(The Center Square) – The Washington State Department of Ecology has announced the results of last week’s emergency carbon auction, and it seems the carbon business is booming with all $62.5 million in shares selling.
The closed-bid, fixed price auction consisted of two 527,000 credit tranches, with the first tranche priced at $51.90 per credit and the second at $66.86 per credit.
Add up those two tranches and you get 1,054,000 carbon credits sold for a grand total of just under $62.5 million.
Add that number to the $857 million that regular quarterly auctions have yielded thus far, and you arrive at $919.5 million in proceeds for Washington’s new cap-and-trade program. That’s just over $4 million per day year-to-date.
The results of the emergency Allowance Price Containment Reserve, or APCR, auction will not be finalized until certified Aug. 23 by Ecology.
These special APCR credits differ from standard quarterly auction credits in two important ways.
First, APCR credits are more restrictive in their use and can only be used for emissions compliance reasons. They cannot be traded on the open market.
“They’re valuable, but they’re only valuable for emitters,” Department of Ecology spokesperson Claire Boyte-White told The Center Square. “In our methodology, we said this tool is designed only to contain allowance costs for businesses, not for investors.”
The second difference is actually a benefit, but again only to actual emitters.
“APCR allowances don’t have a vintage, like a wine, which means they can be used to cover emission from any year, which makes them valuable,” Boyte-White explained, before again noting that they’re only valuable for emitters spending them in their compliance account.
Last Wednesday’s auction saw a list of 32 qualified bidders taking part in the APCR auction.
The majority of bidders were your usual suspects of BP, Chevron, Marathon, Shell, and Phillips 66 to name a few. There were also some entities that raised a few eyebrows such as the City of Ellensburg, the City of Enumclaw, and most notably Washington State University.
With this auction, the APCR reserve fund depleted approximately 5.6% of its shares, falling from 18.65 million reserve carbon credits to just under 17.59 million credits.
With share amounts being at a fixed price, and all shares selling out, the market seems to have more demand than there is supply.
One policy expert seems to agree.
“Half [of the credits] were at $66.68 – 19% higher than the price for the last auction. That implies bidders think prices will go even higher in the future. You wouldn’t buy at $66.68 if you think prices would go down,” said Center for the Environment Director at the Washington Policy Center Todd Myers via X, formerly known as Twitter.
It remains to be seen if this demand will translate to even further increased prices at the next regularly scheduled quarterly carbon credit auction coming up on Aug. 30.
Washington’s cap and trade program requires emitters to obtain “emissions allowances” equal to their covered greenhouse gas emissions. Similar to stocks and bonds, these allowances can be obtained through quarterly auctions hosted by the Department of Ecology.
