State preps for second sale of pollution allowances

Washington is preparing to conduct its second auction of pollution allowances on Wednesday, May 31 with proceeds paying for an array of programs to reduce greenhouse gas emissions and combat the effects of climate change.

The 2021 Climate Commitment Act created a cap-and-trade program aimed at getting the state’s largest polluters, including facilities like oil refineries and paper mills, to reduce emissions.

Under the program, Washington caps the amount of carbon pollution that can be emitted by certain industries, requiring businesses with high emissions to purchase allowances to cover their carbon output. Generally, those are businesses that generate in excess of 25,000 metric tons of carbon dioxide per year, according to the Department of Ecology.

Allowances are equal to one metric ton of carbon dioxide. Auctions are held quarterly. 

On May 31, the state will auction 11,035,000 allowances. Of those, 8,585,000 are for the current year and 2,450,000 are for a future vintage, 2026. 

Those 2026 allowances can only be used to cover emissions in that year or later years. They can be bought and later sold, like a stock, presuming there’s demand. They cannot be used to cover obligations before 2026, Ecology officials said.

In the first auction on Feb. 28, the 6.18 million available allowances were sold for $48.50 each earning the state nearly $300 million. Starting price for the auction was $22.20 per allowance. That is the same starting amount for the May 31 auction.