Washington Cap and Invest
The Washington Cap and Invest Program is a state-level carbon market designed to reduce greenhouse gas emissions by placing a cap on total emissions from major industries, including transportation and utilities. Businesses are given an allocation of free allowances which declines yearly starting at a 7% reduction. Any shortfall compared to their emissions can be bought in the market or in quarterly auctions. The program started in 2023 and saw volatility in pricing and the regulations. Washington announced it is pursuing linkage with the California and Quebec (CA/QC) carbon cap-and-trade programs. The auction-floor price (ACP) increases by CPI plus 5% every year and is currently $25.85 (2025 ACP).
Administered by the Washington Department of Ecology (usually shortened to Ecology), this program was modeled after its older California counterpart. Ecology designed the program future linkage in mind but also with important distinctions. The 2021 Washington Climate Commitment Act (CCA) was designed to reduce GHG emissions by 95% by 2050. Ecology intentionally started the program without the large surplus the CA/QC program has. For this reason, Washington Carbon Allowances (WCAs) have traded at a significant premium CA/QC. After spiking the price of gasoline and diesel fuel, the program met with criticism leading to a ballot initiative (Washington Initiative 2117) to (1) prohibit any state agencies from implementing a cap-and-trade or cap-and-tax program and (2) repeal the CCA. On Nov 5, 2024, the measure failed 62% to 38% further bolstering the standing of the program.
Much smaller in size than California, Washington has 134 covered facilities with 2023 emissions of 64,039,850 metric tons. Fuel suppliers accounted for 80% of emissions or ~51 million of the total 64 million tons. As annual cuts reduce the already tight allowance market, allowance demand is expected to challenge the total supply. WCAs primarily trade in futures with physical delivery and over-the-counter (OTC) bilateral trades. They may also be procured in one of four quarterly auctions which occur in February, May, August, and December.
