The Washington state Capitol building in Olympia. (Jules Frazier/Getty Images)
Washington will sell a limited number of emission allowances Aug. 9 in response to higher-than-expected prices in the most recent auction of the state’s cap-and-trade program.
The special auction is from the Allowance Price Containment Reserve, a separate pool of allowances made available when the prices at a quarterly auction exceed a certain level, state Department of Ecology officials explained. Allowances are equal to one metric ton of carbon dioxide.
It 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.
“This is what the program is designed to do,” Ecology spokesperson Claire Boyte-White told the Standard in June. “This is not an emergency.”
The auction will be held from 10 a.m. to 1 p.m.
Washington’s initial quarterly auctions in February and May grossed a combined $857 million, much more than expected as high demand drove the price per allowance well above the announced starting mark of $22.50.
Ecology sets a fixed price for each allowance in the containment reserve. In 2023, it is $51.90. Under program rules, a reserve auction – like next week’s – is triggered when the settlement price at a quarterly auction exceeds the fixed reserve price.
That is what happened May 31 when the final settlement price per allowance was $56.01.
On Wednesday, two batches of allowances will be sold from the reserve. There will be 527,000 sold for $51.90 apiece and another 527,000 sold at $66.68 apiece.
There are no purchase limits. Bidders may submit multiple bids, and each bid must be at either the lower, or Tier 1, price or the higher Tier 2 price. A summary report will be issued a week later with final financial details available Aug. 23, per Ecology documents.
The state will collect $62,491,660 if all 1,054,000 allowances are sold.
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