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Price of carbon plummets at latest Washington state auction

caption: The sun sets behind the Marathon Petroleum refinery in Anacortes in April 2022.
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The sun sets behind the Marathon Petroleum refinery in Anacortes in April 2022.
Courtesy of Kathleen Lumiere

The price of pollution has plummeted in Washington state’s latest carbon auction.

The right to emit large amounts of climate-damaging carbon dioxide sold on March 6 for $25.76 per ton, half the $51.89 price that big polluters paid at the previous auction on Dec. 5. Though the price remained above the $24.02 price floor set in advance, it is the lowest price polluters have paid since the quarterly auctions started in March 2023.

“This was another successful auction showing strong demand from companies who have to pay for and reduce the millions of pounds of pollution they put into our air,” Mike Faulk, a spokesperson for Gov. Jay Inslee, said in an email. “Lower auction prices mean less cost that is passed on to consumers.”

Uncertainty around the future of the state’s climate policy has been pushing prices down, according to energy-market analysts.

RELATED: Washington holds first carbon auction of 2024, with program's future in doubt

Initiative 2117 on the November 2024 ballot aims to repeal the state’s cap on carbon pollution and prohibit the state from enacting anything like it ever again.

Washington’s “cap-and-invest” program has capped emissions from major sources and charged a subset of them $2.2 billion to date. Some big polluters, including oil refineries, pulp mills, and steel mills, will get to keep emitting carbon dioxide for free, at close to their current levels, through the year 2035.

RELATED: Washington carbon exchange lets many big polluters off the hook

Auction proceeds have been funding state programs for reducing climate-harming emissions and improving communities’ abilities to withstand the impacts of a hotter climate.

The March 6 auction raised an estimated $192 million.

“Initiative 2117 is suppressing prices here even further as it has introduced uncertainty,” Leah Missik with the nonprofit Climate Solutions said in an email. “It is important that this initiative fails so we can continue investing in clean energy and climate solutions across the state.”

The Association of Washington Business argues that, based on a similar program in California, Washington’s carbon cap has raised gasoline prices 45 cents per gallon. The business association has called for increasing the number of carbon allowances — in other words, allowing more pollution — to reduce the costs to Washington businesses and consumers.

“Without a clearer understanding of what is driving this price swing, questions about long-term program stability remain unanswered,” Jason Hagey, a spokesperson for the Association of Washington Business, said in an email.

Defenders of the carbon cap point to other factors, including market variability and the recent passage of legislation to link Washington’s carbon market with the much larger one operating in California and Quebec, as causes of the price drop.

RELATED: Why Washington state wants to link up with California and Quebec

Backers of the market-linkage legislation, which awaits Gov. Inslee’s signature, say it will lower carbon prices, though carbon sold at $41.76 per ton in the most recent California-Quebec auction in February — 62% higher than in Washington’s latest auction.

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