On June 24, 2026, the California Air Resources Board (CARB) officially reported the issuance of 13,738 new compliance offsets over its trailing two-week reporting period, with an issuance date of June 23, 2026. across two projects. Approximately 155,000 offsets were issued in the previous reporting period, dated June 9, 2026. This marks a significant slowdown in the creation of new offsets and reflects a limited pipeline of new projects under California’s stringent carbon offset protocols.
At the same time, the update highlighted an important development for the compliance carbon market, driven by a large volume of 2018-vintage offsets clearing their eight-year invalidation window. These credits have now passed the period during which they could be subject to regulatory invalidation and have officially transitioned to zero-liability California Compliance Offsets (CCO-0s). This marks the largest volume of offsets to attain CCO-0 status so far in 2026, increasing the supply of credits with no remaining invalidation risk and further strengthening confidence in offset availability within the Western Climate Initiative (WCI) market.
When CARB initially issues offset credits for projects such as improved forest management or mine methane capture, those credits carry a multi-year invalidation risk. As a result, offsets that remain within their three-year or eight-year liability periods typically trade at a discount. If CARB later determines that a project violated regulatory requirements, experienced a reversal event, or contained fraudulent data, the credits may be invalidated, and compliance entities must replace them.
However, once an offset successfully passes its regulatory review period without challenge, it becomes a CCO-0. At that point, all invalidation risk is permanently removed, making the credit a highly secure compliance instrument that generally trades at parity with California Carbon Allowances (CCAs). Once an offset completes its 8-year or 3-year invalidation period without challenge, it is informally known as a CCO-0. At that point, all invalidation risk no longer exists; that's why CCO-0s trade at a slight premium over CCO3s (CCOs with a 3-year validation period) or CCO8s (CCOs with an 8-year validation period).
Implications for California
Although new offset issuance is slowing due to tighter oversight and a shrinking pool of eligible projects, the conversion of a record number of offsets into CCO-0s adds a substantial volume of high-quality liquidity to the market.
The primary benefit for California compliance entities is reduced risk and greater compliance flexibility. Utilities, industrial facilities, and fuel suppliers facing rising compliance costs, with CCAs continuing to trade around USD 32.20 based on the latest pricing from the Intercontinental Exchange (ICE), may increasingly incorporate these newly converted CCO-0s into their compliance strategies. Because CCO-0s no longer carry invalidation risk, compliance entities do not need to account for potential future credit replacement costs. This additional supply of risk-free offsets provides a valuable compliance instrument and may help moderate demand for allowances.
Implications for the California–Québec–Washington Linkage
With the signing of the California, Québec, and Washington linkage agreement on June 25, this development also carries important implications for the future integrated carbon market, which is expected to become fully operational by 2027.
Québec has already proposed regulatory changes that would reduce its offset usage limit from 8% to 6% while requiring a larger share of offsets to originate from domestic projects. Given that California has a much larger and more mature offset market, its growing supply of risk-free CCO-0s could become an attractive compliance instrument across the linked market. As a result, CCO-0s may play an increasingly important role in supporting liquidity and market stability throughout the integrated cap-and-invest system.
The growing supply of California CCO-0s could also benefit Washington compliance entities once linkage occurs. Historically, Washington Carbon Allowances (WCAs) have experienced significant price volatility and periodic supply constraints. Through linkage with California and Québec, Washington participants will gain access to a much larger carbon market and a broader pool of compliance instruments. However, in Washington, covered entities may use offsets for up to 8% of their compliance obligation, with 5% for Non-Tribal lands, which will decrease to 4% for Non-Tribal lands from the second compliance period (2027 onwards). The increasing focus on domestic offsets in Washington and Québec may limit the availability of offsets that can move freely across jurisdictions. Consequently, California’s substantial pool of de-risked CCO-0s could play a critical role in addressing structural supply imbalances and supporting market stability throughout the linked carbon market.
A substantial inventory of risk-free California CCO-0s could help reduce concerns about supply shortages and extreme price movements. In addition, on June 16, Washington adopted amendments to its U.S. Forest Projects Protocol to increase the focus on domestic offset generation. Rather than relying solely on newly established regional offset programs, Washington buyers will be able to access California’s mature and de-risked offset supply.
Overall, the increasing volume of CCO-0s strengthens compliance certainty, supports market liquidity, and could contribute to long-term price harmonization across California, Québec, and Washington as the jurisdictions move toward a more integrated North American carbon market.
ClearBlue is actively monitoring these developments. For more information regarding ClearBlue’s advisory services or market intelligence coverage, please contact us.