Washington State is about to take the first steps towards merging its carbon market with the already combined California and Quebec equivalents.
The director of the state’s Department of Ecology, Laura Watson, announced earlier this week that negotiations are about to begin with the hope that forming a larger market will address issues with price volatility and the impact on gas prices and consequently consumers.
In a press statement, the Department said that: “Such an agreement is expected to produce more stable allowance prices, which would help businesses make long-term plans to reduce emissions.”
The announcement comes after the release of a publicly available analysis report by the Department, which states that the linkage is the best course of action.
The market itself was created in 2021 as part of the Climate Commitment Act, which established thresholds for large CO2 emitters and mandated the creation emission allowances for them.
California and Quebec’s carbon markets have a longer history with their linkup dating to 2014. The market has stood the test of time and is currently six times that of Washington, which is of course in its first year of existence.
So far this year there have been three carbon auctions, as well as an Allowance Price Containment Reserve auction, bringing in over $1.4 billion which have been directed towards emission reduction projects and environmental initiatives.
It seems like emitters have passed on some of the expenses on to the end consumer with gas prices in Washington among the highest in the U.S. throughout this year. Although impacted by the broader global oil markets and geopolitical tensions, the impact of the emission allowances has not gone unnoticed and could influence some voters in upcoming elections.