Washington moved its cap-and-invest system closer to a larger regional carbon market Wednesday, when the Department of Ecology filed final rule changes designed to support linkage with California and Québec as early as 2027.
The amendments update Washington’s allowance budgets for 2027 through 2050 and align key market rules, including compliance periods, auctions, registration, corporate associations and price-containment mechanisms. Ecology Director Casey Sixkiller signed the package Sept. 17, the agency filed it Sept. 23, and the rules take effect Oct. 24. The filing does not itself activate a shared market. It instead establishes Washington’s operating framework so the state can join coordinated sales once all three governments have completed their requirements.
Linkage would let covered businesses use allowances issued by any of the three jurisdictions and participate in joint auctions with a common settlement price. Washington’s overview says the state, California and Québec signed a linkage agreement in June, but each jurisdiction must finish its own legal and regulatory steps before the agreement becomes effective. The partners must give at least 90 days’ public notice before the first joint auction.
California also advanced the plan this week. Gov. Gavin Newsom announced Wednesday that he had made the findings required under state law, authorizing the California Air Resources Board to begin its final regulatory process. California and Québec have operated a linked carbon market since 2014; Washington would be the third member.
Washington launched its program in 2023 under the Climate Commitment Act. The system limits emissions from major covered entities and distributes a declining supply of allowances, mostly through quarterly auctions. A June account by the Washington State Standard noted that adding Washington would create the largest subnational carbon market in North America.
Ecology argues that a wider pool of buyers and sellers should make allowance prices more stable and lower compliance costs while preserving Washington’s emissions cap. Independent analysis from Resources for the Future has likewise found that linkage can reduce price volatility and provide regulated businesses more options, while warning that allowance flows among jurisdictions can shift auction revenue and alter where emissions reductions occur. Those tradeoffs are detailed in the group’s Washington report.
The timing matters for companies planning their compliance strategy. Washington’s current 2023–2026 compliance period ends with a Nov. 1, 2027, deadline, and Ecology says allowances from a linked market could be available before that date if all parties complete their remaining work. Businesses should not assume cross-border allowances are usable yet; the existing Washington-only rules remain in force until linkage begins.
Further steps include California’s formal rulemaking, Québec’s approvals and coordinated auction planning. Washington’s new rule provides the state-side framework, but the first joint sale will depend on the three governments completing those processes and issuing the required notice.
