Washington State’s Emissions Allowance Program’s 1st Auctions

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Washington State wrapped up its first full 12 months of auctions for tradable emission allowances in December, because the state considers becoming a member of an built-in regional greenhouse gasoline discount program with California and Québec.

In 2021, the Washington state legislature arrange a cap-and-invest program that creates tradable emission allowances as a measure to scale back and restrict greenhouse gasoline emissions over time. This program is meant to assist the state transfer towards a low-carbon economic system. One allowance equals one metric ton of carbon dioxide-equivalent emissions. This system held its first allowance public sale on February 28, 2023, and held subsequent auctions in Could, August, and December.

Washington’s cap-and-invest program, the newest addition to U.S. carbon market packages, goals to scale back the state’s greenhouse gasoline emissions to 45% beneath 1990 ranges by 2030, 70% beneath 1990 ranges by 2040, and net-zero emissions by 2050.

Below this market-based initiative, the Washington State Division of Ecology points allowances for greenhouse gasoline emissions. The Division of Ecology allocates some allowances to sure companies free of charge, as directed by the legislation, and it sells the remaining at quarterly auctions. Companies can apply these allowances to fulfill annual compliance necessities, save them to offset future emissions, or commerce them in a secondary market.

On the first cap-and-invest program public sale, allowances bought at $48.50 per allowance, and the worth elevated to about $56.00 on the second public sale and about $63.00 on the third public sale as a consequence of sturdy demand. To handle the demand, the Division of Ecology activated its Allowance Worth Containment Reserve (APCR). The APCR is as a separate allowance pool the Division of Ecology can launch into the market when costs surpass a predetermined threshold. The Division of Ecology held two APCR auctions—one in August and one in November 2023—the place solely entities with a compliance obligation to acquire allowances equal to their emissions and submit them to the Division of Ecology had been eligible to take part.

The settlement worth in this system’s fourth public sale was about $52.00 per allowance, down from about $63.00 per allowance within the third public sale.

In November 2023, the Washington State Division of Ecology introduced that it intends to hyperlink its program with greenhouse gasoline discount packages in California and Québec. By linking these three packages, it intends to harmonize efforts throughout jurisdictions and mix carbon markets via varied parts, reminiscent of compliance intervals, allowance costs, and offsets.

Principal contributor: O. Nilay Manzagol

Courtesy of U.S. EIA