Washington state carbon market prices drop sharply amid threat of program repeal
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Washington’s carbon market saw a sharp drop in prices in its latest emissions auction, state Department of Ecology data showed March 13, as the program faces repeal in the upcoming November election. The settlement price for Auction No. 5, held March 6, was $25.76/mt, a 50.36% drop from the previous quarter and only $1.74/mt above the current floor price.
The Washington Department of Ecology oversees the state's cap-and-investment trading program, which Washington's Climate Commitment Act created in 2021. An initiative will appear on ballots in November giving Washington voters an option to repeal the CCA, effectively eliminating the carbon market.
Washington Initiative 2117, follows two different carbon pricing ballot initiatives in 2016 and 2018, both of which voters rejected.
While S&P Global Commodity Insights is not making a particular call on the fate of the program at this time, said Matt Williams, emissions and clean energy analyst at S&P Global, he said the initiative was the primary reason for the price downturn in the latest auction.
"If the program survives this ballot challenge, the fundamental picture is still bullish," Williams said. "Annual cap declines of 7% with no opportunity for coal-to-gas switching, hydro generation below recent averages, electric vehicles making up only 2% of the current light-duty vehicle fleet, and no linkage with California and Quebec until later in the decade, suggests supply reductions will outpace demand reductions."
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