On June 1, 2026, the Washington Department of Ecology proposed regulatory amendments to support the future linkage of Washington's Cap-and-Invest Program with the joint California-Quebec carbon market under the Western Climate Initiative (WCI). Although Washington had indicated its intent to link with the California–Quebec market since launching its cap-and-invest system, the proposal marks a formal step in the linkage process. Building on a draft linkage agreement released in March 2026, the proposal would align key market rules and administrative systems across the three jurisdictions, including compliance timelines, allowance tracking, accounting procedures, and other program requirements.
As per Ecology, the amendments are intended to establish compatibility between the markets and pave the way for a formal linkage agreement in 2026, with a shared carbon market potentially becoming operational in 2027 to coincide with Washington’s second compliance period (CP2). The proposal follows an analysis indicating that linkage could achieve greater greenhouse gas reductions while lowering overall compliance costs. In addition to supporting linkage, the rulemaking would update future allowance budgets to remain consistent with Washington's greenhouse gas reduction targets through 2050, implement recently enacted legislation, and introduce operational improvements to enhance program efficiency. These amendments are based on implementation experience from the start of the Cap-and-Invest Program, in 2023, to date.
The proposed amendments are as follows:
- Enable future linkage between Washington's Cap-and-Invest Program and the California–Quebec carbon market by aligning key program elements, including compliance periods, price containment mechanisms, registration requirements, corporate association rules, and auction processes. Certain provisions would take effect only upon linkage.
- Set allowance budgets for 2027–2050 and adjust 2023–2026 budgets to support Washington's 2030, 2040, and 2050 emissions reduction targets.
- Update rules related to imported electricity, centralized electricity markets, and allowance allocation for electric utilities.
- Implement provisions from recent legislation, including SB 6058 (2024) on linkage, HB 1975 (2025) on auction and price containment mechanisms.
- Improve program clarity, strengthen enforcement, and incorporate implementation experience since the Cap-and-Invest Program launched in 2023.
As per Ecology, participation in the larger market would provide Washington businesses with more stable and predictable carbon allowance prices, supporting long-term emissions reduction investments. Overall, Ecology expects the amendments to improve program implementation, support potential future linkage with other jurisdictions, strengthen market stability and confidence, ensuring that the rules remain aligned with changes to state law.
What this means for WCI compliance markets
The proposed linkage with the California–Quebec carbon market could represent a significant shift for Washington's Cap-and-Invest Program, which has historically operated as a standalone market characterized by tighter supply-demand conditions and higher allowance prices. By enabling allowances to be traded across all three jurisdictions, the linkage may increase market liquidity, reduce price volatility, and narrow Washington's pricing premium relative to the broader WCI market. At the same time, Washington would retain key program features, while ensuring that the state-specific climate and community objectives remain intact.
Washington-California-Quebec linkage
In May 2026, Washington, California, and Quebec completed public consultations on the draft linkage agreement that would establish joint market governance, coordinated auctions, and cross-border emissions tracking, laying the foundation for an integrated carbon market across the three jurisdictions. While Washington is moving quickly toward formalizing the linkage, California and Quebec are finalizing their own regulatory updates to further align their programs. California is expected to adopt amendments to its Cap-and-Invest Program in September, while Quebec recently proposed changes to its Cap-and-Trade Regulation, including a lower offset usage limit, a requirement for Quebec-generated offsets, and compliance period adjustments that better align with California's framework. Quebec's proposal is currently under a 45-day consultation period ending in early July, with final regulations expected by the end of summer. As these regulatory updates are finalized by Fall 2026, attention is expected to shift toward completing a binding linkage agreement and establishing a unified multi-jurisdictional carbon market.
Next Steps
- Public comments on the proposed regulations are invited until July 17, 2026.
- ClearBlue is actively monitoring these developments. For more information regarding ClearBlue’s advisory services or market intelligence coverage, please contact us.