On November 5, voters in the state of Washington chose to uphold the carbon market by rejecting Initiative 2117, which sought to repeal the 2021 Climate Commitment Act. According to analysts, this decision may lead to an increase in carbon allowance prices in the coming months.
The Climate Commitment Act introduced a cap-and-trade system where companies must purchase allowances to offset their greenhouse gas emissions. The goal is to gradually reduce emissions and fund green initiatives. However, the introduction of Initiative 2117 caused carbon prices to drop by 50% in the last quarter, reaching approximately $25 per allowance.
Expected Return to Higher Price Levels
Following the rejection of this initiative, the price of carbon allowances is expected to rise, according to Matt Williams, an emissions and clean energy analyst at S&P Global. Williams believes that prices could stabilize around the projected 2025 reserve level, approximately $60 per allowance, more in line with the market’s initial expectations.
Prior to the vote, the uncertainty surrounding a possible repeal also disrupted a sale of future carbon allowances, with some permits going unsold. These unsold permits will be reintroduced in a 2027 sale, according to program officials.
Prospects for Linkage with the California-Quebec Market
Washington’s program was designed with the potential for integration into the joint cap-and-trade market of California and Quebec. This linkage aims to standardize carbon prices across the three jurisdictions, offering increased stability and additional options for market participants. A joint announcement in September confirmed that this agreement could be finalized by the end of next year.
Program officials claim that this integration should enhance market efficiency and support emission reduction efforts uniformly across the states and provinces involved. California, already engaged in carbon trading with Quebec, represents a model of cross-border partnership for cap-and-trade programs that Washington may soon join.
Maintaining Auction and Compliance Schedules
In parallel, Washington authorities have announced that the carbon allowance program will continue to operate according to the established auction and compliance schedules, without changes. This continuity aims to reassure companies and investors involved in the state’s carbon market.
The rejection of Initiative 2117 and the prospect of integration with the California market thus strengthen Washington’s position in combating climate change through emission reduction policies. For observers, maintaining this market is an important step in the state’s environmental commitment, providing both a revenue source and a strong incentive for companies to limit their carbon footprint.
