Key Takeaways

1. WCA front on Friday closed at $60.50, that saw a decrease of $0.12 over the week. 
2. Nodal volume pulse went flat as no volumes were traded in the last week.
3. CCarbon outlook for WCA#2 auction – Fully subscribed auction with a clearing price of $51.90, resulting in an APCR auction on August 9^th .
4. The WCA #2 Auction on 31^st May with 11.035 million allowances up for sale.
5. High likelihood of APCR auction of 18.6 million allowances on August 9^th.

This time WCA front end’s week at $60.50, $6.18 below the $66.68 APCR Tier 2 reserve price. The front saw a 0.20% loss over the last week.  The current dominant exchange for WCAs, the Nodal Exchange, saw no trade volumes between 22^nd and 28^th May. The lack of trade in the market means that there’s limited transparency of WCAs price now.

Market Dynamics and Outlook for Upcoming WCA Auction

The auction this week will see 11,035,000 allowances up for sale. Of those allowances, 8,585,000 are for the current year and 2,450,000 are for a future vintage, 2026. The minimum bidding price for the May 31^st auction is going to be the same ($22.20 per allowance) as the first auction.

Our outlook for the WCA#2 auction to be held on May 31^st is it to be a fully subscribed auction with a clearing price of $51.90. The result is scheduled to be announced on 7^th June. Watch our webinar on WCI and Washington pre-auction outlook.

The auction clearing at the APCR-1 trigger price will result in an APCR auction on the 9^th of August. The possible APCR auction in August 2023 will see 9.3 million allowances at $51.8 and another 9.3 million at $66.68 for only compliance entities to purchase.

Market Events that are shaping the WCA Market 

Ecology Begins Rulemaking on Climate Funds Reporting

Ecology is starting new rulemaking Chapter 173-446B WAC focused on reporting requirements for state agencies that receive and use these auction revenues to fund various climate programs, projects, and initiatives across the state. From this information, Ecology must compile an annual report to the Legislature that shows where funds were spent and, for decarbonization projects, the greenhouse gas reductions they achieved.

Washington State Passes Carbon Removal Funding in Capital Budget

Washington passed its capital budget, part of which is funding for carbon dioxide removal (CDR). This also marks the first time any US state has approved investment in technologies to actively remove the full range of greenhouse gases from the atmosphere — including methane and nitrous oxide.

The $12 million funding will be made available as grants that representatives of business, academia and non-profit organizations will have the opportunity to apply for in order to support their research, development, and demonstration projects.

Read about our coverage on the Washington Market

• WA Ecology Acts on High Carbon Prices, offers 5M APCR Tier-1 Allowances in November APCR Auction; WCA Auction clears at $63.03
• Washington’s APCR auction fully subscribed – allowances sold at $66.68; Rush to secure reserve
• Ecology announces Electricity Markets Rulemaking for the cap-and-invest program
• Decoding Washington’s approach to the APCR allowance supply
• Washington Auction #2 continues to set highest carbon price of $56.01 in the Americas; sends mixed messages
• How will the APCR auction play out in Washington – A scenario analysis
• Washington’s Ecology Accepts Industry’s Inputs on Electricity Imports, No Immediate Adoption of Changes
• The Subtle Differences Between Washington and California Emission Trading Programs
• How does the year of linkage impact the WCA price?
• Unlocking the Mystery of Washington’s APCR Allowances: Decoding the Calculations
• Demystifying WA Ecology’s Emergency Rulemaking on APCR allowances
• The puzzle around the high Washington Carbon Allowance (WCA) Prices
• A legal update on Washington’s Climate Commitment Act
• Washington’s First-Ever Auction: Investor and Compliance participant deep-dive
• The Rising Tide of Washington’s State-Wide Emissions

Analyst Contact:
Mira Dhandra (mdhandra@ckinetic.com)
Craig Rocha (cmrocha@ckinetics.com)