Washington to Lose $3.8 Billion if Cap-and-Invest Repealed: Sec. of State
The Washington state Office of Financial Management estimates $3.8 billion in lost revenue from canceled emissions allowance auctions through fiscal years 2025-2029 if citizens vote to repeal the state’s cap-and-invest program in November, according to a new fiscal impact statement released this week.
The Washington Secretary of State published the statement along with new ballot materials this week for the vote on Initiative 2117 in November, which would repeal the state’s cap-and-invest emissions trading program if passed.
Initiative 2117 would also prohibit the state from enacting other similar emissions allowance trade systems if passed. The citizen-led initiative to the legislature collected signatures in 2023, the cap-and-invest program’s inaugural year, and was certified in January to appear on the general election ballot.
According to SurveyUSA polling results published this week by the Seattle Times, 48% of likely Washington voters were “certain to vote yes” on Initiative 2117 while 34% of respondents were “certain to vote no,” and 18% were “not certain.” SurveyUSA polled 708 likely voters from July 10-13.
The fiscal impact statement released this week detailed potential reductions to state expenditures and revenues from carbon allowance auctions under the initiative.
“If approved by voters, Initiative 2117 will reduce state revenue from carbon allowance auctions by $3.8 billion and reduce state expenditures by $1.7 billion between the effective date of the initiative and June 30, 2029,” according to the statement.
If successful, the initiative’s effective date would be Dec. 5, meaning the fourth quarterly Washington Carbon Allowance auction scheduled for Dec. 4 would no longer take place, the report stated.
Auction certification and other processes would extend past the date Initiative 2117 potentially would take effect, the Office of Financial Management said.
“Under the initiative, the last auction would take place on September 4, 2024,” the statement read. “The three remaining auctions scheduled in state fiscal year 2025 would be canceled.”
The cap-and-invest auction 7 on Sept. 4 will offer 7.94 million WCAs during the current portion, without an advance offering. The previous auction on June 5 sold out of 7.8 million V23 and V24 WCAs and settled at $29.92/mt. The auction did not sell out of the advance portion of V27 allowances.
The fiscal impact report noted reduced funding would go to projects and programs including “transportation emissions reduction, transit, pedestrian safety; ferry and other transportation electrification; air quality improvement; renewable and clean energy; grid modernization and building decarbonization; increasing the climate resilience of the state’s waters, forests and other ecosystems; fire prevention and forest health; and restoring and improving salmon habitat.”
The six quarterly and two allowance price containment reserve WCA auctions have generated $2.15 billion in funds since the cap-and-invest program began in 2023, according to the state Department of Ecology.
“The 2024 supplemental transportation, operating and capital budgets identify which programs and projects would and would not be eligible for this funding if the initiative passes,” according to the statement. “Spending authority of $1.7 billion in state fiscal year 2025 would no longer exist because the budget appropriations would be eliminated along with repeal of the accounts.”
The report also said under the initiative, Ecology would undertake rulemaking from 2025-2027 to “repeal Climate Commitment Act rules and to amend rules regarding greenhouse gas emission reporting.”
WCA secondary market prices deflated during the first 2024 quarter following news of the Initiative 2117 appearing on ballots in the fall.
OPIS WCA assessed prices in 2024 bottomed out on March 15 at $29.50/mt for December and $27.80/mt for the prompt month before slowly regaining ground.
Washington state, California and Quebec in late March announced they were working to link carbon markets. Ecology held a listening session Monday on environmental justice and the potential linkage of cap-and-invest to California and Quebec’s joint carbon market.
Ecology staff earlier this month reiterated a potential linkage agreement could be enacted by late 2025.
The Secretary of State this week also published a ballot measure Explanatory Statement and Public Investment Impact Disclosure.
Initiative 2117 will appear on the ballot as written: “Initiative Measure No. 2117 concerns carbon tax credit trading. This measure would prohibit state agencies from imposing any type of carbon tax credit trading, and repeal legislation establishing a cap and invest program to reduce greenhouse gas emissions. This measure would decrease funding for investments in transportation, clean air, renewable energy, conservation, and emissions-reduction. Should this measure be enacted into law?”
Reporting by Slade Rand, srand@opisnet.com
Editing by Mayra Cruz, mcruz@opisnet.com and Michael Kelly, mkelly@opisnet.com
© 2024 Oil Price Information Service, LLC. All rights reserved.