The East Coast\u2019s signature climate policy is poised to spike electricity prices just as governors are desperate to lower them.<\/p>\n
A carbon-trading program that covers power plants across 10 mostly blue states from Maine to Maryland is undergoing a price shock. The cost for permission to burn fossil fuels has roughly doubled over the last two months and hit a record high this week \u2014 foreshadowing potentially billions of dollars in extra energy costs.<\/p>\n
The cause, experts and observers say, is Virginia\u2019s looming reentry to the Regional Greenhouse Gas Initiative later this year \u2014 bringing the world\u2019s densest concentration of power-hungry data centers into a system without enough renewable energy to feed them.<\/p>\n
The move could add several dollars each month to home electricity bills across the northeast and mid-Atlantic. The exact impact will vary across utilities \u2014 which are still calculating the new costs \u2014 but the political consequences are starting to come into focus. Republicans aim to use the hike to regain the upper hand on energy politics.<\/p>\n
\u201cPower bills are going up. That\u2019s the bottom line,\u201d said Virginia House Republican Leader Terry Kilgore, who argued the new costs validate longstanding GOP criticism of the cap-and-trade program. \u201cDemocrats ran on affordability, and they ignored every chance to lower bills this past [legislative] session \u2014 and then voted to add this back to power bills. That\u2019s the opposite of making life more affordable.\u201d<\/p>\n
Democrats for months have hammered the Trump administration over rising energy prices, and two new Democratic governors, Abigail Spanberger in Virginia and Mikie Sherrill in New Jersey, romped to victory last year by focusing on that issue.<\/p>\n
Prices have continued to rise since then, driven by the war in Iran and the continued boom of AI data centers. Now, the record-high costs of the northeast\u2019s cap-and-trade program promises to push power bills even higher \u2014 and put even more pressure on politicians.<\/p>\n
\u201cThis additional cost getting added to consumers\u2019 bills is going to get the attention of the political class,\u201d said Todd Snitchler, president of the Electric Power Supply Association, which represents power plant owners.<\/p>\n
A rise in prices for power plants could cause headaches for Democratic governors across the region, including Sherrill and Maryland\u2019s Wes Moore, who both promised to cut energy costs.<\/p>\n
It could prove to be an especially big challenge for Spanberger. The Virginia governor has said that rejoining the Regional Greenhouse Gas Initiative \u2014 which her Republican predecessor Glenn Youngkin quit in 2023 \u2014 would raise money for energy efficiency and flood protection, and cut costs overall.<\/p>\n
\u201cWithdrawing from RGGI did not lower energy costs,\u201d she said in January<\/a>. \u201cIn fact, the opposite happened \u2014 it just took money out of Virginia\u2019s pocket.\u201d<\/p>\n The Spanberger administration pointed to Virginia\u2019s three-year hiatus from the program to argue the state lost opportunities to boost renewables and make homes more efficient \u2014 long-term investments that could have eased the state\u2019s energy crunch. Virginia also uses RGGI funding for flood resilience, which can yield $6 in savings for every $1 spent.<\/p>\n \u201cThe previous administration\u2019s unlawful decision to withdraw from this multi-state program took hundreds of millions of dollars away from communities across Virginia,\u201d Spanberger\u2019s press secretary Jack Bledsoe said in a statement, contrasting that with a suite of bipartisan bills<\/a> the governor signed this year to boost carbon-free power generation. \u201cVirginians deserve leaders who will do more to contend with these high costs.\u201d<\/p>\n Overshadowing the climate program, too, is the worldwide spike in fossil fuel prices caused by the U.S. and Israel\u2019s war in Iran.<\/p>\n \u201cThe price of natural gas is going to have much more of an impact on the electricity price than RGGI,\u201d said Brian Murray, who helped design the system and is now at Duke University.<\/p>\n But Spanberger already is getting pushback in Richmond.<\/p>\n \u201cIt\u2019s a bait and switch,\u201d said Delegate Michael Webert, the No. 3 Republican in the Virginia House. \u201cIt\u2019s essentially a hidden tax. It raises the cost of energy.\u201d<\/p>\n \u2018How RGGI is supposed to work\u2019<\/p>\n Environmentalists say making fossil fuels more expensive isn\u2019t a flaw of the cap-and-trade program. It\u2019s the central purpose of the Regional Greenhouse Gas Initiative, or RGGI for short.<\/p>\n \u201cThis is how RGGI is supposed to work,\u201d said Nate Benforado, a senior attorney at the Southern Environmental Law Center, which fought the effort by Youngkin, the former Virginia governor, to exit the market.<\/p>\n The program is designed to make power generators account for the harms of burning fossil fuels, he said, and to gradually reduce customers\u2019 exposure to volatile fuel prices, which have been one of the biggest drivers behind rising power bills.<\/p>\n RGGI is the oldest greenhouse gas cap-and-trade system in the U.S., limiting emissions from power plants and auctioning off permits to pollute since 2008. Power sector emissions in states covered by the program have declined 46 percent, and nearly $11 billion has been raised over the last 18 years, according to the system\u2019s own figures<\/a>.<\/p>\n But environmentalists often have bemoaned the fact that prices in RGGI weren\u2019t high enough to spur aggressive investments in clean energy. Now, they might be getting their wish.<\/p>\n Prices for permission to emit a ton of carbon \u2014 known as allowances \u2014 have nearly doubled in the past few weeks on a secondary market, rising to $52 as of Tuesday, according to one public exchange<\/a>. They\u2019d dropped down to about $46 on Thursday.<\/p>\n The allowances are created and sold by the member states \u2014 Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island and Vermont. In March, they sold credits at a quarterly auction for $25 per allowance, which covers one ton of carbon dioxide emissions.<\/p>\n Supporters of RGGI tout the proceeds from these auctions as helping states raise money that can be used for bill relief along with investments in energy efficiency and other clean energy priorities.<\/p>\n Sherrill of New Jersey, who signed an executive order to freeze utility rates during her inaugural address, is planning to use money from RGGI auctions<\/a> to offset increases to other parts of ratepayers\u2019 bills.<\/p>\n \u201cGov. Sherrill took historic action on Day One to freeze rate hikes, and has moved incredibly quickly to increase supply,\u201d Darwin Pham, a spokesperson for the governor, said in an email. \u201cThe governor will continue to use every tool possible to keep energy costs in check.\u201d<\/p>\n New York\u2019s plan to spend RGGI funds includes a provision aimed at helping consumers. It says that a third of revenues collected when prices in the auction exceed about $20 per ton will be used to reduce the costs of other ratepayer-funded clean energy programs, Hochul spokesperson Ken Lovett said when asked about the current rise in prices.<\/p>\n This will help manage costs, he said.<\/p>\n \u201cThe Governor had made clear that energy rates are too high,\u201d Lovett said. \u201cWe will continue monitoring the market.\u201d<\/p>\n Moore spokesperson Rhyan Lake said the Maryland governor is \u201claser-focused on lowering bills while keeping the grid reliable\u201d \u2014 and declared that RGGI is a \u201cproven investment strategy\u201d to do both, pointing to the hundreds of millions of dollars it enables Maryland to spend on energy efficiency, renewables and direct utility rebates.<\/p>\n Virginia\u2019s reentry sparks a \u2018feeding frenzy\u2019<\/p>\n As Virginia prepares to reenter the market, the volume of allowances being traded and the prices for allowances have spiked.<\/p>\n In the past week, roughly $1.3 billion in trades were made on the Intercontinental Exchange\u2019s secondary market, according to POLITICO calculations.<\/p>\n