These comments are submitted by William Penniman, Reston, Virginia.  These comments reflect my experience working, over 40 years, on energy regulatory and transactional issues for clients that included large energy users, utilities, producers, traders and trade associations.  My work involved electric and natural gas markets, regulation and transactions.  In the last decade, I have focused my work on mitigating the severe climate harms from fossil fuels and electric utilities.

The proposal to withdraw from the Regional Greenhouse Gas Initiative (RGGI) is deeply flawed.  The premises and purported findings underlying EO 9, the March 11 report it commissioned and the Agency’s NOIRA Background Document are badly flawed.  Those documents utterly ignore the harms from accelerating climate changes that are already hurting Virginians and other Americans and will spiral out of control if, as proposed, we return to business-as-usual combustion of fossil fuels over the decades ahead. 

Climate Change Is Driven Primarily by CO2 and Utilities Are a Major Source

Climate change and air quality deterioration generally are strongly driven by combustion of fossil fuels, and electric utilities are among the largest sources of those emissions.  Carbon-dioxide (CO2), which traps heat for centuries, is the largest cause of climate change and must be rapidly reduced if we are to have any chance of protecting our children and future generations from severe harm.

Temperature increases driven by CO2 and other GHGs are fundamentally altering weather patterns, oceans, and atmospheric patterns.  The impacts are increasingly widespread and severe:

• Heatwaves that kill and sicken people and livestock, devestate agriculture, and reduce times that workers, children and people generally can safely be active outdoors (e.g. in Virginia, South, Midwest, and West);
• Storms that kill people and cause massive property, business and agricultural damage such that billion-dollar storms are now a commonplace (e.g., just this year in Virginia, West Virginia, Kentucky, Tennessee, Florida, Michigan, Mississippi, Texas, to name a few states);
• Droughts (e.g., throughout the Western United States., Alaska, Europe, Asia, Africa, Australia) which are destroying crops, hydroelectric water sources, local and regional water supplies, and driving mass migrations of people, as well as food price inflation;
• Wildfires (e.g., throughout the Western United States, Alaska, Europe, Asia, Australia) which kill people and wildlife, destroy homes, forests and grasslands, drive inflation of food and lumber, and compound GHG emissions with more CO2 and particulate matter;
• Sea level rise from melting glaciers and ice caps and from thermal expansion of oceans, which are a direct threat to Virginia’s coastal and tidal communities (now facing sunny-day flooding and forecast to see 1-2 feet of sea level rise by 2050 and up to 6 feet this century, inundating coastal communities and property in Virginia and elsewhere;
• Warming of seas and inland water bodies, which intensifies algae blooms, kills aquatic life and harms fisheries upon which the U.S., including Virginia, relies;
• Poisoning through CO2-driven acidification oceans and inland water bodies and their aquatic life and fisheries;
• Expanding the ranges of harmful insects and diseases, which harm people, forests and agriculture in the U.S. and around the world;
• Food supply disruptions from all of the forces above leading to higher prices, hunger and famine in many parts of the world;
• Economic disruptions in the U.S. and around the world from all the factors identified above, raising prices, disrupting supply chains, increases malnutrition, drives human migrations, and increases international conflicts.
• National security and migration threats, which the U.S. military and CIA recognize are accelerating for the U.S. and most other countries due to the disruptions that climate change is causing to water, agriculture and economic resources worldwide.

And, if that list was not bad enough,

• These crises are already worse and are growing worse much faster than had previously been foreseen;
• Rising temperatures are triggering “feedback” affects (e.g., methane and CO2 releases from peat and permafrost) that are accelerating climate change even faster;
• The direct and indirect economic, ecological and human harms from continued emissions of GHGs will last for many centuries, with CO2 continuing to trap heat for many centuries or even millennia, methane (natural gas) having 87 times the heating impact of CO2 over the 20 years, and N2O having a stronger heat trapping impact per ton than either over two hundreds of years;
• Heat-trapping GHGs build up in the atmosphere (and ocean) so that postponing reductions will lead to increasingly steep and disruptive reductions in the future and/or increasingly severe harms to our children and generations beyond that. 

To put these in perspective, 21 of the 22 hottest years on record have occurred this century; the last year below the 20^th Century average was 45 years ago; and while warming has increased every decade since 1880, the rate of temperature increase has doubled since 1981. https://www.climate.gov/news-features/understanding-climate/climate-change-global-temperature 

Business-as-usual does not serve the health, safety or welfare of residents of the Commonwealth. Virginia’s coast (including tidal rivers that extend inland) is highly vulnerable to sea level rise.  See  https://www.noaa.gov/news-release/us-coastline-to-see-up-to-foot-of-sea-level-rise-by-2050 ; https://www.washingtonpost.com/climate-environment/2022/09/08/sea-level-rise-climate-central/?%20environment_2 ; https://riskfinder.climatecentral.org/state/virginia.us?comparisonType=county&forecastType=NOAA2017_int_p50&level=5&unit=ft

Storms exacerbated by rising temperatures have killed people and severely harmed several parts of the Commonwealth, including Southwest Virginia most recently, and a truly massive hurricane has still not done to Virginia what has been done to states to the north and south (e.g., Ian, Sandy, Katrina, Harvey).  Rising temperatures have increased the frequency of heat illnesses in Virginia, while temperatures plus storms threaten agriculture and infrastructure.  Low-income residents are particularly vulnerable to climate impacts, including un-airconditioned dwellings, fluctuating energy costs, and disruptions of food and energy.  Virginia’s natural heritage (forests, wildlife, fisheries, parklands) is also being harmed by climate change and its impacts.

RGGI is Critical to Mitigating the Harms from Climate Change 

The Governor’s proposal, the rapidly drafted March 11 “report” to support it and the Agency Background Document are badly flawed.  Not only do they totally ignore the dangers and harms from CO2 emissions, but they are based on a number of flawed claims about RGGI, electric utilities and consumers.  They also ignore the realities that states participating in RGGI have substantially reduced CO2 emissions while growing their economies faster than non-RGGI states and while improving health outcomes through reduced pollution from electric utilities.  (New Jersey withdrew for a Governor’s political reasons only to rejoin when the Governor left office, which could have only happened if the citizens believed that the benefits outweighed the costs.)

The March 11 report makes many sweeping assertions based on very little actual data.  It acknowledges (p.3) that the availability of data is “limited since Virginia has just completed its first year of participation.” And, it ignores the actual benefits achieved by states that have participated longer in RGGI.  The NOIRA Background Document repeats many of the same mistakes and adds a collection of prices-are-rising statistics that have nothing to do with RGGI and its benefits and do not differentiate electricity from other parts of the economy.  Indeed, the rising cost of natural gas is a good reason to reduce reliance on fossil fuels, which is one of RGGI’s benefits.

The report asserts that “participation in RGGI is in effect a direct carbon tax on all

households and businesses.”  One could more accurately characterize it as a fee for emissions, which all economists would agree is a sensible way to link price to causation in order to mitigate harms from an activity like combusting fossil fuels.  Moreover, after surveying the recent climate-driven disasters in Southwestern Virginia, the Governor said he intended to fund disaster relief and efficiency programs – which would require taxing Virginians based on income or transactions without any linkage to the CO2 emissions they cause.  That general taxation would cost all taxpayers without the incentives from a carbon-based emission fee. (Of course, it would be still worse to gut funding designed to help residents to reduce their energy bills through energy efficiency improvements or to gut funding to help communities threatened or harmed by accelerating climate change.  Gutting such funding is likely what would result from trying to shift such measures to general taxation.)   

The report claims that “RGGI fails to achieve its goal as a carbon “cap-and-trade” system because it lacks any incentive for power-generators to actually reduce carbon-intensive gas emissions.”  That claim, which is echoed in the Background Document, is built on two other misleading claims:  that utilities have no incentive to reduce emissions due to cost-based ratemaking and that customers have no ability to reduce their purchases because Virginia’s market has not yet opened to full competition.  Those claims are wrong for several reasons.  (a) Utilities’ rates are subject to review for imprudent incurrence of costs which can result in limiting recovery of costs that a prudent utility would have avoided. (b) Utilities’ always have incentives to grow load, which requires them to seek to mitigate costs. (c) Virginia utilities are directed by existing law to reduce their CO2 emissions over the next 20 years which fits well with RGGI’s system.  (d) Small and large customers can reduce their purchases of electricity from utilities through greater energy efficiency or conservation practices, by installing solar on their property or by joining a community solar program.  Utility prices, including CO2 charges, will help to drive those consumer decisions—which is what we want in order to mitigate global warming.

The report makes the misleading claim that other states return RGGI revenues through rebates.  Most offer rebates to support energy efficiency investments by residents, which is what much of what Virginia would do.  Some use funds to support adaptation and recovery measures, which is part of what Virginia would do.  It is misleading to imply that most or any other states use most of their RGGI revenues to simply return cash to residents.

Although it is possible that CO2 emission charges will raise utilities’ per-KWH rates for sales, that would likely be a temporary impact.  As utilities shift to zero-carbon energy sources their operating costs will decline both because wind and solar have near-zero operating costs and because that switch will reduce incurrence of RGGI charges.  Also, customers’ reduced purchases from utilities through energy efficiency or solar energy would offset rate increases and lower bills, while cutting CO2 emissions.  In other words, RGGI’s CO2 charges will do what they are supposed to do – provide incentives to reduce emissions and mitigate climate change.

The report says that Virginia’s CO2 emission rates per MWH have been reduced but “mass emissions levels of CO2 from the Virginia power sector have remained fairly constant over the last 10 years despite a 30% increase in power production.”  However, continuing to emit the same total amount of CO2 as in the past will destroy the future for our children and their descendants.  We need to achieve total reductions to limit the accelerating climate change.  It is fortunate that renewable energy options have become the cheapest fuel and that there still remains much that can be done to improve energy efficiency.  But there is no guarantee that past trends will continue, particularly since the Governor seems to want to encourage more fossil fuel combustion and CO2 emissions, not less.  RGGI’s targeting CO2 emissions is vital to moving Virginia to the net-zero emissions level that is essential to protecting our children and future generations.

The report and Background Document focus on hypothesized utility rate impacts in a vacuum.  As noted above, it ignores the external costs of fossil fuel emissions to human health and to the horrific climate harms that are growing in Virginia, the U.S. and the world.  The primary recommendation of the report and Background Document is to turn the clock back to higher emissions and greater harm to ourselves and our descendants, to our natural resources and to our economy.  That blinkered view would deeply harm our children and country for the sake of some short-term political gains.  It makes no more sense than continuing business-as-usual while waiting decades for some imaginary compact, modular nuclear reactor which may never emerge, will be hugely expensive, and certainly won’t emerge in time to stop the acceleration of global warming.  Greenhouse gas emissions must be cut now and cut rapidly.  Virginia’s citizens and economy will be badly harmed by removing RGGI’s incentives for more rapidly reducing CO2 emissions and for accelerating energy efficiency.

In sum, contrary to the Governor’s political goals and executive order, exiting RGGI would be a disservice to the Commonwealth and all who will live here.  Exiting RGGI would more likely create an emergency than prevent one.  Any claim of an emergency warranting a rapid exit from RGGI is utterly bogus.