Photo: Pixabay
Last month, Washingtonians voted to protect their landmark cap-and-invest program, showing support for the program’s strong limit on pollution and game-changing investments. Thanks to this resounding win, the cap-and-invest program continues to deliver for Washington communities — with today’s results bringing in record revenue for the year.
The results released today are for Washington’s fourth quarterly auction of 2024, administered last Wednesday by the department of Ecology (Ecology). During the auction, participating entities submitted their bids for allowances. Under the Climate Commitment Act — Washington’s landmark climate law that sets a binding, declining limit on pollution — Washington’s major emitters are required to hold one allowance for every ton of greenhouse gas that they emit, with the total number of allowances declining each year. With fewer allowances available each year, this system requires polluters in Washington to reduce their emissions in line with the state’s climate targets.
December auction results
- All 5,312,871 current vintage allowances offered for sale by Ecology were purchased, resulting in the 8th consecutive sold out quarterly auction.
- The current auction settled at $40.26, $16.24 above the price floor of $24.02 and $10.38 above Washington’s last quarterly auction price of $29.88.
- All 2,222,832 advance auction allowances offered for sale by Ecology were purchased, settling at $26.00, $1.98 above the previous advance auction settlement price of $24.02.
- This auction is projected to generate roughly $272 million in revenue, which will be invested into Washington communities to enhance climate resilience, create jobs, and improve air quality. A report from Ecology confirming the amount of revenue raised in this auction will be published on December 31.
What factors may be at play with these results?
This is the first auction conducted since voters decisively defeated Initiative 2117, preserving this cornerstone of Washington’s climate policy. With the program’s future now more secure, covered entities appear to be bidding more aggressively, which could contribute to higher allowance prices compared to the last auction. The defeat of Initiative 2117 has likely bolstered confidence among market participants, removing uncertainty around the program’s future and reinforcing its durability. Higher prices reflect robust demand for allowances, signaling that covered entities are prioritizing compliance and long-term planning within this transformative program.
The prices today are also more stable than some market analysts were predicting, which may reflect the efficacy of several aspects of the program’s design. One is the function of the Allowance Price Containment Reserve (APCR), a price containment mechanism that was built into Washington’s cap-and-invest program to help keep allowances stable and predictable.
The APCR contains a number of allowances that were set aside ahead of time and are still part of the overall allowance budget set by Ecology to keep Washington on track to meet its climate targets. Releasing these additional allowances through an APCR auction helps to stabilize allowances prices by making a specific set of allowances available to covered entities at a transparent, predictable, predetermined price point.
Ecology can hold APCR allowances if prices at the quarterly auctions reach a predetermined price point — which they have not hit this year — and they can be held at least once a year prior to the annual compliance deadline, which Washington recently completed. Covered entities can choose to participate in this auction if they have a need to obtain more allowances — at the set price point of $56.16 — before the deadline to turn over allowances to cover their emissions.
Washington held their pre-compliance APCR auction in October, where covered entities had the opportunity to buy more allowances if they needed them, which may have helped covered entities feel less pressure to out-bid each other for current vintages at this auction. Similarly, covered entities had the chance to purchase future vintage allowances at last week’s auction (something that’s not offered at every quarterly auction), which may have further stabilized the price of the current vintage allowances.
Overall, today’s results emphasize the importance of all the program features that were designed to help keep this market stable and effective, even during an uncertain year in which the program faced repeal. This program is proving its durability and its ability to deliver crucial revenue for the state, while driving down emissions.
Boosting community investments with growing revenues
Higher allowance prices not only signal robust demand but also amplify the impact of Washington’s cap-and-invest program by increasing the funds available for reinvestment. These revenues are the financial backbone of the Climate Commitment Act (CCA), enabling transformative projects that cut emissions, enhance climate resilience, and improve public health — especially in communities disproportionately affected by climate change.
From electrified public transportation and expanded renewable energy infrastructure to wildfire prevention and improved air quality, these investments are reshaping Washington’s landscape. Importantly, the program is designed to ensure that benefits flow to communities most in need, creating a more equitable transition to a sustainable future.
Recent modeling underscores the program’s economic potential. Over the next eight years, CCA investments could create more than 45,000 jobs and generate $9.1 billion in economic activity, yielding a net return of $3.9 billion. These figures highlight the dual impact of the program: advancing climate goals while fueling local economies.
By securing the program’s future through the defeat of Initiative 2117, Washingtonians have ensured that this critical funding pipeline will continue to support bold climate action and economic opportunity statewide.
Looking ahead
Washington’s cap-and-invest program is more than a mechanism for reducing emissions — it’s a blueprint for how states can address the climate crisis while driving economic growth and improving equity. By setting a binding, declining cap on greenhouse gas emissions and investing auction revenues in transformative projects, the program showcases the potential of ambitious, market-based climate policies.
The state is also pursuing linkage with the joint California-Quebec market, known as the Western Climate Initiative. By linking markets, Washington can create a larger, more stable system that facilitates deeper emission reductions while stabilizing compliance costs for covered entities.
Washington’s cap-and-invest program underscores the importance of state leadership in driving climate progress, offering a proven framework for other states to follow as they work to meet their own climate and economic goals. With a clear mandate from voters, the state’s cap-and-invest program is well-positioned to continue delivering on its promise of a cleaner, more resilient future.