reduce emissions. Industrial energy customers seem to be bearing the brunt of increased costs, paying $1,000 more per month, with families paying just $2.39 more per month.

There are several solutions available to the Youngkin administration that have nothing to do with leaving RGGI or stalling Virginia's transition away from polluting fossil fuels. They include breaking up energy monopolies, investing in local energy infrastructure and resilience, and amending the law to prevent providers from passing costs onto ratepayers. Unfortunately, Youngkin has chosen the path of greatest deregulation.

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