Chapters 173-441 WAC and 173-446 WAC, Cap-and-Invest Program Updates and Linkage Rulemaking

Proposed amendments:

• Allow for the option to link Washington’s carbon market with the California-Québec carbon market, creating a unified carbon market across the three jurisdictions. This rulemaking sets the stage for potential future action to link with California and Québec by aligning certain aspects of the Cap-and-Invest Program rules with those jurisdictions, including compliance period lengths, allowance price containment provisions, registration requirements, corporate association requirements, and auction processes. The rule includes provisions that would become effective upon linkage with another jurisdiction.
• Set the allowance budgets for future compliance periods (2027-2050) and adjust 2023 through 2026 budgets consistent with statutory direction, ensuring that emissions reductions align with Washington's 2030, 2040, and 2050 greenhouse gas emissions limits. This rule also facilitates the entry of additional sectors — waste-to-energy and railroads — to coverage under the Cap-and-Invest Program in future compliance periods, as required by statute.
• Address topics associated with imported electricity and centralized electricity markets, as well as amendments relevant to allowance allocation to electric utilities.
• Implements sections of recently enacted legislation, including Senate Bill 6058 (2024) to facilitate linkage; House Bill 1975 (2025), which modifies auction price containment mechanisms, allowance supply, and ceiling prices; House Bill 1912 (2025), which updates the exemption for fuels used for agricultural purposes; and House Bill 2416 (2026), which concerns the treatment of waste-to-energy facilities.
• Enhance clarity, strengthen enforcement, and ensure that the market remains effective. These amendments are based on implementation experience from the start of the Cap-and-Invest Program, in 2023, to date.

Overall, Ecology anticipates that these amendments will improve program implementation, facilitate potential future linkage, and ultimately strengthen market stability and confidence, as well as ensure that the rule aligns with changes to statute.

Comments are accepted from June 1, 2026, at 12:00 AM to July 22, 2026, at 11:59 PM. For more information, visit the rulemaking webpage.

Background

We write rules to implement and enforce state and federal environmental laws and rules. Ecology follows a three-phase process for rulemaking:

1. Announcement and development
2. Proposal
3. Adoption

For each phase of the process, we update the rulemaking web page and notify interested parties. We also file notice in the Washington State Register. To learn more about Ecology’s rulemaking process, read the Frequently Asked Questions.