The specter of a November referendum on the fate of Washington’s cap-and-invest program hovered over the state’s Senate Feb. 12 when it passed a bill to link the program to that shared by California and Quebec.
The Senate approved Senate Bill 6058 on a 29-20 vote along party lines after a brief discussion. The bill, which would start the process of integrating Washington into the larger and older system, will now advance to the state’s House of Representatives.
Cap-and-trade supporters think that linking with California-Quebec would reduce and stabilize Washington’s carbon allowance prices and lower the state’s gasoline prices. But Sen. Drew MacEwen (R) argued the Legislature should wait to pursue a link-up until after the votes are counted on a November ballot initiative that seeks to disband the program, which opponents have blamed for the state’s high gas prices.
“We have a tremendous amount of political uncertainty around the [cap-and-invest program],” MacEwen said.
Rep. Jim Walsh (R), chair of the Washington Republican Party, is leading the efforts to rescind the cap-and-invest program.
A November vote in favor of removing the cap-and-invest program would nullify the state’s attempts to link with California and Quebec.
Sen. Kevin Van De Wege (D) said Monday that linkage “obviously provides a more stable marketplace.”
Sen. Shelly Short (R) tried unsuccessfully to amend SB 6058 to require the state’s Ecology Department to provide relief from emissions caps to utilities affected by lower levels of electricity produced by hydropower, the largest source of Washington’s electricity. Bill sponsor Sen. Joe Nguyen (D) agreed that was a legitimate wrinkle to study but successfully argued putting off addressing the issue until a later date.
Washington’s year-old cap-and-invest program has seen allowance prices rise steadily in its quarterly auctions last year, hitting $63.03 for one metric ton of emissions — much higher than state experts predicted in 2021.
By comparison, California’s allowance prices started at $10 in 2012 and reached slightly above $36 in 2023. Washington’s program is designed to trim emissions at a higher rate than California’s, which is one reason observers believe Washington’s prices have been higher.
Nguyen noted that the cap-and-invest program was created with the idea of eventually linking with the joint California-Quebec market to reduce and stabilize prices. He hoped that the larger market would encourage other states to join and further bring down prices. New York is currently designing its own cap-and-trade program.
The earliest this linkage could take place is 2025.
SB 6058’s biggest proposed change to the Washington program would be allowing a single bidder to obtain up to 25% of the allowances for sale in a quarterly auction. The current limit for a single auction is 10%. However, a single organization would still be limited to 10% of the allowances offered across all auctions in a calendar year.