Successful Auction of Cost-Containment Allowances for CCA Cap-and-Invest Program
Washington's Department of Ecology held its first auction from the "Allowance Price Containment Reserve" under the Climate Commitment Act on August 9th, raising an additional $62.5 million for needed climate solutions across Washington. This allowance account is a mechanism built into the CCA to stabilize costs and ensure that carbon allowances are obtainable and reasonably priced for covered entities.
What is the Allowance Price Containment Reserve and why is the state offering this additional auction?
As its name would suggest, the allowance price containment reserve (APCR) auction is intended to “contain” prices, or keep costs within a reasonable range. This auction is one of a handful of safeguards written into the law to ensure the price for pollution permits doesn’t become exorbitant, including a firm price ceiling and two “soft” ceiling prices below that as guardrails.
When the price settles above the lowest of the two soft ceiling prices, allowances that were reserved at the start of the auction process become available in a separate APCR auction to increase the supply of allowances for covered entities. This is an important feature of the APCR to remember–that these are not additional allowances being added to the program, but rather a portion taken from the top to ensure climate pollution sticks within the cap while offering flexibility in the case of high prices. During the second CCA auction held in May, prices settled at $56.01, exceeding Washington’s tier 1 soft ceiling price by about $4, thus triggering the APCR auction.
Ecology offered over 1 million allowances at this auction, half of which were at the tier 1 price of $51.90, and the other half at the tier 2 price of $66.68, to offer certainty for businesses on prices and to stabilize costs. All available allowances were sold, generating an additional $62.5 million that will be invested in climate solutions in our communities.
The results of this ACPR auction show that cost protections in the Climate Commitment Act are working as intended- the program raises revenue from polluters to invest in solutions, while ensuring that the carbon allowances are obtainable and reasonably priced for covered entities.
What is the impact of this auction?
When digging into the details of the auctions and their processes, it’s important not to lose sight of the bigger picture–this program is ushering in transformational climate investments across Washington. The APCR auction’s $62.5 million is in addition to the $850 million already generated in this year’s first two auctions alone, with the third auction coming up on August 30th.
These climate funds are needed now more than ever, with record heat waves across the globe, wildfire smoke reaching new territories, and flash floods and storms causing millions of dollars in damage becoming our new “normal.” Despite the millions of dollars the oil industry and other wealthy corporations continue to pour into opposing this policy, the Climate Commitment Act is finally holding polluting businesses accountable for the damage they’ve done to our environment and our communities for decades.
Soon Washingtonians will feel the impact of these investments, including- cool and clean homes through subsidized heat pumps and other clean and efficient electric appliances; cleaner air from zero-emission medium- and heavy-duty vehicles; and protected and resilient state lands that store carbon and are home to critical species. You can read more about the policies and programs Climate Solutions wants to see funded here.