Virginia is for Lovers, and RGGI is for Lower Energy Costs

The Regional Greenhouse Gas Initiative (RGGI) was the nation’s first cap-and-invest program, capping emissions and forcing power plants in the Northeast and Mid-Atlantic to pay for pollution. Since its launch, RGGI has helped participating states cut CO₂ emissions from the power sector by 40%^[1] and generate over $11.4 billion^[2] in proceeds that are reinvested into clean energy programs, energy efficiency, weatherization for low-income households, and flood resilience infrastructure, among other priorities. Acadia Center has been a central voice in RGGI’s design and advocacy since 2009. We have closely analyzed what the program delivers and what states lose out on when they walk away from it (see: New Jersey, Pennsylvania) – and what they gain when they come back.

Virginia is now on track to formally resume participation on July 1, 2026, and to participate in the September and December allowance auctions, a quarterly marketplace where power plants buy allowances to comply with RGGI.

Acadia Center agrees with our colleagues at the Natural Resources Defense Council (NRDC) who called the move a fulfillment of “long-term commitment to addressing rising energy costs and building resilient homes and communities that can withstand the growing threat of extreme weather and sea-level rise.”^[3] Virginia and Governor Abigail Spanberger should be applauded for rejoining RGGI and taking advantage of this program as a tool to deliver substantial benefits to the state’s families and businesses.

RGGI has a proven, multi-decade track record of market stability, demonstrating the durability to withstand changes in state participation, new market dynamics, and technology advancements. Many effective tools remain in both the RGGI toolbox and in states’ control to address and adapt to changes happening during this dynamic period in the power sector that will have an impact on the program, as we explore below. Virginia’s re-entry will only give the regional program greater strength in numbers to navigate the fast-evolving power market shifts underway.

What’s at Stake: How Virginia Stands to Benefit from Rejoining RGGI

Here is a by-the-numbers look about how Virginia will benefit from its reentry into RGGI:

• Amount of revenue: Virginia generated over $827 million in proceeds in just three years (2021-2023). With prices currently trending around the same levels and higher, Virginia’s return in July is projected to generate substantial new revenue, likely in the hundreds of millions of dollars annually.
• Reinvestment of proceeds: By statute, Virginia’s RGGI proceeds are directed half and half into low-and moderate-income energy efficiency programs and community flood resilience/adaptation efforts. Based on Virginia’s track record of generating over $275 million per year during its first three years in RGGI, this will translate to more than a hundred million dollars per year available to invest in each of these two key priority areas, a major infusion of resources that will help protect ratepayers from rising costs and communities from rising flood waters.
• Energy efficiency savings: Reinvesting RGGI proceeds into energy efficiency is highly likely to yield roughly 2:1 savings for every dollar invested, or more. This is true at a system level for RGGI: to date, the program has generated over $9 billion in proceeds, and RGGI has found that program investments are expected to save ratepayers over $20 billion on energy bills, directly benefiting more than 8 million households and 400,000 businesses. This 2:1 savings-to-costs multiplier is also borne out in individual states’ energy efficiency portfolios, such as in Massachusetts – where $8.4 billion in energy efficiency investments between 2016 and 2024 are saving ratepayers more than $16 billion in energy supply and infrastructure costs. As such, if Virginia brings in $150 million or more per year to invest in LMI energy efficiency programming, it can reasonably expect to generate at least twice as many energy bill savings or more for its residents and businesses over the life of those investments.
• Resources for community resilience: Millions of dollars have already been appropriated to localities affected by devastating flooding in recent years, such as in Southwest Virginia. Virginia’s return to RGGI will mean greater resourcing to serve even more communities all across the state, and to move increasingly from planning to actual deployment of resilient infrastructure. Much of the funding to date has gone toward creating flood resilience plans, and new revenue from the reentry to the program will allow localities to actually move toward breaking ground on flood mitigation infrastructure projects.
• Strength in numbers: RGGI’s bipartisan regional collaboration is strengthened by new program entrants and the expansion of the market. New market dynamics can be better planned for and navigated as a broader group of cooperating states, rather than states going into it alone.

Three Years Virginia Didn’t Have to Lose

In 2023, Virginia left RGGI. Former Gov. Glenn Youngkin considered RGGI to be a “hidden tax” on ratepayers, despite the initiative only adding an average of $2 to consumer energy bills per month, significantly less than what it brings back to consumers. During the three years that Virginia participated in the program, it raised over $800 million for low-income energy efficiency programs, the Community Flood Preparedness Fund, and related administrative costs.^[4]That funding simply stopped when Youngkin pulled the state out of RGGI, hurting the programs it supported and the overall economy. Additionally, the court costs from the attempted withdrawal forced customers to pay twice what they were paying for the RGGI program itself.^[5] As Governor Spanberger later put it to the General Assembly: “Withdrawing from RGGI did not lower energy costs. In fact, the opposite happened — it just took money out of Virginia’s pocket.”^[6] It is estimated that Virginia lost out on close to one billion dollars in RGGI revenues during its period of non-participation, and multiples of that amount in energy savings and economic impact.

On April 14, 2026, Gov. Spanberger corrected that misstep. Fulfilling her campaign promise to prioritize the clean energy future, she signed Virginia back into RGGI and placed the state back on the path of greenhouse gas mitigation and community investment.

Setting a Price Signal for the Market, and Controlling Costs

RGGI’s program is specifically designed to moderate price spikes and be able to withstand changes that accompany states entering and leaving the program. Longstanding program mechanisms help directly manage program compliance costs, from foundational market rules like the ceiling price for allowances to dedicated cost mechanisms such as the two cost containment reserves (CCR) that function as relief valves. And again, the reinvestment of proceeds into energy saving programs like energy efficiency is expressly designed to reduce overall system costs borne by ratepayers, reducing energy demand to save on both fuel and infrastructure costs.

Virginia’s return has driven attention to allowance price dynamics. RGGI allowance ‘futures’ – the secondary market that signals market perceptions about where allowance prices may go in the future – have been at elevated levels in recent weeks. The main drivers for this seem straightforward: the harsh past winter, Virginia’s large power sector joining the market, and the uncertainty with demand growth in PJM territory (the regional transmission organization for the Mid-Atlantic and portions of the Midwest) associated with the arrival of data centers – not to mention a global fossil fuel price shock driven by the war in Iran. For Virginia specifically, one concern held by some is that its power sector may emit more than the allowances the state will bring back to the market, which could see demand for allowances increase across the board^[7]– but, as cited below, the market should be positioned to absorb higher demand were this to occur. And again, Virginia’s reentry is only one of multiple factors affecting market dynamics and outcomes at this time.

Recent allowance price signals are important to take seriously, especially in the near term as the program adapts and responds to the reentry of a large state. But higher secondary market prices do not represent a new market floor price, and instead likely contain a significant amount of “noise” that will smooth out in subsequent auctions. These prices are a response to short-term dynamics that are not a settled equilibrium. In the past, Virginia was a neutral contributor to the program, and we expect that to remain the case in the near term with Virginia rejoining. As the RGGI states have pointed out, there are currently an estimated 60 million surplus allowances in circulation beyond what is needed to cover current emissions obligations – on top of allowances that will be made available at auction in 2026, which includes Virginia’s 11.48 million allowances and an additional 1 million+ cost containment reserve allowances for the second half of 2026.

Fundamentally, the largest drivers of electricity costs will remain the price of natural gas, the cost of grid infrastructure and repairs, storm damage costs, and increases in utility profits – not RGGI. More revenue from subsequent auctions will only give the RGGI states more resources to address energy affordability.

The Data Center Question

Virginia’s electricity demand picture is genuinely complex. The state has the largest data center market in RGGI, and accounts for 12% of the US’s data center market.^[8] That load growth, if powered by fossil fuels, is subject to RGGI compliance costs (at least for power plants above 25 MW). Data center demand contributed to an 833% increase in PJM’s capacity market auction price in 2025-2026 compared to the year prior, and Virginia’s demand is projected to rise from about 34 terawatt-hours (TWh) in 2024 to anywhere from 78 to 164 TWh by 2030 under different low, medium, and high growth scenarios.^[9]

This is exactly why RGGI’s market signal matters. Efficiency upgrades, weatherization for low-income households, and demand reduction measures supported by the reinvestment of RGGI proceeds will directly reduce electricity consumption, price, and peak load growth. As demand from data centers increases, these investments will help mitigate the impact of rising electricity demand from data centers and protect everyday customers. It will also signal that new generation should be coming from renewable sources instead of emitting sources that will be required to be in compliance with RGGI costs: data center developers, utilities, and independent power producers will all be able to shape their investment decisions around the known market construct RGGI provides.

Virginia cannot meet rising demand at scale while protecting regular customers without leveraging the revenue RGGI generates and the clean energy transition RGGI helps accelerate. Letting the data center buildout proceed without an emissions backstop would mean absorbing that growth entirely through fossil generation, which is a worse outcome for both ratepayers and for the climate.

A recent poll of 1,000 registered Virginia voters by the Washington Post and a researcher found that people are dramatically less comfortable with new data center construction in their community now, at 35% in 2026, compared to 69% in 2023.^[10] This change is happening across party lines and all over the state, as almost every region in Virginia is seeing opposition to data centers. This is important as Virginia is rejoining RGGI because the people who are against data center growth are among those who will benefit the most from the money RGGI will reinvest in the community. The program will help the environment and local communities, where many residents themselves want to make sure data centers do not hurt their environment.^[11]

Welcome Back, Virginia

Acadia Center commends this consumer-focused move from Virginia and thanks Governor Spanberger, the General Assembly, and the advocates who held the line through years of legal uncertainty. Virginia’s return restores a critical funding stream for communities and recommits the state to the regional collaboration that has made the northeast and Mid-Atlantic a leader on driving affordability, community resilience, and efficient energy consumption. Now, more than ever, clean energy must be embraced as a driver for lower bills and lower pollution, and heavily polluting energy sectors will need to pay their fair share of energy system and emissions costs. By rejoining RGGI, Virginia signals an acceptance that doing right by its people also means doing right by the climate and the environment.

[1] https://www.rggi.org/allowance-tracking/emissions/dashboard
[2] https://www.rggi.org/auctions/auction-results , https://www.rggi.org/sites/default/files/Uploads/Auction-
Materials/72/PR060526_Auction72.pdf
[3] https://www.nrdc.org/press-releases/spanbergers-signature-virginia-finalizes-return-rggi
[4] https://virginiamercury.com/briefs/virginia-set-to-rejoin-rggi-as-utilities-prepare-to-pass-the-cost-back-to-ratepayers/
[5] Ibid.
[6] https://www.arlnow.com/2026/01/20/gov-spanberger-targets-energy-costs-amid-data-center-growth-in-n-va/
[7] https://www.baconsrebellion.com/with-virginia-back-in-rggi-futures-price-tops-41-per-ton/
[8] https://powering-intelligence.epri.com/dashboard/
[9] https://powering-intelligence.epri.com/dashboard/
[10] https://www.washingtonpost.com/business/2026/04/15/data-centers-poll-virginia/
[11] https://www.washingtonpost.com/business/2026/04/15/data-centers-poll-virginia/