Washington’s largest air polluters snapped up all available carbon emission allowances in this month’s state-run auction – and they did so at a relatively low price for a third consecutive time.
The Sept. 4 auction was the last regular sale before voters decide the fate of the Climate Commitment Act and its cap-and-trade program in November.
Opponents of the climate law say uncertainty tied to the looming initiative is the reason for the drop in auction prices over the last year. But supporters say the decline follows trends seen in other cap-and-trade markets where allowance costs stabilize after a year or so.
During Washington’s auction last week, 7,939,271 allowances were sold at $29.88 each. Sales generated more than $237 million, of which $157 million will go to the state and the remaining will go toward utilities to help their low-income customers.
The state’s $157 million share will help pay for programs aimed at fighting climate change. That’s on top of about $324 million the state already raised from auctions this year and last year’s $1.8 billion haul.
In order to comply with the program, businesses in Washington that produce the largest amounts of air pollution – like oil refineries and paper mills – must meet an emissions cap set by the state or purchase allowances in quarterly auctions.
When auctions started last year, allowances were regularly selling for more than $50 or $60 each. They’ve dropped to below $30 throughout 2024.
It’s unclear how much of that price dive is due to the upcoming election where Initiative 2117 to repeal the Climate Commitment Act will be on the ballot.
Michael Mann, executive director of Clean and Prosperous Washington, a group that supports the law, said the auction system is working as intended.
“It’s very stable,” he said. “Over time, the prices do settle down as the regulated parties establish their protocols for ensuring compliance. We see that as very consistent.”
Mann pointed to Washington’s efforts to link its program with the combined carbon market between California and Quebec as another reason for the allowance prices cooling this year.
“There’s a strong indication that Washington’s regulated parties anticipate a future program and one that is linked with the California-Quebec market,” he said.
Backers of the Climate Commitment Act repeal effort say the lower prices are a sign the program is on shaky ground.
“The low costs at the last three auctions speak for themselves: the markets are clearly indicating that 2117 is going to pass which will render the carbon auctions null and void,” said Hallie Balch, communications director at Let’s Go Washington, the group behind the initiative.
Businesses covered by the program must obtain allowances equal to their emissions and submit them to the state Department of Ecology. The first compliance deadline is Nov. 1. That’s when businesses subject to the regulations will need to have allowances to cover 30% of their 2023 emissions. The rest will be due over time through 2027.
The Department of Ecology is holding a special auction in October, which they are required to do to give companies one more chance to get needed allowances before the Nov. 1 deadline.
Lawmakers have already earmarked how money from the Climate Commitment Act should be spent through June 2025 across the state’s operating, transportation and construction budgets. The spending is structured so most programs won’t get their cut until after the election, in case the law is repealed.
The money raised is supposed to go toward programs that fight climate change and help those who are suffering its effects the most. This spending includes things like a $200 energy credit to help low-income families cover utility costs, bike and pedestrian safety grants and tribal clean energy projects.
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