Established by the Climate Commitment Act (CCA) in 2021, Washington’s Cap-and-Invest Program is only the second of its kind in the United States. The first U.S. program began in California in 2012, and a similar program was launched in Québec, Canada, the following year. Given their similar structure and goals, it was determined that "linking" the two carbon markets could yield important benefits in emissions reductions and long-term program sustainability. California and Québec connected their programs in 2014, creating one shared carbon market.
Washington seeks to link with the California-Québec market, and all three jurisdictions have expressed mutual interest in this possibility. California and Québec would need to undergo their own processes to decide whether to link. All three programs would also need revisions to some regulations. Depending on when linkage process steps and regulatory changes are completed, we could begin operating a linked market in 2026 or 2027.
Linkage means combining Washington's Cap-and-Invest Program with similar carbon markets.
In a linked market, allowances issued by California and Québec could be used by Washington businesses to cover their emissions, and vice versa. The three jurisdictions would host joint allowance auctions and share a common allowance price. Market participants could also trade allowances across jurisdictions.
The Climate Commitment Act directs us to actively consider linking Washington's Cap-and-Invest Program with other carbon markets and requires that our state's program be built in such a way that linking would be as seamless as possible. However, the law also requires us to review specific criteria to ensure linkage would benefit our state’s communities, economy, and climate goals.
Linkage overview video
The video provides an overview of how Washington's Cap-and-Invest market currently works and how it would change if it linked with other markets.
Joining markets wouldn't negatively impact Washington's ability to meet the emissions-reduction commitments set in state law.
Linking would reduce the cost of compliance for covered businesses.
The linking jurisdictions have provisions to make sure their programs provide benefits to vulnerable populations and overburdened communities.
Linking wouldn't have an overall negative effect on highly impacted communities in any jurisdiction.
In addition, we're required to conduct an Environmental Justice Assessment before we can join a linkage agreement.
What are some of the potential impacts of linking markets with California & Québec?
When California and Québec linked in 2014, it created a single market with a higher volume of emissions allowances being traded. Larger markets are generally more stable and have more consistent pricing because a larger pool of buyers and sellers reduces price swings.
The agreement to link California and Québec's markets has enabled businesses to participate in these programs more sustainably and has generated lasting reductions in carbon pollution and much-needed revenue for critical climate projects.
Environmental & health considerations of linkage
By law, we must evaluate the effect on vulnerable populations and overburdened communities before making a final decision to link markets. For our initial assessment of potential impacts, read the Preliminary Linkage Criteria Analysis.
We'll review new information about changes California and Québec may make to their programs as we continue to refine our analysis.
We’re also looking at potential impacts to overburdened communities and Tribes as part of the Environmental Justice Assessment. Learn more about the assessment and how to share your input.
CCA policies that center communities and Tribes
The CCA includes several policies to address potential environmental justice concerns for communities and Tribes. Read more about these policies below or in our CCA: Focus on Environmental Justice resource. These polices will stay in place if we link with California and Québec.
Under the CCA, Ecology must reduce “criteria” air pollution in Washington's most affected communities. Criteria air pollutants are six common substances known to harm human health and the environment: carbon monoxide, lead, nitrogen dioxide, ozone, particle pollution, and sulfur dioxide. Ecology identified 16 Washington communities that are historically overburdened with health, social, and environmental inequities and are highly impacted by air pollution.
Improving air quality will happen in stages over multiple years. We've launched a grant program for these communities. We also started a rulemaking process to set stricter air quality standards for the 16 overburdened communities.
Every two years, we'll report on air pollution, greenhouse gases, and health impacts in each community. We'll review the list of communities every six years. Our first report was published in December 2023.
In a linked market, we'd continue to expand air quality monitoring and reduce pollutants in these communities. Read more about our air quality work.
The CCA also directs us to consider air quality when approving new, high-emission industrial facilities classified as emissions-intensive and trade-exposed (EITEs). New EITEs covered under the Cap-and-Invest Program must reduce their impact on particle pollution in the affected communities.
Businesses can use offset credits from qualified projects to cover a small portion of their emissions (up to 8%). These offsets are “under the cap,” meaning we reduce the number of allowances we issue by the number of offset credits used, keeping us on track to meet our statutory commitment to reduce emissions by 95% by 2050.
The CCA gives us the authority to reduce the number of offset credits a business can use if we determine it contributes substantially to air pollution in an overburdened community.
If we link, Washington would still have these restrictions on the use of offset credits.
In a linked market, the revenue from the sale of allowances that Washington adds to a joint auction would fund projects in Washington.
While the Legislature is responsible for selecting which types of projects are funded, the Climate Commitment Act includes some specific requirements that ensure the benefits of this program are enjoyed by all of Washington. The CCA requires that a minimum of 35%, with a goal of 40%, of Washington’s auction proceeds be used for projects that provide a direct benefit to vulnerable populations within overburdened communities. In addition, 10% of auction funds must be used for projects with Tribal support.
Separately, Ecology administers two grant programs for Tribes through the CCA. Tribal Consultation Grants provide support for federally recognized Tribes with lands and territories in Washington to engage in the consultation process on CCA funding decisions and clean energy siting studies.
Tribal Carbon Offset Assistance Program Grants assist federally recognized Tribes with lands and territories in Washington State in designing, assessing, and implementing carbon offset projects on Tribal lands. The Legislature must allocate at least $5 million biennially for the carbon offset grant program.
In a linked market, both the Tribal funding portion and grant programs would continue.
These measures ensure the CCA's benefits reach all Washingtonians.
Washington's law mandates regular program reviews to verify emissions reductions align with state limits. Linking would not impede our ability to adjust the Cap-and-Invest Program through rule or law changes. The law also ensures any linkage agreement includes provisions for withdrawal or delinking, preserving our autonomy and flexibility in emissions management.
Linkage criteria: Preliminary analysis report
We shared a report in 2023 with our analysis of how linking would impact Washington’s communities, economy, and climate goals. The report included our initial evaluation of the linkage criteria from the CCA and a summary of input we received. We'll continue to assess the potential impacts of linking and share a final assessment of the criteria before making a final decision to link.
In early 2023, we began engaging Tribal governments and seeking input from the Environmental Justice Council, followed by other interested parties and the broader public. We used this input to inform our analysis of the linkage criteria laid out in the CCA and the preliminary decision on whether to pursue linkage.
We provided multiple options for submitting comments, including three online listening sessions, an online survey, email, mail, and voicemail. For a link to the recording of an online public listening session, please email us at CCALinkage@ecy.wa.gov.
We held a forum for Tribal governments Feb. 9, 2023. If you represent a Tribal government and would like to meet with us, please contact us at CCALinkage@ecy.wa.gov.
On Oct. 12, 2023, we issued a report covering our initial analysis of the linkage criteria, as well as a summary of the feedback we received during our exploratory process.
We initially planned to announce this preliminary decision in summer 2023, but moved back that decision to fall 2023 to give the Environmental Justice Council more time to discuss the topic. We'll conduct a full Environmental Justice Assessment before finalizing or signing a linkage agreement.
While much of Washington’s program was designed to align with the programs in California and Québec, some policies need further alignment through changes to the law and rules. In March, Governor Inslee signed our request legislation to make those changes to the law, and we began the rulemaking process in April 2024.
Of note: California and Québec also would need to make regulatory adjustments before entering into a linkage agreement.
Before Washington can enter into a linkage agreement, the CCA requires Ecology to conduct an Environmental Justice Assessment focused on understanding how linking Washington’s carbon market to the California-Québec market could potentially impact overburdened communities and Tribes. As a part of this assessment, we’ll identify overburdened communities and vulnerable populations that could be impacted by linkage, and we'll also offer Tribal consultation.
We began this Environmental Justice Assessment in June 2024. Find information on how to share your input below.
If you have questions or would like to schedule a meeting with us about the Environmental Justice Assessment, please email CCALinkage@ecy.wa.gov.
Now that all three jurisdictions have expressed interest in linkage, the next step is to discuss a linkage agreement.
In Washington, we’ll also hold a public hearing and ask for input again after we develop a draft agreement with California and Québec. We'll also issue a final assessment of the linkage criteria prior to making a final decision on linkage.
Depending on the outcome of these steps, we may sign on to a linkage agreement, which we believe is likely to be finalized in 2026.
As mentioned in the sections above, in order to operate a linked market, Washington also needs to finish making regulatory changes that make our markets compatible, complete our Environmental Justice Assessment, and do a final linkage criteria assessment. California and Québec will have to take additional steps, too.
Depending on when linkage process steps and regulatory changes are completed by all three jurisdictions, we could begin operating a linked market in 2026 or 2027.
More information
If Washington links with the combined California-Québec market, then any allowances issued by Washington, California, or Québec could be used for compliance by a Washington entity. For example, if linkage occurs before the first compliance period deadline (Nov. 1, 2027), we expect that allowances issued by Washington, California, and/or Québec may be used by Washington businesses to cover emissions from 2023 through 2026.
Each jurisdiction may need to make regulatory adjustments before entering into a linkage agreement. The California and Québec rulemaking processes and the timeline for finalizing a linkage agreement could change the above expectations.
The Legislature established an expectation of linking with other markets when it passed the Climate Commitment Act. The law clearly directs us to pursue linkage if it's determined to be beneficial, though it doesn't provide a specific timeline for doing so.
In 2023, Ecology shared our initial analysis of the impacts of linkage. The Cap-and-Invest Linkage Criteria: Preliminary Analysis Report makes clear that a larger, more liquid market with a greater number of participants would likely provide greater price stability and lead to a more durable program. Predictable allowance market prices are important because they give covered entities the certainty needed to make long-term investments in decarbonization.
Washington is pursuing linkage with California and Québec because it's expected to provide substantial benefits to Washington’s cap-and-invest program, economy, and communities. We expect linking to help our state successfully decarbonize its economy and meet our greenhouse gas reduction mandates established by the state Legislature.
Given the significant impact linkage is projected to have on allowance prices and market stability, we prioritized exploring linkage, beginning that process alongside the implementation of the Cap-and-Invest Program.
The CCA directs us to develop a "linkage-ready" program in Washington, so many key aspects of our Cap-and-Invest Program are already aligned with the programs in California and Québec.
For example, we use the same auction platform as California and Québec, which is administered by WCI Inc.
However, some policies need further alignment through changes to the law and rules in Washington. In 2024, lawmakers passed legislation addressing needed changes to the law, and we then started the rulemaking process. California and Québec would also need to make regulatory changes to link. All three programs would need to complete regulatory changes before markets could link.
The CCA explains how covered entities could use offset credits in a linked market (RCW 70A.65.170). During the first compliance period (2023-2026), at least 50% of the offset credits used for compliance must provide direct environmental benefits (DEBs) to Washington. The remaining 50% of offset credits can come from projects located in a linked jurisdiction (for example: in California or Québec if we link with them).
During later compliance periods, at least 75% of offset credits must provide DEBs to Washington, with up to 25% from projects in California or Québec. Since the CCA says the projects must be in a linked jurisdiction, not all projects that provide DEBs to California could be used for compliance in Washington.
We would still have the same overall limit on using offset credits for compliance, and offsets would still be "under the cap."
We asked for public input during a spring 2023 outreach period, which ended May 15, 2023. We used your input to inform our analysis of the linkage criteria laid out in the CCA and the preliminary decision to pursue linkage.
The Preliminary Linkage Criteria Analysis includes background on linkage, a summary of input received, and Ecology’s initial evaluation of the linkage criteria from the CCA.
Linkage agreement
A linkage agreement is a non-binding agreement that sets expectations for information sharing, cooperation, and accounting. It doesn't create new regulations or change existing regulations. That can be done only through each jurisdiction’s rulemaking process and changes to laws (statutes) made by legislators.
Governor Inslee signed our request legislation in March 2024, which allows us to make necessary changes to program rules to facilitate linkage. We've begun the rulemaking process.
We're doing two Environmental Justice Assessments related to a possible carbon market linkage. The first focuses on the linkage agreement and understanding how linking Washington’s carbon market to the California-Québec market could potentially impact Tribes and overburdened communities, as defined in the HEAL Act. The second focuses on understanding potential impacts of specific rule changes that would need to occur in order to link (Chapter 173-441 WAC and Chapter 173-446 WAC).
Under the HEAL Act, “overburdened communities” are defined as geographic areas with combined, multiple environmental harms and health impacts facing vulnerable populations. This means groups of people who are more likely to be at higher risk for poor health outcomes in response to environmental harms.
The purpose of an Environmental Justice Assessment is to identify a wide range of potential environmental justice impacts an action may have. The Environmental Justice Assessment is required to occur in the early developmental stages of our work and helps us make informed decisions to reduce environmental harms and to address environmental and health disparities in overburdened communities.
We’re hosting public meetings, individual and small group meetings, and asking for written feedback to hear how the potential linkage of carbon markets could impact Tribal communities, communities of color, low-income communities, and other communities who face environmental harms and health impacts.
There will be more opportunities for public input before we make a final decision on linkage, including a public hearing to get feedback on a draft linkage agreement.
Ecología busca vincular el mercado de carbono de Washington con los de California-Québec. El proceso de vinculación comenzó al principio del 2023 y lo más pronto que podremos firmar un acuerdo de vinculación es en el 2025 o después. Estamos solicitando comentarios sobre un acuerdo de vinculación y sobre los posibles impactos que la vinculación podría tener en las comunidades más afectadas por problemas ambientales y de salud. Para obtener más información en su idioma, envíenos un mensaje a CCALinkage@ecy.wa.gov.
Bộ Môi Sinh đang theo đuổi việc kết hợp thị trường carbon của Washington với thị trường carbon California - Québec. Quá trình kết hợp bắt đầu vào đầu năm 2023 và sớm nhất chúng tôi có thể ký kết thỏa thuận kết hợp là năm 2025 hoặc muộn hơn. Chúng tôi đang tìm kiếm phản hồi về thỏa thuận kết hợp và cách kết hợp có thể tác động đến các cộng đồng bị ảnh hưởng nhiều nhất bởi các vấn đề về môi trường và sức khỏe. Vui lòng liên hệ với chúng tôi theo địa chỉ CCALinkage@ecy.wa.gov để biết thông tin bằng ngôn ngữ bạn muốn.
주 환경부는 워싱턴 주의 탄소 시장을 캘리포니아-퀘벡 탄소 시장과 연계하는 것을 추진하고 있습니다. 연계 프로세스는 2023년 초에 시작되었으며, 연계 협정에 서명할 수 있는 가장 빠른 시기는 2025년 또는 그 이후입니다. 우리는 연계 협정에 대한 피드백과 연계가 환경 및 건강 문제로 가장 큰 영향을 받는 지역사회에 미칠 수 있는 잠재적 영향에 대해 의견을 구하고 있습니다. 선호하는 언어로 된 정보를 원하시면 CCALinkage@ecy.wa.gov로 문의해 주십시오.
Le Département Ecology poursuit ses efforts pour relier le marché du carbone de l’état de Washington avec ceux de la Californie et du Québec. Le processus de liaison a débuté début 2023 et l’accord de liaison pourrait être signé en 2025 au plus tôt. Nous aimerions recevoir du feedback sur ce possible accord et les effets qu’il pourrait avoir sur les communautés les plus exposées aux problématiques environnementales et sanitaires actuelles. Veuillez nous contacter sur CCALinkage@ecy.wa.gov pour obtenir des informations dans votre langue préférée.
We offer free language services about our programs and services for people whose primary language is not English. We can provide written information in your preferred language and interpreters in person or over the telephone.
