The results are in for Washington’s first auction of carbon pollution permits. The cap-and-invest program brought in $300 million from many of state’s biggest emitters, including fossil fuel refineries and energy utilities. The program’s goal is to drive down climate-harming emissions by putting a price on pollution and investing the proceeds into low-carbon technologies.
Not surprisingly, environmental groups cheered the outcome, calling the funds raised “monumental.”
“The results of this auction indicate long-term confidence in the program from covered entities and are an encouraging sign of what’s to come from the Evergreen State,” said a commentary by the Environmental Defense Fund.
Reuven Carlyle, a former state senator who championed the legislation behind the program, was more measured, calling the results “the first step in a long journey of market-based carbon pricing.”
“One auction result is not a pattern,” Carlyle said by email.
It’s unknown how individual climate tech and clean energy businesses in the state will be impacted by the dollars raised. But the funds are meant to be additive, rather than replacing existing investments and programs to green the economy.
“There’s an opportunity to explore additional creative areas to invest that lead to accelerated decarbonization,” said Carlyle, who recently co-founded a climate consulting venture.
The fossil fuel sector took a dimmer view. Catherine Reheis-Boyd, president and CEO of the Western States Petroleum Association, told the Seattle Times that the “unnecessarily expensive” price of the permits would harm consumers and the economy.
Here’s a quick overview of Washington’s cap-and-invest program.
How does cap and invest work?
To reach Washington’s required target of net zero by 2050, the state is setting a cap on overall greenhouse gas emissions and auctioning pollution permits to businesses and organizations. The volume of emissions allowed ratchets down over time.
The program applies to most businesses whose annual emissions exceed 25,000 metric tons of carbon dioxide, with exceptions such as aviation fuels and agricultural operations. About 75% of the state’s emissions are covered by the effort. If a business that is covered by the program does not comply, it faces fines of up to $50,000 per violation, per day.
What happened at the recent auction?
The state’s Department of Ecology runs the cap-and-invest program and held its first auction last month. Fifty-six companies and institutions were eligible to bid for the right to pollute. Ecology did not disclose who participated.
The price paid per allowance — which covers one metric ton of carbon — was $48.50, an amount more than double the minimum bid allowed. It’s also higher than the $27.85 paid per ton at a joint auction in February held by California and Quebec. But the price was well below the ceiling amount of $81.47, and all of the Washington permits sold.
Where does the money go?
The auction proceeds go into three main accounts:
- Carbon Emissions Reduction Account, funding projects to reduce transportation emissions — Washington’s largest carbon source;
- Climate Investment Account, funding clean energy, carbon removal, ecosystem health and the operations of the cap-and-invest program;
- Air Quality and Health Disparities Improvement Account, funding projects to benefit communities most harmed by pollution.
Lawmakers will determine which projects within the accounts are funded. At least 35% of the proceeds must benefit communities overburdened by climate change, and 10% must go to projects with tribes’ support.
How much more money will there be?
Auctions are held quarterly. The program was predicted to bring in about $1 billion a year. Seattle Times has a detailed look at the revenue and budgeting.
Why does Washington have cap and invest?
State law makers approved the Climate Commitment Act in 2021, establishing the cap-and-invest program.
