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 power from coal or other fossil fuels with high carbon emissions.

The potential for significant imports of these...