The Virginia Department of Environmental Quality (DEQ) will soon publish a rule to align the state's participation in the Regional Greenhouse Gas Initiative (RGGI) with the program changes finalized last year.
The rule, which DEQ director Mike Rolband signed on 24 September, will be published in the Virginia Register of Regulations on 19 October and will take effect on 1 January 2027.
The rule outlines the state's emissions cap plan for the next decade, which will start at about 20.4mn short tons (st) in 2027 and decrease by more than 2.5mn st/yr through 2033. Starting from 2034, the cap will fall by nearly 728,900st/yr, ending at almost 2.2mn st in 2037.
The emissions cap plan is similar to the one DEQ proposed in August, though the rate at which the cap falls during 2034-37 is slightly higher than what was previously floated.
In addition, the rule establishes two cost-containment reserve (CCR) tiers each holding more than 3.4mn additional allowances, which can be released into the market if an auction price exceeds certain thresholds. The trigger price for each CCR tier start at $19.50/st and $29.25/st in 2027 and will increase by 7pc/yr. The 11 member states hold quarterly auctions where market participants can purchase allowances to satisfy their compliance obligations.
Other changes include the removal of the emissions-containment reserve (ECR), which was designed to withhold allowances if auction prices drop below a certain level, the elimination of offsets starting from 2027 and the alignment of the minimum reserve price at the same level as what would have been the ECR trigger price. The minimum reserve price will start at $9/st and increase by 7pc/yr.
The new rule aligns Virginia with changes finalized in July 2025 by the rest of the 10 member states in the power plant CO2 cap-and-trade program.
The finalization of the new rule will cement the state's budgets for the coming decade, resolving a major source of uncertainty for market participants over the future scarcity of allowances — a factor that has loomed over the market since Virginia in March first announced its intent to rejoin RGGI in July.
RGGI allowance prices have climbed to historic highs both in the last two auctions as well as in the secondary market since Virginia's announcement. The last auction, held on 9 September, cleared at $37.65/st and sold more than 28.5mn allowances while secondary market prices have held at more than twice the CCR trigger price for 2026 since April, when Virginia finalized its return to RGGI.
In addition, the secondary market has been volatile, particularly in recent weeks, likely because of fluctuating trends in the northeast US power markets. RGGI prices fell to a four-month low on 23 September before reaching a five-week high a week later, according to Argus assessments. But since then, allowances have again been on a downward trend in tandem with power prices in the region.
December 2026 and prompt-month contracts were last assessed at $39.83/st and $39.54/st, respectively, on 2 October.
