US elections: what’s at stake for carbon markets? Part 3 – state level elections

Though presidential and congressional elections take most of the attention, state-level and jurisdictional races often have greater direct impact on carbon markets. That is the case in the northwestern US state of Washington, where a ballot measure and governor change will affect the fate of a nascent cap-and-trade program.

Washington, the northwesternmost of the contiguous US states with a population of over 8 million, is home to a cap-and-invest program that began operating in 2023. The greenhouse gas trading initiative owes its existence largely to Washington’s governor since 2013, Jay Inslee, a Democrat known for promoting climate change mitigation policies. Inslee was the state’s representative in the US Congress before becoming governor, and in that position he supported congressional efforts to create a US national emission trading system (ETS). The Washington state law under which the ETS was created is the Climate Commitment Act, passed by the state legislature in 2021.

Like California’s ETS in the Western Climate Initiative (WCI), the Washington state ETS is aimed at helping achieve the state’s overall climate target, which is a 95% reduction in greenhouse gas emissions compared to 1990 levels by 2050. Most of the program’s elements, such as its covered sectors and cost containment structure, intentionally resemble those of the California-Quebec joint ETS, as it leaves room for Washington to eventually link its program. Linkage with Washington would in turn slightly enlarge North America’s biggest carbon market: Washington’s ETS cap is roughly 60 million tonnes in 2024 compared to California’s 280 million tonnes and Quebec’s roughly 50 million. Washington’s Department of Ecology announced a decision to pursue linking with the WCI in November 2023, just before the cap-and-invest program had completed a full year of operation. Allowance prices over that year averaged $52.88 per tonne, significantly higher than the allowance units (CCAs) traded in the California-Quebec program.