Climate 411

Auction results and budget decisions emphasize importance of investments from Washington state’s Climate Commitment Act

This blog was co-authored by Janet Zamudio, Western States Climate Policy Intern

The last week has been eventful in Washington, seeing the end of legislative session last Thursday and the first quarterly cap-and-invest auction of 2024, which posted results today. With the legislative session wrapped up and budgets passed, we now know what additional spending lawmakers plan to do with the revenue generated by these cap-and-invest auctions thanks to the supplemental budget passed last week. And with the results from the first auction of 2024 now in the books, it seems the Evergreen State will continue to see significant revenue from this program to reinvest in communities, clean energy projects and climate resilience. There’s a lot to unpack, so let’s start with the auction results:

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Building a greener future: How federal purchasing power can drive a low-carbon cement industry

This blog was co-authored by Dara Diamond, Federal Climate Innovation Intern

Historic climate investments from the Biden administration have put a much-needed down payment toward cutting emissions from industry — a major economic sector that makes up over a quarter of U.S. emissions. Still, a lot of hard work remains to meaningfully scale up solutions in this sector. A particularly tricky piece of the industrial emissions problem is hidden in plain sight all around us, in our buildings, sidewalks, highways and bridges: cement.

The scale of this climate challenge is colossal. Cement is the most widely used man-made material on the planet. If the cement industry were a country, it would be the third largest emitter in the world.

To slash emissions from cement production, policymakers will need to make the most of existing climate investments and put forward a range of new solutions, including putting the federal government’s massive purchasing power to work.

Here is why cement poses unique climate challenges — and how policymakers can leverage public procurement to help meet them.

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Also posted in Clean Power Plan, Energy, Greenhouse Gas Emissions, Health, Innovation, Policy, Science / Comments are closed

Cut carbon, raise cash: How New York’s cap-and-invest program could invest billions in communities

In leading climate states, you’ll find trailblazing projects that are benefiting people’s lives and cutting costly pollution right now.

In Washington, young people ride the ferry across Puget sound and buses around the state for free. In California, low-income residents get money-saving home energy efficiency upgrades at no cost. And in New York, businesses and apartments earn major rebates to install EV charging stations — with 4,000 stations installed so far.

These are just a few projects supported by funding from cap-and-invest programs. While limiting and driving down harmful climate pollution, these programs are in turn raising revenue that is re-invested in communities.

As New York develops the rules for its statewide cap-and-invest program — the third such program in the nation — a high-ambition program would give New Yorkers an exciting opportunity to shape and direct billions of potential investments each year for communities. From improving public transportation access to lowering energy bills, the possibilities are endless.

Here are just a few ways that other statewide programs, like California and Washington, are putting their revenues to work, and how New York’s participation in the Regional Greenhouse Gas Initiative (RGGI) is already funding projects around the state — investments that could be significantly expanded and scaled up with a strong statewide cap-and-invest program.

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One year into its cap-and-invest program, Washington state looks to build upon its landmark climate law

Photo of mountain in Washington state

Results were released today for Washington’s fourth quarterly cap-and-invest auction, which was held on December 6th. The results from this sold-out auction show continued strong demand for allowances in the program, which has brought in substantial revenue for the state of Washington to reinvest in its communities. This is the final auction of 2023, marking the end of this program’s first year of auctions, which in total have generated close to $2 billion for Washington communities. The revenue has already begun to be distributed to different projects that benefit communities across the state, including expanding public transportation in rural areas and improving pedestrian and bicyclist safety, with much more investment to come.

December auction results

At the auction, administered by the Department of Ecology (Ecology), participating facilities submitted their bids for allowances. Washington’s major emitters are required to hold one allowance for every ton of greenhouse gas that they emit, with the total number of available allowances declining each year. This declining cap requires Washington’s businesses to reduce their climate pollution in line with the state’s climate targets. Here are the results, released today:

  • All 7,142,146 current vintage allowances offered for sale were purchased, resulting in the 4th consecutive sold out quarterly auction.
  • The current auction settled at $51.89, $29.69 above the floor price of $22.20, and $11.14 below Washington’s last quarterly auction price of $63.03.
  • This auction is projected to generate roughly $370 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 on January 4.

What these results mean

The settlement price for this auction is a very promising indication of strong and stable demand in the Washington market. Covered entities are still eager to acquire allowances early in the program, but the fact that this auction settled below the Allowance Price Containment Reserve (APCR) trigger price shows that those entities also feel more confident in their ability to secure enough allowances or to further reduce their emissions.

The lower settlement price in this auction compared to recent auctions could be driven by a few factors; for one, this could be the result of previous APCR auctions fulfilling their role as price stabilizers in a market with high demand. APCR allowances were budgeted out ahead of time when the cap-and-invest program was originally designed, and they’re still under the overall allowance budget set by Ecology in order to keep Washington on track with its climate targets. Making these additional allowances available at a predetermined and transparent price point through the APCR helps to stabilize allowance prices in the program, and that’s precisely why Ecology designed this feature into the program from the start. Entities who were able to secure additional allowances at the two APCR auctions held this year may have felt more confident in this auction that they don’t need to scramble to out-bid other entities to buy up allowances.

Another factor that may have driven slightly calmer demand in this auction is the recent decision by Washington’s Department of Ecology to officially pursue linkage with the joint California-Quebec market, known as the Western Climate Initiative (WCI). The December auction was the first auction to be held following this decision, and this step towards a larger, linked market with greater access to more allowances may have given covered entities more confidence in their ability to obtain allowances in the future through this broader market. Read on for more information about this milestone decision, what it means, and what’s next!

Looking ahead: Linkage and the legislative session

In case you missed it, early last month the Department of Ecology officially announced its intention to pursue linkage with the California-Quebec market. This decision is a significant milestone in the linkage process, and if California and Quebec follow suit, it would lead to a tri-jurisdictional system operated jointly by all three parties. California, Quebec, and Washington would all be able to pool their supply of emission allowances and hold shared auctions. As we’ve written previously, these jurisdictions all stand to benefit from a linked market as it can drive faster cuts in climate pollution and support a more stable, predictable market for all participants.

Before that happens though, there are a lot of things to get done. California and Quebec each have their own processes to go through and there’s some legislative fine-tuning that Ecology is planning to request in order to make the linkage process as smooth as possible.

That means potentially making small, strategic updates to the Climate Commitment Act (CCA) to build alignment with the joint California-Quebec program, with the goal of making it easier to operate as a single, linked market. The CCA is the landmark climate policy that Washington passed in 2021 that placed a firm, declining limit on climate pollution while also providing new tools for tackling local air pollution and creating the cap-and-invest market. Thanks to the CCA, Washington is one of only a few states in the nation that’s actually on track to meet its targets. Now, state leaders have an opportunity to scale up the state’s climate action by ensuring that Washington’s cap-and-invest market is ready to deliver enhanced climate and cost-savings benefits as part of a linked market.

As things progress in the legislative session, we’ll be keeping an eye on all things CCA and linkage — stay tuned for our updates and analysis!

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As Washington state considers linking carbon market with California-Quebec, this cost-containment tool ensures that its program continues to run smoothly

Fall foliage over a Washington lake

Today, the Washington State Department of Ecology (Ecology) released the results from Washington’s second Allowance Price Containment Reserve (APCR) auction, held on November 8th. At this auction, all 5 million available APCR allowances were sold at the Tier 1 price of $51.90. This auction, along with three previous sold-out cap-and-invest auctions, continues to show strong demand for allowances in Washington’s cap-and-invest program and illustrates the important role of the APCR in providing predictability and stability in allowance prices.

APCRs: A Recap

An APCR is a price containment mechanism that was designed into Washington’s cap-and-invest program as a way to keep allowance prices stable and predictable. It functions similar to a soft price ceiling by ensuring that, if a certain price is reached in a quarterly auction, a separate number of allowances set aside for this purpose become available at a separate APCR auction. Importantly, these allowances are set aside ahead of time and are still part of the overall allowance budget set by Ecology to keep Washington on track to meet its climate targets. By making these allowances available at a transparent and predetermined point, an APCR auction helps to stabilize prices in the market overall.

Want more information about how Washington’s APCR works? Check out our blog from earlier this summer explaining this key program feature.

APCR auction results

At last week’s auction, participating entities submitted bids for APCR allowances at the Tier 1 price of $51.90. All allowances were offered at the Tier 1 price, with none available at the Tier 2 price of $66.68.

Here are the results, released today:

  • Tier Price 1: 5,000,000 allowances sold at a price of $51.90 per allowance.

In this auction, Ecology offered all APCR allowances at the Tier 1 price, rather than dividing them between Tier 1 and Tier 2 prices. There were also more allowances available at this APCR auction than at August’s APCR auction, with 5 million made available this month compared with just over 1 million in August. Ecology determined that this is an important strategy for increasing market stability by putting downward pressure on compliance costs early in the program, while many covered entities are still developing their strategies for compliance and decarbonization.

What these results mean

This was Washington’s second APCR auction and its implementation shows just how important this feature is as a price-stabilizer. In the first year of this program, covered entities are still in the early stages of figuring out and implementing their plans to reduce their emissions. As these early auctions play out, businesses are inclined to out-bid each other for allowances sooner rather than later — with the expectation that allowances will get more expensive over time. This drives strong demand in these early auctions, illustrating the utility of a cost containment mechanism like the APCR. As covered entities reduce their emissions, they’ll need fewer allowances to cover their pollution — which will lower demand and keep prices low in turn.

An APCR might not be triggered at every quarterly auction, but it was designed into the program from the beginning to keep it functioning smoothly. In doing so, Ecology created a more stable and durable program while utilizing allowances that are still part of the planned allowance budget.

Cutting costs through linkage

Earlier this month, Ecology announced its decision to pursue market linkage with the joint California-Quebec carbon market. This is great news for long-term cost containment and stabilization for Washington and, if also pursued by California and Quebec, could bring about significant advantages for all participating markets. A broader, linked market could drive deeper and faster cuts in climate pollution, lower the cost of compliance for Washington companies and support a more stable, predictable market overall. Ecology’s decision is the start of a process in Washington and we’ll be watching for further developments in the Evergreen State as well as in California and Quebec.

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New tool equips community voices to spur a just energy transition

Community Voices in Energy logo(This post originally appeared on EDF’s Energy Exchange)

Our new website, Community Voices in Energy — a collaboration with Chicago-based Blacks in Green — equips frontline communities to participate as experts in climate and energy proceedings and influence energy investments. By ensuring that community members are able to share their direct experience on the record in public utility commission hearings, the site helps utility regulators to make rulings that lead to a more equitable, healthy and affordable energy future.

Health and economy at stake

Communities located near polluting power plants experience more health problems, including high rates of asthma and lung disease. They also have less wealth, in part because of lower property values and unaffordable energy rates. Yet frontline, BIPOC and low-income communities have historically been excluded from energy regulatory and legal decision-making spaces that directly impact their quality of life.

Energy is among the largest sources of man-made climate pollution in the world, and energy solutions that benefit communities will also be healthier for the climate. A just transition requires equitable distribution of the benefits of clean energy to communities that have been left behind in the past.

A solution emerges in Illinois

In Illinois, regulators this year alone are considering $1.8 billion in rate hike requests from utilities, much of which will repair and extend systems that would lock in fossil-powered energy for generations to come. But cleaner, more affordable, solutions are available.

Environmental Defense Fund, Blacks in Green, and Citizens Utility Board pioneered the idea of bringing community experts into energy proceedings to provide testimony that could be entered into the legal record on which all commission decisions must be based. In a 2022 decision, the Illinois Commerce Commission explicitly acknowledged that EDF and partners raised its awareness that environmental justice communities experienced longer and more frequent power outages than wealthier Chicago communities, while also having fewer resources to recover from disruptions. As a result, the Commission required the utility to address system disparities, rather than only measuring their system as a whole.

Family staring at wind turbines with a sunset

Community Voices in Energy website drives energy justice

Our Illinois win encouraged us to expand our work and develop the Community Voices in Energy website, so that our community-centered approach can be replicated and spread around the country. Community expert contributors helped to shape the trainings offered on the website to enable meaningful participation in cases, and we developed the Energy Justice Intervenor certification program to support them.

With tools to frame what a just energy system is and how to get involved, the Community Voices in Energy website equips community members to advocate for a more just and equitable system. Including lived experiences at the forefront of big energy decisions will speed the transition to an equitable, affordable, clean, and healthy energy future for everyone.

Since our launch, we have already heard from federal energy regulators and from other states where energy proceedings threaten to lock in high rates and fossil energy at a moment where we must urgently transition to a clean energy. The new Community Voices in Energy website, and the movement it supports, give hope for our energy future.

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