Cap-and-invest linkage

Among other things, we must determine that:

• Joining markets would not 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 ensure their programs provide benefits to vulnerable populations and overburdened communities.
• Linking would not have an overall negative effect on highly impacted communities in any jurisdiction.

In addition, we are required to conduct an Environmental Justice Assessment before we can approve a linkage agreement.

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.

After considering the analysis and input, Ecology’s director made a preliminary decision to pursue linkage on Nov. 2, 2023.

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 linkage rulemaking process in April.

Visit the linkage rulemaking webpage for updates on the process, including draft rule language.

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. 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. Information on how to share your input is available 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.  

California and Québec have their own respective processes to decide whether to link.

Now that all three jurisdictions have expressed interest in linkage, the next step would be to discuss a linkage agreement. In Washington, we would hold a public hearing on the proposed agreement. We'd 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. At this time, we can't predict if or when we would enter into a linkage agreement with California and Québec and start holding joint allowance auctions. This is because all three programs would need to complete regulatory changes before markets could actually be linked.

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.

For more information on compliance deadlines, visit our Cap-and-Invest Auctions and Market webpage.

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 October, 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. We also wrote our regulation to mirror those programs' floor- and ceiling-price calculations.

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 in order to link. All three programs would need to complete regulatory changes before markets could actually link.