California and Washington state released a draft agreement outlining how their carbon emissions trading programs could be linked. This step would expand the existing California–Québec cap-and-trade market and potentially create a larger West Coast carbon market.
Under a linked system, regulated entities in each jurisdiction would be able to use emissions allowances issued by the others for compliance with their greenhouse-gas (GHG) limits. The programs would also coordinate emissions allowance auctions and maintain shared accounting systems for tracking emissions permits.
The proposed linkage agreement, published March 3, 2026 by the Washington Department of Ecology, sets out the legal and administrative framework for integrating the emissions trading programs of California, Washington, and Quebec. The release of the draft agreement begins a public review process during which state regulators must complete rulemakings and make formal findings before integrating the programs.
Expanding the existing California–Québec market
California and Québec have operated a joint cap-and-trade market since 2014 under an international linkage agreement authorized by California’s AB 32, known as the Global Warming Solutions Act of 2006. The program is part of the broader Western Climate Initiative carbon market. Washington launched its own carbon trading system in 2023 under the Climate Commitment Act, which established the state’s cap-and-invest program covering major industrial emitters, electricity suppliers, and fuel distributors.
Key provisions in the draft agreement
The draft agreement outlines governance rules and operational requirements that would apply if Washington joins the California–Québec market. Key goals of the agreement are:
regulatory harmonization for reporting GHG emissions and for the market-based program;
equivalence and interchangeability of compliance instruments to allow compliance with Québec’s, California’s, and Washington State’s own market-based program;
a transparent and data-driven calculation that attributes to Québec, California, and Washington State their respective portion of the total greenhouse gas emission reduction;
permit the transfer and exchange of compliance instruments between participants registered with each respective market-based programs using a common secure registry;
compatible market requirements for Québec’s, California’s, and Washington State’s respective market-based programs to ensure no entities in any of the programs are disadvantaged relative to their counterparts in the other jurisdictions;
joint auctions of compliance instruments;
information sharing to support effective administration and enforcement of Québec, California, and Washington State statutes and regulations.
Potential market impact
California must complete a regulatory review and make formal findings that the linked program will maintain equivalent emissions reductions and enforcement standards under state law. The other parties would also need to complete their regulatory processes. Officials from the participating jurisdictions say the goal is to complete the regulatory process and implement the linked market as early as 2027, depending on the outcome of rulemaking and public review.
The integrated system would represent the largest carbon trading market in North America and one of the most significant subnational climate policy collaborations in the United States. Policymakers say a larger market could increase liquidity and stabilize allowance prices by increasing the number of participants trading emissions permits.