California advances plan to build larger carbon trading market with Washington
Sacramento, California – California’s carbon market could soon become much bigger. After more than a decade of trading emissions allowances with Québec, the state is taking a key legal step toward bringing Washington into the same system, potentially creating a broader West Coast carbon market beginning in 2027.
Gov. Gavin Newsom announced during Climate Week NYC that he had made the formal findings required under California law for the state to continue the linkage process. The action clears the way for the California Air Resources Board, or CARB, to begin the public regulatory process that must be completed before the markets can formally connect.
Newsom took the action on Sept. 21 after CARB requested the required findings earlier in the month and after receiving legally required advice from the California Attorney General. Washington, meanwhile, has finalized regulatory changes needed to make its system compatible with the existing California-Québec market.
California, Washington and Québec had already signed a linkage agreement in June, setting the framework for Washington to potentially join the market. California has been linked with Québec’s carbon trading system since January 2014.
Under linkage, regulated businesses can use eligible allowances and credits from participating systems to meet their compliance obligations. State officials say a larger market can increase stability and give companies more options for reducing emissions at lower cost.
“By joining forces with our partner in Washington State, we will build a stronger, more durable carbon market that will drive investment, cut pollution, and power the clean economy of the future,” Newsom said.
His broader statement also criticized President Donald Trump and the federal government’s environmental policies, framing California’s approach as an alternative centered on state-level climate partnerships.
Washington Gov. Bob Ferguson also described linkage as an economic strategy.
“Linkage isn’t just good climate policy — it’s smart economics,” Ferguson said. “Linking will unlock greater emissions reductions, lower the cost of clean technologies, and create good-paying jobs in high-growth industries.”
California’s Cap-and-Invest program places a declining emissions limit on major sources including large industrial facilities, energy companies and oil and gas suppliers. Those covered sources account for about 80% of the state’s climate emissions.
State figures show the program has generated about $37 billion for climate investments, funded roughly 600,000 projects and supported 143,000 jobs. California also reports that approximately $16 billion in utility bill credits has been delivered to residents through the program.
Recent changes are projected by the state to provide another $10 billion in electricity bill credits and generate about $8 billion for the Greenhouse Gas Reduction Fund through 2030.
The remaining work now shifts largely to CARB. Its regulatory proceeding represents California’s final formal step before Washington can join the existing California-Québec market, with officials in both states working toward linkage in 2027.
