Photo: Pixabay
With climate policy under attack at the federal level, it’s more important than ever that state leaders deliver real action that lowers pollution, creates jobs and expands affordable clean energy. Washington state’s cap-and-invest program continues to show the power of state policies that cut pollution and raise funds for their communities.
Results were released today for California’s first cap-and-trade auction of 2025. Prices decreased from the November 2024 auction, reflecting continued uncertainty among market participants due to the lack of regulatory and legislative clarity. This uncertainty is costing California hundreds of millions of dollars in lost revenue for climate and environmental justice programs at a time when the state needs it most.
First, it is important to understand that the market is functioning as designed. Despite fluctuating prices, the emissions cap remains intact and covered entities must comply with the program’s requirements. However, continued uncertainty surrounding the California Air Resources Board (CARB)’s rulemaking process and the state legislature’s timeline on program reauthorization are introducing unnecessary volatility and costing California critical revenue for climate and community investments.
This latest auction demonstrates the financial consequences of policy uncertainty. With CARB yet to finalize key decisions on pre-2030 allowance budgets and allocation, market participants lack the clarity needed to plan compliance strategies and make long-term investments in emissions reductions. The result? Auction prices that are lower than they might otherwise be, meaning California is leaving huge amounts of revenue on the table — funds that could have been used to invest in clean energy, wildfire prevention, and air quality improvements.
This month’s report from the Legislative Analyst’s Office highlights that the state may need to revise its Greenhouse Gas Reduction Fund expenditure plan if prices continue to trend lower than forecasted, potentially impacting both the 2024-25 and the 2025-26 budgets. Much of the revenue raised through these quarterly auctions is already committed to be spent on important programs statewide and the loss of revenue due to uncertainty could have very real impacts.
The lack of clarity also dampens the incentives for businesses to invest in emissions reductions; investments that often happen over years. If companies aren’t sure what the cap-and-trade market will look like in the next decade, they’re less likely to take proactive steps to decarbonize. Similarly, investors in clean energy and climate technology need confidence in long-term market stability to support new projects.
California has an opportunity to strengthen market confidence and ensure the cap-and-trade program continues driving ambitious emissions reductions while raising urgently needed funding for climate resilience and community investments. That starts with swift action on two fronts:
Market fluctuations like those seen in this auction are a symptom of uncertainty. By committing to ambitious climate action through regulatory and legislative pathways, and reinforcing the essential role of cap-and-trade in delivering emission reductions, California can protect its climate leadership and generate the revenue needed for critical investments.
Inés María Manzano, Minister of Environment, Water, and Ecological Transition of Ecuador and Eron Bloomgarden, CEO Emergent (LEAF Coalition) at the official signing event in Ecuador, January 29,2025. Photo by Santiago Garcia, EDF.
By Santiago García Lloré, Senior Manager of IPLC and Conservation Partnerships at EDF.
Ecuador is one of nine countries in the Amazon rainforest. It is also known as one of the most biodiverse countries in the world — its unique ecological heritage includes the famous Galápagos Islands.
Following Costa Rica, Ghana, and the State of Para in Brazil, Ecuador signed an Emissions Reduction Purchase Agreement (ERPA) under the LEAF Coalition’s carbon finance framework to reduce 3 million tons of carbon emissions in exchange for $30M. (3 million tons of carbon emissions roughly equal the annual emissions of about 570,000 average passenger cars.)
The deal covers four Ecuadorian jurisdictions and is a shining example of deploying carbon finance that advances equitable participation from diverse groups. In Ecuador’s case, this process has resulted in the inclusion of Afro-Ecuadorian communities, who, like many other Indigenous communities in the region, have traditionally been marginalized. This showcases progress toward a more inclusive and representative model.
EDF has been privileged to support Ecuador in this journey over the past several years. Our efforts have focused on building the technical capacity, policy frameworks, and stakeholder engagement processes needed to bring this ambitious program to life. Here are a few things we’ve learned that are critical to ensuring integrity and bolstering climate ambition.
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Last month, Washingtonians voted to protect their landmark cap-and-invest program, showing support for the program’s strong limit on pollution and game-changing investments. Thanks to this resounding win, the cap-and-invest program continues to deliver for Washington communities — with today’s results bringing in record revenue for the year.
Source: Pexels
With anticipated environmental rollbacks at the federal level, the U.S. needs states to act on climate in order to make progress towards the nation’s 2030 commitments. Luckily, there are already signs of momentum. A landslide victory in Washington state to protect its climate law sends a hopeful message that ambitious climate action at the state level is not only possible — it’s popular. This result in Washington should give state leaders across the country confidence to move forward with bold action at a moment when it’s needed the most. Here’s what to know about the power of state-level action and a few highlights to watch out for in 2025.
Photo: Pexels
Results were released today for California’s fourth cap-and-trade auction of the year, which was administered last week by the California Air Resources Board (CARB). Auction prices in the joint California-Quebec market (known as the Western Climate Initiative, or WCI) have trended downward this year, reflecting growing uncertainty among market participants about how best to plan their compliance strategies in the absence of regulatory or legislative clarity. A clear commitment to ambitious reductions in climate pollution and long-term market stability are urgently needed.
