Washington carbon prices continued to rise last week after the state’s latest cap-and-trade auction cleared at $63.03, up 13% from the May auction.

The August auction represented the third quarterly sale of allowances by the state, raising roughly $542 million in revenue on 8.6 million allowances sold, according to the Washington Department of Ecology. That translates into about $1.462 billion raised so far this year, with one regular quarterly and one supplemental auction still to go.

Washington Carbon Allowance (WCA) prices have risen steadily with each auction, with the February sale clearing at $48.50 and May’s hitting $56.01. The cap-and-trade program went into effect on Jan. 1, 2023.

“Prices at quarterly auctions are determined by auction participant behavior, so we can’t really speculate as to why bidding has resulted in any increasing settlement prices,” Claire Boyte-White, Ecology’s policy relations manager on cap-and-invest issues, said in an email to NetZero Insider.

“Because our program is still new, one potential explanation is that market participants are still getting their feet under them as they develop their compliance and decarbonization strategies” Boyte-White wrote.

In a summary of the auction results, emissions markets analytics company cCarbon noted that both the California cap-and-trade and Regional Greenhouse Gas Initiative markets saw prices peak during their third auctions before pulling back from those highs.

“Only time will tell if Washington’s WCAs will follow a similar trend!” cCarbon said.

The company also pointed out that financial traders increased their takings in Washington’s most recent auction, winning 14.5% of allowances compared with 10% in the previous auction.

“This increase, coupled with a lower bid ratio of 1.79, strongly suggests that compliance entities are content with their current holding at these price levels,” cCarbon said.

High allowance prices have been blamed for Washington having the highest gasoline prices in the nation this summer, outpacing even California, the only other state with a cap-and-trade program. (See Cap-and-trade Driving up Washington Gasoline Prices, Critics Say.)

Washington officials have been exploring whether the state should link up with the California-Quebec cap-and-trade system as a way to reduce prices, and hope to make a decision this year. That combined market is roughly six times as liquid as Washington’s, with allowance prices hovering at about $35.

Last week’s WCA auction once again exceeded the soft cap of $51.90 that triggers a requirement to hold a supplemental Allowance Price Containment Reserve (APCR) auction, a mechanism intended to contain carbon costs for industry by releasing more allowances into the market. The first APCR auction held in early August raised about $62.5 million on 1,054,809 allowances sold. (See Wash. Raises $62.5M from Cap-and-trade Reserve Auction.)

The next APCR auction is scheduled for Nov. 8 and will offer 1.58 million allowances.

“We anticipate that these extra APCR allowances will moderate prices in the short term,” cCarbon said in its summary. “Indeed, we are already seeing signs of this impact on the prices and demand from compliance entities in this third WCA auction.”