Washington’s Carbon Auction Prices Rebound

The eighth quarterly auction of greenhouse gas allowances under Washington’s cap-and-invest program sold all allowances offered, with current vintage allowances settling at $40.26 per allowance, which is nearly 35 percent higher compared to the previous auction, according to the results released on Dec. 11 by the state’s Department of Ecology. The surge in auction prices follows Washington voters’ decision in November to reject a ballot measure, which sought to repeal the program.

The current auction clearing price is well above the floor price of $24.02. The current auction offered 2023 and 2024 allowances totaling nearly 8 million and the advance auction offered 2027 allowances totaling about 2.2 million. The advance auction cleared at $26 per allowance.

Washington voters on Nov. 5 rejected Initiative 2117, a ballot measure that sought to repeal the 2021 Climate Commitment Act, which established the cap-and-invest program, a key component of the state’s efforts to achieve emission limits set in law and progress toward net-zero carbon emissions by 2050. Nearly 62 percent of voters cast ballots against the initiative, affirming public support for climate action and the state’s emissions-reduction targets.

At the previous auction held in September 2024, current allowances settled at $29.88 per allowance, about half the price of the August 2023 auction, which cleared at $63.03. Prices have continued to decline since the August 2023 peak amid uncertainty over the program’s future. The results of the latest auction, held on Dec. 8, reflect renewed confidence.

Earlier this month, the department released a report detailing the distribution of $472 million of 2021 Climate Commitment Act investments among 37 state agencies. The agencies used the funds to support projects such as habitat restoration, clean energy, and energy bill assistance from Jul. 1, 2023, to Jun. 30, 2024. These projects have the potential to reduce over 335,000 metric tons of carbon dioxide equivalent.

The market-based program sets a limit, or cap, on overall carbon emissions in the state, requiring businesses to purchase allowances equal to their covered greenhouse gas emissions. This cap is designed to decline over time, incentivizing companies to reduce emissions. Revenue generated by the program funds clean energy initiatives and climate resilience projects across Washington, supporting the state’s target of carbon neutrality by 2050.