WA’s second carbon auction nets $500M, gas prices could jump
Jun 9, 2023, 4:00 PM | Updated: 4:50 pm
(Photo by Frank Rumpenhorst via Getty Images)
After Washington held its first cap-and-invest auction on Feb. 28 — raising nearly $300 million in the process — the state held its second carbon emission auction to allow gas and oil companies to bid against each other to buy a limited amount of carbon emission allowances.
The cap-and-invest program sets a limit, or cap, on overall carbon emissions in the state and requires businesses to obtain allowances equal to their covered greenhouse gas emissions. These allowances can be obtained through quarterly auctions hosted by the Washington State Department of Ecology. They can also be bought and sold on a secondary market, like a stock or bond.
Washington’s second auction of greenhouse-gas pollution allowances raised more than half a billion dollars, according to the Washington Policy Center.
The Department of Ecology reported the greenhouse gas credits are going for more than predicted as Washington’s auction of carbon allowances sold out. Companies bought all 8.6 million units the state offered at its second-ever auction last week, approximately 2.5 million more allowances than what was offered at the first auction back in February.
This program was established in 2021 within the Climate Commitment Act (CCA), which established a comprehensive, market-based program to reduce carbon pollution and achieve the greenhouse gas limits set in state law.
The price per allowance or credit reached $56.10 — compared to the first auction’s price of $48.50 — and was high enough to trigger an additional auction later this summer. Each credit is equivalent to one metric ton of greenhouse-gas emissions.
Will gas prices jump as a result?
According to Todd Myers with the Washington Policy Center, this program will mean drivers will pay approximately 45 cents more per gallon of gas and 54 cents more for diesel.
“Fundamentally, Washington’s climate policies are designed to be inflexible and narrow the scope of climate innovation,” Myers wrote in a statement. “That lack of flexibility drives the tax on CO2 emissions up, putting more money into the state budget. Washington could more effectively and efficiently reduce emissions, but the system is designed to prioritize the government, not the climate.
“Some will argue that the additional tax revenue generated by the higher prices will allow the state to subsidize other efforts to reduce CO2 emissions,” Myers continued. “But this is unlikely to do anything to reduce CO2 emissions. The state already has a cap on total CO2 emissions. How that is done doesn’t matter. More government spending only changes how emissions are reduced, not the total. If state programs reduce more CO2, it makes more permits available under the cap, allowing companies to emit more than they might have otherwise.”
Ninth District Senator Mark Schoesler echoed Myer’s statement.
“Drivers across Washington will pay even more at the pump thanks to the cap-and-trade program,” Schoesler said in a prepared statement. “Fuel prices typically rise when summer driving season arrives, and this latest auction by DOE will cause trips to the gas station to be even more expensive for both drivers here and those from other states who want to see Washington.”
The state aims to generate revenue for clean energy projects and programs to support communities affected by climate change and air pollution. Over the next two years, these auctions are projected to generate $1.7 billion in revenue, with the CAA requiring more than one-third of the revenue to be invested in environmental and economic benefits for disproportionately-impacted communities.
The cap will continually be reduced over time, in four-year increments, to ensure Washington hits its 2030, 2040, and 2050 emissions-reduction commitments.
Seattle’s commitment to lowering carbon emissions
Tangentially, Seattle Mayor Bruce Harrell is hoping the city council will pass his new proposal to reduce carbon emissions in Seattle.
The Mayor’s Office claims it can reduce emissions by 27% by 2050 from residential and commercial buildings through the Building Emissions Performance Standard Policy (BEPS), which would apply to buildings larger than 20,000 square feet.
Think tanks have cited the energy it takes to keep buildings of this size lit and warm generates a fair chunk of all emissions globally. The reduction in emissions is the equivalent of taking 72,322 gasoline-powered cars off the road for a year as, according to the International Energy Agency, in 2021, it contributed to 19% of all energy emissions worldwide.
“Buildings are one of our largest sources of pollution and must be part of the solution to the climate crisis,” Harrell said. “This legislation is among the most impactful proposals we can advance to reduce emissions. It will help Seattle decrease energy use and pollution, create new green jobs, and build more resilient communities for extreme heat and smoke events.”