On 28 February 2023, the US state of Washington’s Department of Ecology held its first quarterly allowance auction under the state’s cap-and-invest program, which entered into force in January 2023. 6,185,222 allowances were offered for sale, and the auction cleared at a price of USD 48.50. All allowances were purchased, generating a total revenue of almost USD 300 million. There were 56 qualified bidders for the first auction, with an average of 2.67 bids placed for every allowance offered for sale.
The settlement price of USD 48.50 is well above the auction floor price of USD 22.20. This indicates strong demand by regulated entities and reflects the ambitious cap of Washington’s cap-and-invest program. Starting at a level of 63 MtCO2e in 2023, the system’s cap will decline by 7% annually in the period to 2030, and by 1.8% from 2031 to 2042. A cap decline factor of 2.6% between 2043 and 2049 will then deliver emissions reductions of 95% below 1990 levels in 2050. The program covers industrial facilities, electricity generators, importers of electricity, fuel distributors, and natural gas suppliers, with annual emissions of more than 25,000 tCO2e. It is envisaged to expand to include eligible waste-to-energy facilities from 2027 and railroad companies from 2031.
Over the next two years, the quarterly auctions under Washington’s cap-and-invest program are projected to generate up to USD 1.7 billion in revenues that will be invested in climate mitigation measures. Under the state’s Climate Commitment Act, at least one third of the revenue is earmarked for investment in environmental and economic benefits for communities that are disproportionately affected by climate change.
The Washington government is exploring the possibility of linking its cap-and-invest program to the systems of California and Québec. A decision on whether to link with the joint market is expected this summer.
