A carbon price can be a tough sell when electricity costs are rising.<\/p>\n
That\u2019s what governors up and down the eastern seaboard are facing as they decide what to do with revenues from the Regional Greenhouse Gas Initiative, an 11-state cap-and-trade program for the electricity sector that operates from Virginia to Maine.<\/p>\n
In Virginia and New Jersey, two states where Democratic governors won last year amidst a maelstrom of concern about rising electricity prices, the program has been at least partially reoriented around putting dollars back into the pockets of ratepayers.<\/p>\n
Virginia only recently rejoined the group this year after having left under the leadership of Republican Glenn Youngkin in 2023. When Virginia was last a member of RGGI, the proceeds from the auctions for emissions allowances largely went to<\/a> an energy efficiency program for low-income households and a flood resilience fund. Today, having rejoined RGGI, some 45% of the revenue will be earmarked for rate relief<\/a>, thanks to a budget amendment passed in June.<\/p>\n In New Jersey, meanwhile, Governor Mikie Sherrill has used money raised through to help fulfill the rate freeze pledge on which she centered her campaign for Drumthwacket by directly reducing bills<\/a>.<\/p>\n Conservatives in RGGI states have for years tried to make a stink<\/a> about the up-front costs it imposed on ratepayers. Now as electricity costs balloon, Democratic governors and state legislatures are looking to RGGI to help balance their emissions goals and efforts to keep electricity bills under control. <\/p>\n In New Hampshire, for instance, the most conservative state to be a consistent RGGI member, nearly all the state\u2019s proceeds from the program now go to rate relief, compared to about three-quarters historically. In its latest report on how RGGI funds get used, the organization reported that in 2024, the last year for which comprehensive data is available, some 23% of RGGI proceeds went to direct bill assistance, compared to 16% over the 17-year lifetime of the system.<\/p>\n \u201cThe affordability narrative is the leading political narrative of 2026. And the albatross around the neck of carbon pricing has been that it\u2019s going to raise energy prices,\u201d Dallas Burtraw, a senior fellow at Resources for the Future, told me.<\/p>\n Seen holistically, Burtraw told me, \u201ccarbon pricing is built for affordability.\u201d That\u2019s because, one, economists generally consider carbon pricing the cheapest and most efficient way to hit a given emissions reduction goal (assuming, that is, that you want to reduce emissions in the first place), and secondly because the proceeds from the carbon price can be invested and distributed in ways that mitigate price hikes.<\/p>\n \u201cCarbon pricing raises tremendous proceeds, and the question comes down to the distributional impacts of carbon pricing. It always comes down to how you use those carbon proceeds,\u201d Burtraw told me.<\/p>\n The current pressure for rate relief comes as RGGI prices have risen as the same time electricity prices up and down the East Coast are at or near all-time highs. The clearing price in the latest quarterly auction for carbon dioxide allowances was $35 per ton<\/a>, the highest price in the history of the program, bringing in some $642 billion to be distributed among the states. By contrast, the third quarter auction in 2025 had a clearing price of $19.63 and raised some $300 million.<\/p>\n At the same time, electricity bills have risen across the RGGI system, including an 18.5% rise in New Jersey by 12.5% rise in New Hampshire just over the past year, according to Heatmap and MIT\u2019s Electricity Price Hub<\/a>. <\/p>\n Because every state in the RGGI system besides Virginia operates in a restructured wholesale electricity market, it\u2019s hard to say exactly how much RGGI prices affect ratepayer bills. In Virginia, Dominion, the dominant utility, has requested permission for a rider on bills<\/a> of $10 to $13 per month, compared to monthly added costs under $3<\/a> when Youngkin began the process of withdrawing Virginia from the system in 2022.<\/p>\n In a New Jersey regulatory filing<\/a>, meanwhile, the state\u2019s Board of Public Utilities recommended using RGGI proceeds<\/a> to fund $150 million of rate relief for moderate- and low-income households that Sherrill announced in June, citing an update to the state\u2019s three-year strategic plan for RGGI that directly the NJBPU \u201cto provide direct bill credits on residential energy bills for NJ\u2019s most vulnerable residents.\u201d There is precedent for this in the Garden State: In 2025 Governor Phil Murphy helped deliver rate relief by shifting some RGGI money<\/a> around.<\/p>\n The trend toward using RGGI funds for rate relief has caused disquiet among environmental groups that support carbon pricing and want to see the dollars largely go to energy efficiency programs, not ratepayers.<\/p>\n In 2025, a coalition of Virginia environmental groups that supported rejoining RGGI called for<\/a> revenue to go to the \u201clow-income energy efficiency fund and the Community Flood Preparedness Fund.\u201d The Flood Preparedness Fund issues grants to local governments for flood mitigation and resiliency projects<\/a>, while the energy efficiency programs fund things like home weatherization.<\/p>\n \u201cThe case we\u2019ve made to our environmental advocates in Virginia is that we have taken 45% towards RGGI credits, but we\u2019ve left 55% of the revenue. That leaves each of the programs with record levels of funding,\u201d Josephus Allmond, Virginia\u2019s chief energy officer, told me, referring to the flood and energy efficiency programs that have historically been funded by RGGI.<\/p>\n \u201cWe were able to take what could have been a pretty negative impact to residential customer bills and turn it into something we can basically hold customers harmless.\u201d<\/p>\n While the Natural Resources Defense Council has said it supports temporary rate relief to low-income ratepayers, it also has also mounted a defense<\/a> of using RGGI revenues \u201cto fund energy and environmental programs.\u201d<\/p>\n