Climate 411

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

By Caroline Jones / Published: November 15, 2023

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.

Also posted in California, Carbon Markets, Cities and states, Economics, Energy, Greenhouse Gas Emissions / Comments are closed

A decade in, California’s cap-and-trade has slashed climate pollution and generated investments — where does it go from here?

By Caroline Jones / Published: November 15, 2023

Sunset on the Mohave Desert

This year, California marked the 10th anniversary of its landmark cap-and-trade program, and the Golden State has good reason to celebrate: California saw reduced year-on-year emissions from nearly every sector covered by the program. On top of delivering on critical emissions reductions, cap-and-trade has generated revenue resulting in $9.3 billion implemented through California Climate Investments programs that contribute to emission reductions, support climate equity and improve public health outcomes. And yet, there’s still much more work to be done to ensure that this program delivers reductions at the scale and speed required to avert the worst impacts of climate change while meaningfully supporting overburdened communities.

With a rulemaking in progress to make further necessary improvements to cap-and-trade, here’s what you need to know about what’s coming up through the end of the year and what to pay attention to in the new year.

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Also posted in California, Carbon Markets, Cities and states, Energy, Greenhouse Gas Emissions / Comments are closed

Latin America’s Climate Challenge, and Opportunity

By Juan Pablo Hoffmaister / Published: October 24, 2023

This blog is co-authored by Sergio Sánchez, Senior Policy Director of Global Clean Air; Edgar Godoy, Associate Vice President of Jurisdictional Partnerships; Santiago Garcia, Indigenous Peoples and Local Communities Relationships Manager; and Erica Cunningham, AVP of Latin American Fisheries and Oceans.

Scene from the Latin America and the Caribbean Climate Week 2023 opening ceremony. UNclimatechange via Flickr.

This week leaders and climate stakeholders from throughout Latin America are meeting in Panama to discuss climate action, and the strategies and finance needed to climate-proof the continent. It’s not an easy task in a region facing multiple challenges, from political instability to insecurity to stunted economic growth in many countries.

Climate change is already making life even more challenging for many vulnerable people in Latin American and Caribbean. Communities throughout the region are grappling with sea-level rise and extreme weather events that occur more frequently. The largely man-made destruction of natural resources, like the Amazon rainforest, will intensify the impacts of climate change, and the impact of climate change is creating further pressure in the ecosystems and their degradation. Yet enforcement of conservation efforts alone is not enough for a problem that is economic in nature.

Mitigation and adaptation strategies will look different from country to country in this highly diverse and mega biodiverse continent. However, they all share some common threads: the need for climate finance, capacity building, and technology transfer, among others.

The opportunity for climate action

A successful climate strategy for Latin America will also solve other problems. Efforts to conserve the region’s rich natural ecosystems must happen alongside efforts to safeguard vulnerable communities against climate impacts. At Latin America and the Caribbean Climate Week, the region’s leaders and climate stakeholders will have the opportunity to collaborate and advance discussions on climate policies that address multiple issues for both mitigation and adaptation. Climate financing, both from rich countries and the private sector, will need to be scaled up for solutions to work.

EDF’s delegation at Climate Week will engage and collaborate with the region’s climate leaders from government, civil society, Indigenous and local communities and other stakeholders, on critical topics including clean air, forest conservation, food security, and resilient oceans and coastal communities.

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Also posted in Carbon Markets, Extreme Weather, Greenhouse Gas Emissions, Indigenous People, International, REDD+, United Nations / Comments are closed

New analysis shows that, in a decisive decade for climate action, Oregon must aim higher

By Kjellen Belcher / Published: September 15, 2023

Last legislative session, Oregon’s lawmakers had the opportunity to update Oregon’s statutory climate targets. This would have been the first time that Oregon updated its outdated climate targets in 15 years and would have brought Oregon’s climate goals in line with the level of ambition of President Biden’s national climate targets and from other climate leadership states.

But then, Oregon’s legislative session was stalled by a small group of state Senators who fled the Capitol instead of fulfilling their core responsibility as elected officials: to represent their constituents by casting votes in the legislative process. This walkout tactic has been used time and time again and has prevented climate action supported by a majority of Oregonians. This year’s walkouts — the longest in Oregon’s history — prevented Oregon from updating its climate goals.

Without updated climate goals in place, Oregon risks falling short of securing the greenhouse gas (GHG) emission reductions that are needed to avoid the most dangerous, irreversible impacts of climate change. Oregon has made important progress in regulating emissions, as one of the states leading the way on cutting pollution from the power sector, the transportation sector, and natural gas fuels — but new analysis by EDF has found that without additional action, Oregon is projected to fall short of achieving its climate commitments.

Here’s what to know about the analysis and next steps Oregon can take to raise the bar for climate action.

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Also posted in Carbon Markets, Cities and states, Energy, Greenhouse Gas Emissions, Health / Read 1 Response

New Mexico is off course for reaching its climate goals, but there’s enormous opportunity for action

By Alex DeGolia / Published: September 11, 2023

New Mexico communities know the stakes for climate change are high — hotter and drier conditions threaten public health, livelihoods, and cultural and recreational resources, as they lead to increased drought, extended and more extreme wildfire seasons, and extreme heat. Those impacts are projected to get much worse in the coming decades, without serious and urgent action to slash climate pollution. It’s why polls underscore that the majority of New Mexico voters support strong action on climate change.

Governor Lujan Grisham has made bold, science-based climate commitments and both the legislature and regulators have adopted a number of important policies, but a new EDF analysis finds that with existing state and federal policies in place, New Mexico is projected to fall well short of achieving its 2025 and 2030 climate goals unless it takes aggressive climate policy action as soon as possible. The analysis also finds that the state’s current course will lead to far more cumulative emissions through the end of the decade — a critical metric that ultimately determines the severity of climate damages that our kids and grandkids may face.

While New Mexico is projected to face a glaring “emissions gap” — the distance between emission reductions the state has committed to and those it is projected to achieve — the opportunity to correct course with bold action has never been greater. With historic federal investments lowering the cost of clean energy, New Mexico can leverage this momentum to put in place strong limits on pollution that secure a safer climate future and grow a prosperous, equitable clean energy economy.

Here’s what you need to know about this analysis:

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Also posted in Carbon Markets, Cities and states, Greenhouse Gas Emissions, News / Comments are closed

Washington state’s carbon market continues to raise major investments, as state leaders consider linking to California-Quebec market

By Caroline Jones / Published: September 6, 2023

Results were released today for Washington’s third quarterly cap-and-invest auction, which was held on August 30th. The results from this sold-out auction continue to demonstrate strong demand for allowances in this program, which has brought in significant revenue for the state of Washington to reinvest in its communities. These results follow on two previous sold-out quarterly auctions, as well as an auction from the Allowance Price Containment Reserve last month which raised an additional $62,491,660 while functioning as a market stabilizing feature. In total, these auctions have generated $919,564,777 for Washington communities.

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Also posted in California, Carbon Markets, Cities and states, Economics, Energy, Greenhouse Gas Emissions, Health / Read 1 Response