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WA’s first carbon auction of 2024 raises far less than expected

The U.S. Oil & Refining Co. in Tacoma has been in operation since 1957.
Genna Martin, Crosscut
The U.S. Oil & Refining Co. in Tacoma has been in operation since 1957.

The first quarterly carbon auction of 2024 has added two new wrinkles to the economics of Washington’s fledgling program.

First: The auction price was $25.76 per allowance. That’s radically lower than the four quarterly auction prices posted in 2023, which took a lot of blame for Washington’s high gasoline prices. The ripple effect on gas prices is uncharted territory.

Second: The March auction results, announced Wednesday, raised $135.5 million for the state, only a fraction of the $941 million the state predicted the auctions would bring in during the first half of 2024.

Carbon-emitting corporations, including oil companies, bid every three months on state allowances for the pollution emitted by their facilities. The prices in the four 2023 auctions ranged from $48.50 for roughly one metric ton of carbon in the first quarter of 2023 to $63.03 in the third quarter. Those 2023 prices were significantly higher than predicted before the program began, and were blamed for adding 21 to 50 cents per gallon to Washington’s already high gas prices.

High fuel costs have led to a conservative initiative on the November ballot to repeal the cap-and-invest program. Washington has always had some of the nation’s highest gas prices due to variousgeographical and economic factors outside of the cap-and-invest program. Washington’s average gas price per gallon is currently $4.22 compared to a national average of $3.40, according to the AAA.

The state Office of Financial Management said the $135.5 million in new 2024 revenue is $108 million to $110 million less than what was predicted for the March auction. OFM spokesman Hayden Mackley said in an email he could not speculate on the effect of auction prices on gas prices.

But Jaime Smith, Gov. Jay Inslee’s spokesperson, noted: “Even as allowance prices were relatively high throughout the fall and winter, gas prices fell to a two-year low, showing how difficult it is to infer direct impacts.”

Washington is exploring joining a joint California/Quebec carbon market in order to bring down auction prices, but this quarter’s auction prices in Washington were lower than those in Quebec and California.

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This story was originally published by Crosscut.