Dominion Energy Inc. and Virginia businesses argue that the state’s proposed carbon trading program will raise electricity rates and increase imports of dirtier power.

Dominion, Virginia’s largest power company, said a proposal for the state to join the Regional Greenhouse Gas Initiative would lower carbon emissions locally, but raise emissions of planet-warming gases in the region.

That’s because the commonwealth would import more power from states outside the trading program—such as West Virginia, North Carolina, and Kentucky— that produce...