In 2021 the legislature passed and the governor signed E2SSB 5126 (the Climate Commitment Act [CCA]) establishing a cap and invest system to regulate and reduce the emission of carbon dioxide (CO2) and other greenhouse gasses in Washington state. Under the CCA the state will annually sell at auction tradable emissions allowances. Each allowance would permit the owner to emit one metric ton of CO2 or the global warming equivalent quantity of another regulated greenhouse gas (that is, to emit one “MTCO2e”).

The first column of the table below shows forecasts of average allowance auction prices for years 2023 to 2040 from the fiscal note for E2SSB 5126. According to the fiscal note, average allowance prices start at $22.78 in 2023 and rise to $96.62 in 2040, the last year for which the fiscal note provides a forecast.
In May the Department of Ecology issued its preliminary regulatory analyses of the CCA program. This document included new forecasts of allowance prices prepared for the department by consultancies Vivid Economics and its parent McKinsey & Company. The Vivid/McKinsey forecasts, which are in constant 2022 dollars, are shown in the third column of the table. To facilitate comparison with the fiscal note forecasts, I have translated the fiscal note forecasts into constant 2022 dollars in the second column of the table. *

For the first 12 years (2023-2034) the allowance prices forecasted by Vivid/McKinstry are much higher than the prices forecasted in the fiscal note. The divergence between revenues is even greater, as Vivid/McKinsey consistently forecasts greater quantities of allowances will be sold than the fiscal note forecasts. Over the full 2023-2040 period, the total revenue forecasted by Vivid/McKinsey is nearly three times that forecasted by the fiscal note: $21.9 billion versus $7.4 billion in 2022 dollars.

The E2SSB 5126 fiscal note is available here. Its allowance price forecast is on page 121 of the pdf. Ecology’s preliminary regulatory analysis is available here. Its allowance price forecast is on page 192. The CBO consumer expenditure price index projections are available here.

*My adjustment to constant 2022 dollars involved two steps: First I adjusted the fiscal note prices to constant 2021-dollars using the CBO’s March 2021 long term economic projections of the personal consumption expenditure price index, which reflect expectations of future inflation at the time that the fiscal note was prepared. I then adjusted the constant 2021-dollar prices to constant 2022-dollars using the CBO’s May 2022 10-year projections, to reflect current expectations regarding 2021 to 2022 inflation.