Extra cap-and-trade auction may net $62M for Washington

By: - August 16, 2023 2:48 pm

The Marathon Anacortes Refinery, operated by Marathon Petroleum, is seen on March 8, 2022 in Anacortes, Washington. (Photo by David Ryder/Getty Images)

A special auction of pollution allowances on Aug. 9 likely generated $62.5 million for Washington, revenue that the state can funnel into programs to reduce greenhouse gas emissions and fight climate change.

During the three-hour bidding window, all 1,054,000 allowances offered were sold at preset prices, the state Department of Ecology reported Wednesday.

Two batches of 527,000 allowances were made available. They cost $51.90 apiece in one batch and $66.68 in the other. The state stands to collect $62,491,660 since all the available allowances were bought. Ecology will confirm the amount raised on Sept. 6.

Those dollars are on top of $857 million collected from regular quarterly auctions in February and May, the first conducted under the state’s new cap-and-trade program. The next quarterly auction is Aug. 30.

The special auction on Aug. 9 was from the Allowance Price Containment Reserve, a separate pool of allowances made available when the prices at a quarterly auction exceed a certain level, Ecology officials explained. An allowance is equal to one metric ton of carbon dioxide.

Selling from the reserve is a mechanism to ensure that businesses required to buy allowances to cover their emissions can actually obtain them. Allowances purchased from the reserve can only be used to cover emissions, not sold or traded to generate revenue. Investors or other entities without a pollution compliance obligation cannot participate in reserve auctions.

There were 32 qualified bidders for the special auction though it is not clear which made purchases.The list, released by Ecology, included Shell, BP Products, Chevron, Phillips 66, Puget Sound Energy, Cascade Natural Gas Corp. and Washington State University.

Reserve auctions take place when allowance costs at quarterly auctions exceed a certain trigger price. In 2023, that amount, set by Ecology, is $51.90. In the May 31 auction, the final price per allowance was $56.01

The cap-and-trade program is a component of Washington’s Climate Commitment Act. It puts a price on carbon emissions which the state hopes will motivate large industrial polluters, such as oil refineries and paper mills, to reduce emissions.

The current two-year budget cycle is the first in which Gov. Jay Inslee and lawmakers are spending the proceeds. 

Roughly $2 billion is spread among the operating, capital and transportation budgets, money that will go toward electrifying ferries and ports, lowering costs for heat pumps, investing in transit, and assisting tribal communities dealing with disproportionate fallout from climate change.


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Jerry Cornfield
Jerry Cornfield

Jerry Cornfield joined the Standard after 20 years covering Olympia statehouse news for The Everett Herald. Earlier in his career, he worked for daily and weekly papers in Santa Barbara, California.