The Marathon Anacortes Refinery, operated by Marathon Petroleum, is seen on March 8, 2022 in Anacortes, Washington. (David Ryder/Getty Images)
Prices for Washington’s air pollution allowances rebounded at an auction this month, the first sale since voters upheld the state’s cap-and-trade program.
The Department of Ecology on Wednesday said allowances the state offered on Dec. 4 sold for $40.26 each. That’s about 35% higher than the $29.88 sale price in September. Allowances for 2027, sold in advance at the latest auction, fetched $26 apiece.
Businesses in Washington that produce large amounts of air pollution – like oil refineries and paper mills – must meet an emissions cap set by the state or purchase the allowances. Money from the auctions is funneled to programs to combat climate change and improve the environment.
Altogether, the state raised close to $272 million during the Dec. 4 sale. Utilities raised another $107 million from sales of allowances allocated to them, money that is supposed to go toward easing costs for ratepayers.
Supporters of the program, which is part of the state’s Climate Commitment Act, point to November’s election results as an indicator that residents are on board with putting a price on carbon emissions. Nearly 62% of voters rejected a measure that would have overturned the climate law.
Proponents of the law are looking ahead to the 2025 legislative session where lawmakers writing the state’s next two-year budget will decide on how to direct auction revenue.
They also want to see Washington press ahead with plans to link its carbon market with ones in California and Quebec that already operate in tandem.
“Voters were loud and clear that they want to live in a state that continues to lead on climate progress,” Altinay Karasapan, Washington regulatory policy manager with the group Climate Solutions, said in an emailed statement.
Critics say the surge in December auction prices will create difficulties for businesses and drive up prices for consumers.
They want to see state lawmakers revamp the cap-and-trade program, including by increasing the number of allowances available at auction, to help force down prices.
“The program as it exists today is too volatile and unpredictable,” Kris Johnson, president of the Association of Washington Business, said in a statement.
“If changes aren’t made, we expect to see continued price swings,” Johnson added.
The Washington Policy Center, a think tank that frequently criticizes the state’s climate programs, predicted that auction prices would keep rising next year if the state sticks with a plan to reduce the number of available allowances.
Prices at the pump for gasoline and diesel are unlikely to climb significantly due to the added regulatory expense because suppliers have already taken the program into account, the group said. But it added that costs for natural gas and other fuels will likely go up.
Gasoline prices in Washington are now averaging around $3.95 per gallon, according to AAA. That’s higher than the national average of about $3.02 and above Oregon’s average of $3.48.
Allowance prices remained low this year compared to 2023 when auctions got underway. Those tracking the program suspected many buyers were holding off purchasing allowances while they waited to see if voters would decide to scrap the climate program.
In 2023, prices for individual allowances were above $50 and even exceeded $60 in some cases.