Each year, Washingtonians experience the worsening effects of climate change, from shrinking snowpacks, to longer droughts, intensifying wildfires and rising sea levels. Solving this global problem requires reducing emissions on the largest scale possible, and Washington is taking big steps in that direction.
On March 20, Washington, the state of California and the Canadian province of Québec issued a joint statement declaring their intent to explore the formation of a shared carbon market. Coupled with recent legislation that paves the way for linkage on our end, Washington is on a promising path. A larger, shared carbon market between the three jurisdictions is expected to stabilize allowance prices, lower the cost of decarbonization, and foster the type of intergovernmental collaboration needed to tackle climate change.
Recap: What is linkage?
The Climate Commitment Act created Washington’s Cap-and-Invest Program, which requires large emitters of greenhouse gases to acquire allowances equal to their emissions. The state sells allowances at quarterly auctions, issuing fewer each year, meaning fewer overall emissions are allowed. Market participants can also buy and sell allowances from each other. In this carbon market, the shrinking supply of allowances incentivizes companies to cut emissions in accordance with Washington’s commitment to get to net zero by 2050.
California and Québec have similar programs and have shared a carbon market since 2014. In a linked market between all three jurisdictions, allowances issued by California and Québec could be used by Washington businesses to cover their emissions and vice versa. Washington would host joint auctions with California and Québec, meaning the three jurisdictions would have the same allowance prices, and market participants could buy and sell across jurisdictions. Each government would retain authority over its program, but businesses would gain access to a larger pool of allowances. The California-Québec market is about six times the size of Washington’s standalone market.
Washington has been pursuing linkage since November 2023, but the joint statement released on March 20, 2024 was the first time California and Québec have formally expressed interest in the formation of a shared carbon market. Washington has also been preparing for potential linkage through legislation. Senate Bill (SB) 6058, which passed during the 2024 legislative session, allows us to harmonize certain aspects of our Cap-and-Invest Program with programs in other jurisdictions in order to facilitate linkage. It’s important to remember that neither the bill nor the joint statement guarantees or enacts linkage—that can only be done by reaching an agreement with California and Québec.
Why link?
As Department of Ecology Director Laura Watson wrote in her letter to Gov. Jay Inslee announcing her decision to pursue linkage, “The climate crisis cannot be solved by Washington, or any one state, acting on its own. It demands coordinated action.” This sentiment was echoed in the March 20 joint statement:
“The California Air Resources Board on behalf of the state of California, the Gouvernement du Québec, and the Department of Ecology representing the state of Washington each recognize that fighting climate change requires sustained collaboration by all governments.”
From left to right: Climate Pollution Reduction Program Manager Joel Creswell, Washington Department of Ecology Director Laura Watson, Director General of Québec's Ministry of the Environment and the Fight Against Climate Change Jean-Yves Benoit, Deputy Executive Officer of Climate Change & Research at the California Air and Resources Board (CARB) Rajinder Sahota, and CARB Board Chair Liane Randolph at the North American Carbon World Conference on March 20, 2024.
Gov. Inslee also recognized the importance of our progress towards linkage while speaking at the North American Carbon World conference the same day the joint statement was issued. “Even as national governments have been slow to act, subnational governments around the world are moving faster to stem the dangers of greenhouse gas pollution,” Inslee said.
Through linkage, we can prove that large-scale carbon pricing is an efficient and effective way to combat climate change and send a powerful message that it’s possible to work together to solve this global problem. This type of collaboration generates momentum for larger efforts in the future.
We also expect linkage to benefit businesses and consumers. Larger markets generally have lower and more consistent pricing because access to more allowances, through both auctions and trading, reduces the pressure to bid up prices in order to secure future allowances. With more certainty about their costs, companies can properly budget for investments in decarbonization. And when companies decarbonize, they need fewer allowances, reducing their compliance costs and allowing them to deliver lower prices to consumers. Additionally, these investments will ultimately drive down the cost of decarbonizing through competition and economies of scale.
What’s next?
The earliest we can reasonably expect to link markets is in late 2025. Though it’s an ambitious timeline, the passage of SB 6058 makes it possible, and the joint statement is a significant step toward a linkage agreement.
This spring, we will start working on implementing SB 6058 through rulemaking. Before making a final decision to link, we’ll ask for input on a draft linkage agreement. We remain committed to ensuring that linkage benefits communities that have been disproportionately affected by climate change and pollution through an Environmental Justice Assessment and ongoing consultation with Tribes, and engagement with overburdened communities, the Environmental Justice Council, and the public.
Sign up for CCA email alerts to stay up-to-date on linkage and other topics related to the Climate Commitment Act.