WA wants to join CA, Quebec in pollution pricing marketplace
In a July 2023 photo, a motorist fills up at an Englewood, Colorado, Shell station. Republican lawmakers say the new cap-and-trade system is leading to higher gas prices. (AP Photo/David Zalubowski)
Washington wants to link its carbon pricing program with California and the Canadian province of Quebec in hopes of trimming economic ripple effects, the Ecology Department announced Thursday.
“Connecting the market here in Washington to similar programs elsewhere … would incentivize wise long-term strategies to reduce emissions,” Ecology Department Director Laura Watson wrote in a blog post.
A recent Ecology Department preliminary analysis concluded the proposed coalition would likely improve the cap-and-invest program’s economic durability, longevity and efficacy. “In a larger, more liquid market with a greater number of participants, allowance prices would likely be lower and change more predictably. Predictable prices can foster greater investments in decarbonization,” the report said.
Participants in Washington’s cap-and-invest program would be able to improve their long-range planning, and perhaps more readily pursue carbon reduction measures, the report said.
Washington’s carbon pricing market is slightly bigger than Quebec’s, but smaller than California’s.
Joel Creswell, Washington Ecology Department climate pollution reduction program manager, recently briefed the state House Energy & Environment Committee about this proposed move. He said a three-government cap-and-trade collation would likely shrink Washington’s final bid prices in its quarterly cap-and-invest auctions.
Washington’s final “settlement” prices were $48.50 per allowance (roughly one metric ton of carbon) for the first quarter of 2023; $56.01 per allowance for the second quarter; and $63.03 per allowance for the third quarter.
Watson said a final decision will depend on talks with the California-Quebec coalition. The earliest that the two markets could link is 2025.
Critics of cap-and-invest are blaming the program’s high final bid prices for increasing gasoline prices at the pump. However, program supporters blame the increasing gasoline prices on oil companies’ greed. Washington’s Democratic legislators plan to introduce an oil industry financial transparency bill in the 2024 session.
"California has the highest gas prices in the country and the third highest retail electricity rates in the country. ... Everything California policymakers touch related to energy markets ends in disaster for consumers," State Rep. Mary Dye, ranking Republican on the House Energy & Environment Committee, said in a news release.
A Crosscut analysis showed numerous independent factors are in play — increasing crude oil prices, high real estate costs, oil transportation costs, different states having different margins between wholesale and retail prices, what is happening elsewhere globally and several other reasons.