Virginia Rejoins RGGI: What Businesses Need To Know

Virginia has officially rejoined the Regional Greenhouse Gas Initiative (RGGI), a Northeastern multi-state cap-and-trade program that places a regional cap on carbon dioxide (CO₂) emissions from fossil fuel-fired power plants and requires covered generators to purchase allowances for each ton of CO₂ they emit. The cap declines over time, creating a financial incentive to reduce emissions or transition to cleaner energy sources. States sell allowances at quarterly auctions, and the proceeds are reinvested in energy efficiency, flood resilience and other clean energy programs. Virginia had been a member of RGGI from 2021 to 2023. Governor Abigail Spanberger signed House Bill 29 (Chapter 7, 2026 Acts of Assembly) on February 20, 2026, directing state agencies to complete all actions necessary to rejoin RGGI by May 21, 2026. A copy of the Act is available here. On April 9, 2026, the Virginia Department of Environmental Quality (DEQ) adopted final amended regulations reinstating the CO₂ Budget Trading Program (9VAC5-140, Part VIII). A copy of the final amended regulations is available here. Compliance obligations for covered fossil fuel-fired power generators in Virginia resume July 1, 2026.

What Changed Regulatorily

HB 29 mandated that DEQ: (1) repeal the 2023 regulation that withdrew Virginia from RGGI; (2) reinstate the 2020 CO₂ Budget Trading Program regulation, amended to account for the gap in participation and (3) update the regulation by January 1, 2027, to align with the Third RGGI Program Review and the revised RGGI Model Rule. The Third Program Review — begun in 2021 and completed on July 3, 2025 — is RGGI's most comprehensive update to date, tightening the regional CO₂ emissions cap through 2037, restructuring the Cost Containment Reserve, removing offset allowances and setting more ambitious reduction trajectories for 2027 through 2033. The revised RGGI Model Rule is the updated regulatory blueprint that each participating state must incorporate into its own CO₂ budget trading program by January 1, 2027.

Critically, these regulatory actions were exempt from Virginia's Administrative Process Act (APA) by virtue of HB 29 itself, which conferred a statutory directive to act within a fixed timeframe that displaced the ordinary rulemaking process. Under normal circumstances, the APA requires agencies to publish proposed regulations, solicit public comment and obtain approval from the relevant board — a process that typically takes 18 months or more. Because HB 29 mandated action by a specific deadline and authorized the DEQ Director to act directly, no notice-and-comment period was required, and the State Air Pollution Control Board's approval was not needed. As such, the DEQ Director acted unilaterally to repeal the 2023 regulation and to issue the amended CO₂ Budget Trading Program regulation.

DEQ's reinstated CO₂ Budget Trading Program establishes a one-time, six-month control period (July 1–December 31, 2026) in order to ease Virginia's re-entry into compliance and align with the annual RGGI auction schedule. This period adjusts — from the otherwise applicable full-year budget — Virginia's 2026 CO₂ budget to 11.48 million tons (half of the full-year 22.96-million-ton budget) and includes 1.148 million Cost Containment Reserve (CCR) allowances. The CCR is a reserve of additional allowances held separately from the annual cap and released into the market only if auction-clearing prices rise above a predetermined trigger price (currently $18.22 per allowance in 2026, increasing 7% annually). It functions as a soft price ceiling, providing market stability if the cost of reducing emissions runs higher than anticipated.

Who Is Covered And What They Must Do

Virginia's RGGI compliance applies to fossil fuel-fired electric generating units of 25 MW or greater located in Virginia. Initially, covered sources must acquire CO₂ allowances equal to their projected emissions during the July 1–December 31, 2026 period. Covered sources in Virginia will participate in the September and December 2026 RGGI auctions to acquire CO₂ allowances. Allowances from any participating RGGI state are fully fungible and may be acquired for Virginia compliance.

Looking Ahead

Virginia's return to RGGI appears legally and politically settled for the near term, with the current administration and legislative majority firmly committed to participation. Businesses should be aware of two critical upcoming milestones: (1) Virginia's first allowance auctions since 2023, scheduled for September and December 2026, and (2) DEQ's second rulemaking, due by January 1, 2027, which will align Virginia's program with the updated RGGI Model Rule and set cap levels for CO₂ allowances for 2027 and beyond. Utility customers should also expect that allowance costs will be reflected in future electricity rates as utilities seek State Corporation Commission approval to recover compliance costs through bill riders, as they did during Virginia's prior RGGI membership.

Virginia's re-entry has already produced notable market effects. In the weeks following Virginia's approval of its 2026 allowance budget, RGGI allowance prices surged dramatically, with forward prices rising more than 83% between April 13 and May 4, 2026, reportedly driven by trader concerns over compressed supply in the second half of the year. On May 8, 2026, RGGI's participating states issued a public statement acknowledging the short-term volatility in the RGGI futures market, noting that recent futures prices had exceeded the thresholds that trigger automatic cost containment releases, and warning that a sustained period of elevated auction prices would not meet the program's objectives and may require renewed consideration of improvements. A copy of the public statement is available here.

How Buchanan Ingersoll & Rooney Can Help

Our Energy and Environmental Law and Government Relations teams have extensive experience advising clients through complex regulatory transitions, cap-and-trade compliance and energy regulatory proceedings. We can assist with:

• Assessing whether your facilities are subject to RGGI compliance obligations;
• Developing allowance procurement strategies for the September and December 2026 auctions, including registration and compliance account management through RGGI COATS (the RGGI CO₂ Allowance Tracking System — the official platform used to acquire, transfer and surrender RGGI allowances);
• Reviewing electricity supply contracts, wholesale agreements and utility tariffs for RGGI cost pass-through exposure; and
• Participating in DEQ’s second rulemaking on your behalf to attempt to shape 2027 program parameters.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.