On September 23, at New York Climate Week, California Governor Gavin Newsom announced that California is moving ahead with what his office called the next-to-last step in linking its carbon market with Washington State's. Two days earlier, Newsom made the legally required findings that clear the California Air Resources Board (CARB) to begin the formal public rulemaking needed to accept Washington allowances into California's market. Washington Governor Ferguson was also on hand for the announcement and confirmed that state had just finalized its linkage-related rulemaking. The Washington Department of Ecology signed the final version of its updated cap-and-invest rules on September 17, and those rules take effect October 24. Officials continue to target full joint operation sometime in 2027. Quebec representatives were absent from the public announcements, given the upcoming October provincial elections.
“By joining forces with our partner in Washington State, we will build a stronger, more durable carbon market that will drive investment, cut pollution, and power the clean economy,” Newsom said in the announcement. Washington Governor Bob Ferguson struck a similar note: “Linkage isn’t just good climate policy — it’s smart economics. Linking will unlock greater emissions reductions, lower the cost of clean technologies, and create good-paying jobs in high-growth industries.”
The Washington Cap-and-Invest Rulemaking
Washington's Cap-and-Invest Program sets a declining annual cap on the greenhouse gas emissions of roughly 100 of the state's largest polluters, who must buy or receive allowances equal to what they emit. The 2026 rule Ecology adopted on September 17 (effective October 24) locks in changes state lawmakers ordered last year through House Bill 1975, after the program's first two years produced higher and more volatile prices than regulators wanted.
The updated rule holds the price ceiling at a flat USD 80 per allowance for both 2026 and 2027, retroactively enlarges the 2023–2026 emissions budgets by about 6 million metric tons (2.68%) to ease near-term scarcity, and raises how much of each auction a single covered business can buy, from 10% to 25% (with a new, separate 4% cap for financial and other general market participants). The cost containment changes, including the ceiling price, would be aligned with WCI upon linkage. The rulemaking was necessary to facilitate linkage and also to act as an insurance policy to constrain pricing in Washington’s standalone program should linkage be delayed.
It also formally defines a “linkage effective date” as the specific day Washington will start accepting California and Quebec allowances for compliance, and vice versa. Ecology must publicly announce the effective date at least 90 days in advance.
Linkage Means Joint Auctions and a Common Allowance Price
Once linkage takes effect, the jurisdictions will hold joint allowance auctions, with bid lots comprised of a mix of each jurisdiction’s allowance offering. The linkage will lead to a common allowance market price and let companies trade allowances and offset credits freely across every linked jurisdiction. Note, however, prices for offset credits may vary according to individual usage limits and designations. Liquidity will increase. California and Quebec have run this way since their own markets linked on January 1, 2014, and Ontario briefly joined that system before withdrawing in 2018.
Washington, California, and Quebec signed a preliminary linkage agreement on June 25, 2026, but signing that agreement only authorizes the process and doesn't automatically turn linkage on. Each jurisdiction still has to complete its own rulemaking: Washington finished first, with its rule effective October 24. California's is next, with CARB's public rulemaking process now cleared to begin following Newsom's authorization. Quebec's requires a separate rulemaking that becomes final once its linkage agreement is ratified by an Order in Council. Only once all three are done can Ecology, CARB, and Quebec jointly declare the linkage effective date.
What the Market Is Already Pricing In
Washington's allowance prices have had a volatile few years: from a USD 48.50 launch auction in early 2023, prices climbed past USD 70 by the end of 2025 as tight supply and legal challenges to the program kept the market on edge. HB 1975's price ceiling and cap adjustments were designed to calm that volatility, and prices did hold in the low-to-mid USD 60s through the first half of 2026.
Washington's September 2026 quarterly auction settled at just USD 39.50. The surprise settlement came right after California and Quebec wrapped up their own “Program Review” processes to update the Cap-and-Invest and Cap-and-Trade programs. The conclusion of the Program Review clears the runway for each to begin its linkage rulemaking. Secondary-market trading has kept drifting lower since, with Washington's front-December contract closing around USD 38 on September 24.
In contrast pricing in WCI, the linked California-Quebec market, has been soft, trading in a relatively tight band all year and currently around USD 31. Linkage should eventually pull the two prices together into one shared market price. Washington's premium over WCI has been shrinking, as shown on the chart. ClearBlue sees upside for WCI allowance pricing with the rulemaking amendments applying from 2027.
Washington secondary-market allowance prices (front-December contract) vs. the California-Quebec (WCI) secondary spot price, daily, 2026 year-to-date. Source: ClearBlue Markets, Vantage Platform, September 2026.
If California's or Quebec's rulemakings stall, or if the eventual linkage effective date slips well past 2027, Washington's price will keep trading on its own tight fundamentals.
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Sources: Office of Governor Gavin Newsom (Sept. 23, 2026); Office of Governor Bob Ferguson (Sept. 23, 2026); Washington State Department of Ecology, CCA Market Notice: Order of Adoption (CR-103) Signed (Sept. 17, 2026); ClearBlue Markets Vantage platform (Washington and WCI price and auction data); Washington State Standard (Sept. 23, 2026).