Results of last week’s CCA carbon auction were announced today

Following a resounding election victory, December’s auction shows the Climate Commitment Act continues to work for Washington families and businesses.

December’s Regular Auction #8 sold out at an average price of $37.15 across the full volume of current ($40.26) and future ($26.00) vintages.  In the first auction since Washington voted overwhelmingly (62% to 38%) to sustain the program, demand was again robust, selling out all 10.2 million allowances offered. Original economic modeling ($61) and 2024 fiscal planning (just under $50) foresaw higher prices in 2024 than the market ultimately averaged across the full year: $31.64.  This demonstrates that the market is working efficiently to encourage innovation and beat price forecasts while decreasing carbon pollution.

With this auction, another $272 million will be available to add climate-related investments across the state that clean the air, mitigate climate change impacts, and lower energy costs for families and businesses.  Another $108 million was generated in “consigned” revenue, primarily for specified uses by natural gas utilities, including lowering energy bills and increasing efficiency for low-income customers.

Overall, the Washington CCA’s Year 2 pricing behavior is consistent with other similar programs in seeing lower prices than Year 1 (see chart below). This is because as cap-and-invest programs mature, entities typically secure enough allowances to meet several years of compliance deadlines (most emissions for 2023 and 2024 require compliance via allowances in November 2027, a mechanism that differs substantially from a direct tax).  Given the program uncertainty through most of 2024, we will be closely monitoring the first auctions of 2025 to see how the market continues to stabilize.

Washington’s prices rose slightly above the recent price in California and Quebec’s linked market ($31.91) for the first time since December 2023. Overall prices across 2024 were closely aligned despite quarterly differences ($37.15 in WA and $35.91 in CA/QC). Going forward, the state should consider robust programs to meet our environmental goals cost-effectively. This includes maintaining a strong cap mechanism, combined with smart investments and forging ahead with well-designed efforts to link the Climate Commitment Act to California and Quebec’s long-running programs.  Program implementation should ensure additional revenue is returned to farmers, families, and others as Washington transitions over time away from fossil fuels.

Click HERE for the full Auction #8 Summary Report from the Department of Ecology.

Highlights:

• All 10.2 million allowances sold out at an average price of $37.15, above the nearly $30 of the June and September Auctions.  This includes 7.98 million “current” allowances (of which, 2.67 million provide natural gas utilities with “consigned” revenue) at $40.26 and 2.22 million “future” allowances sold at a price of $26.
   
• Total revenue raised: $272 million for state-directed investments into communities through the seven investment accounts of the CCA.  Since the start of the program in January 2023, $2.635 billion for state-directed investments and $696 million for consigned investments has been generated through CCA auctions.
   
• Demand for allowances remains greater than supply at prices above the minimum “price floor” of $24.02.  There were 15% more bids than allowances available (slightly down from the 20-25% of the first three auctions of 2024).

Relevant to the conversation, gas prices continue to fall.  Sagging pump prices remain indicative that CCA auctions do not dictate the volatile rise and fall of gasoline prices. Since the last quarterly auction, gas prices in Washington have fallen 20 cents per gallon and increased just five cents relative to the national average according to the US Energy Information Administration.  That is just over a 1 percent increase compared with what pump prices might have been if they dropped the same amount in Washington as nationally.  

At the same time, CCA revenue is helping more and more Washingtonians ignore volatile fossil fuel prices altogether.  Over 200,000 Washingtonians were driving for the equivalent cost of $1.10 per gallon by going electric as of the middle of 2024.  That number is growing faster than ever, with nearly a quarter of new light-duty vehicles in Washington purchased last quarter being plug-ins (Q3 of 2024, far above all but two other states). An additional 6,500 low-income residents participated in the Washington EV Rebate Program this year to reduce their cost of transportation, the exact type of program that the CCA is designed to bolster and sustain in accelerating the transition to cleaner, cheaper transportation options.  

Despite rising from just under $30 at the September auction to $37.15, average gasoline prices for consumers across Washington are:

• Down 23 cents per gallon since the September Auction, consistent with the decline in the US average gasoline prices (28 cents per gallon) over the same time period (see US EIA weekly prices as of 12/9 versus 9/2);
• Down 20 cents per gallon for regular gasoline since the September Auction according to AAA (as of 12/9 versus 9/2), consistent with a 27 cents per gallon decrease in Oregon;
• Throughout the summer and fall, prices in Washington have been consistently lower this year than they were in 2022 before the program took effect: by an average of 80 cents per gallon since the start of June and a max of $1.33 per gallon in early October (see US EIA weekly prices).