Results were released today for the fourth and final auction of the year in Washington’s cap-and-invest program, with strong demand projected to raise $394 million in revenue for investments in communities, affordability and climate resilience.
As Washington wraps up its third full year in operation, this still-young program continues to demonstrate how effective an ambitious cap-and-invest program can be at reducing pollution and raising revenue. And with program linkage with California and Quebec’s linked market on the horizon, Washington is at an exciting point in its program trajectory.
Cap-and-invest auctions 101
Washington’s cap-and-invest auctions are administered quarterly by the Department of Ecology (Ecology). During the auction, participating entities submitted their bids for allowances. Under the Climate Commitment Act — Washington’s landmark climate law that sets a binding, declining limit on pollution — major emitters in Washington are required to hold one allowance for every ton of greenhouse gas they emit, with the total number of allowances decreasing each year. This system requires Washington’s polluters to reduce their emissions in line with the state’s climate targets, as fewer allowances become available annually.
December auction results
- All 7,424,390 current vintage allowances offered for sale by Ecology were purchased, resulting in the 12th consecutive sold out quarterly auction for Washington.
- The current auction settled at $70.86, $45.01 above the price floor of $25.85 and $6.56 above Washington’s last quarterly auction price of $64.30. Since this auction settled above the Allowance Price Containment Reserve (APCR) Tier 1 price of $60.43, today’s results will trigger an APCR auction.
- All 1,945,905 future vintage allowances offered for sale were purchased, at a settlement price of $29.40. This is $3.55 above the price floor, and $2.79 above the last settlement price for future vintages.
- This auction is projected to generate roughly $394 million in revenue, which will be invested into Washington communities to enhance climate resilience, create jobs and improve air quality. A report from Ecology confirming the amount of revenue raised in this auction will be published later this month.
A return to strong demand after a year of uncertainty
Today’s results cap off a year of resurgent market demand, after prices dropped throughout 2024 while ballot initiative I-2117 threatened to repeal the cap-and-invest program entirely. In 2023, the program’s first full year in operation, we saw similarly strong demand with prices reaching the APCR Tier 1 level in both the June 2023 and September 2023 auctions.
A strong price signal is what creates the financial incentive for covered entities to invest in reducing their emissions (and thus having to purchase fewer allowances in the future), and the declining, binding cap is what ensures those emissions go down at the necessary rate. The results of this auction — and the auctions throughout the year, which settled at an overall average of $60.91 — may reflect a return to long-term confidence in the program as entities work to out-bid each other for a declining pool of emissions allowances.
The settlement price for future vintages, which can be used starting in 2028, was much lower — and far closer to the recent settlement price in California. This lower settlement price on future vintages could indicate Washington-covered entities’ anticipation of market linkage with California and Quebec by the time these allowances are eligible for use.
Linking with California and Quebec
The results today — and throughout this year — further highlight the benefits of securing a linked market between Washington, California and Quebec. California and Quebec have been operating a linked market for over ten years now, and all three jurisdictions have expressed their interest in welcoming Washington’s program into this broader market.
Linking markets would bring about significant advantages for all participating markets, including bringing down and stabilizing the prices of allowances for covered polluters and business in Washington while also enabling deeper regional cuts in climate pollution compared to an unlinked scenario.
Washington has been making steady progress towards their linkage rulemaking, which they’re expecting to finalize in mid-2026. California has been working to update their own program rules, including reducing their emissions allowance budgets, and are expected to take up their own linkage process next year as well.
Linkage is a key opportunity for regional leadership for both states, to take a step that will strengthen one of our best and most cost-effective tools to reduce emissions and raise revenue for community investments.
Growing momentum
Cap-and-invest programs have been a focal point in multiple high-stakes gubernatorial races in the past month: Virginia Governor-elect Abigail Spanberger supported the state rejoining RGGI as part of her platform to make energy bills more affordable, and defeated her opponent, a vocal opponent of RGGI, by roughly 15 points.
Clean and affordable energy also played an important role in New Jersey’s gubernatorial race, where Governor-elect Mikie Sherrill defeated her anti-RGGI opponent by more than 14 points. And just this week, Colorado Senator and candidate for Governor, Michael Bennet, published a proposal to create a cap-and-invest program in the state.
Momentum is growing for ambitious climate action at the state level, and cap-and-invest programs will be a key policy tool for states to cut pollution while cutting costs. Linking programs together takes these already beneficial programs to the next level, helping them deliver greater emissions reductions for years to come.