Cap-and-Invest linkage

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 business. 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 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."

For more information, visit the Cap-and-Invest offsets webpage.

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 identified communities in stages over multiple years. Steps include:

• Rulemaking process to set stricter air quality standards in the 16 communities.
• Expand air monitoring network in the 16 communities.
• Grant program for these communities.
• Track and report every two years about air pollution, greenhouse gas emissions, and health impacts in each community.
• Re-evaluate the list of communities every six years.

In a linked market, we'd continue to expand air quality monitoring and reduce pollutants in these communities.

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.

More about our air quality work.  

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, we would still have the same overall limit on using offset credits for compliance, offsets would still be "under the cap," and the majority of offset credits would need to come from projects that benefit Washington. 

For more information, see "How would offsets work in a linked market."

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 Climate Capacity Grants: provide support for federally recognized Tribes with lands and territories in Washington state to engage in a range of climate-related activities, including developing clean energy projects; consulting on spending decisions; engaging in clean energy siting processes; applying for state or federal grant funding; and activities supporting climate resilience and adaptation.
• Tribal Carbon Offset Assistance Program Grants: provides funding for Tribes to plan, design, and assess the feasibility of carbon offset projects on federally recognized Tribal lands in Washington. The Legislature must allocate at least $5 million biennially for the carbon offset grant program.

In a linked market, both these overburdened community and Tribal funding requirements and grant programs would continue.

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.

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 rulemaking process in April 2024.

Visit the Cap-and-Invest and 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 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.  

We’re currently working with California and Québec to develop a linkage agreement. We held a comment period for the linkage agreement from Nov. 21, 2024 through March 31, 2025. Read the comments.

We’ll 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, 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 2027. 

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.