Washington state is holding its first carbon allowance auction on Tuesday, marking a key step forward in a state program that will impose a limit on greenhouse gas emissions and make it more expensive for companies to emit carbon pollution.
Washington’s cap-and-invest program was established under the Climate Commitment Act that was signed into law by Gov. Jay Inslee in 2021. The program imposes a statewide limit, or cap, on greenhouse gas emissions. It also requires businesses to purchase pollution allowances that will become increasingly costly and act as an incentive for businesses to curb emissions.
The new law requires businesses that emit more than 25,000 metric tons of carbon dioxide annually to buy emissions allowances at the Washington Department of Ecology’s auction. The department will create only as many allowances as the program’s limit allows, and the cap will be lowered each year. Washington joins 14 other states that have imposed some form of a program that imposes caps on company emissions.
In 2013, California was the first state to establish a cap-and-trade system, and Oregon enacted a program last year. Washington has set a goal to curb carbon emissions by 95% below 1990 levels by 2050, an even more aggressive target than California’s plan to achieve an 85% reduction in emissions by 2045.
The revenue from the state’s auctions, which are projected to be roughly $1 billion each year, will go towards efforts including advancing clean energy projects and climate adaptation measures.
Pam Kiely, associate vice president for U.S. climate at the Environmental Defense Fund, said the program makes Washington the “frontrunner on climate action, setting the most ambitious binding limit on climate pollution of any state in the nation.”
In addition to imposing a cap on emissions, Washington’s Climate Commitment Act includes a regulatory air quality program to help reduce air pollution in overburdened communities and requires that at least 35% of the revenue from the cap-and-invest program is invested back into communities disproportionally burdened by climate pollution.
The legislation also requires the department to consult an environmental justice council when imposing policy and spending revenue.
“Alongside driving deep cuts in climate pollution, the program provides innovative tools to reduce local air pollution in communities that have been on the frontlines of environmental harms,” Kiely said. “This dual focus on curbing global climate pollution and local air pollution makes Washington’s program the gold standard for climate policy.”
New York announced in January that will join Washington, California and Oregon, which use similar cap-and-trade programs. Still, some experts have argued that it’s unlikely these types of cap-and-trade programs will be widely adopted across the country.
Danny Cullenward, policy director at CarbonPlan, a nonprofit working on climate solutions, said he doesn’t expect a “wave of these programs anytime soon.”
“Although there’s a lot of appeal around market-based climate policies, in practice, the politics to set these things up are much more difficult,” Cullenward said.