Washington Governor Bob Ferguson and California Governor Gavin Newsom take next steps in linking carbon markets in 2027 during New York Climate Week

Washington completes the final step in its linkage process, California formally authorizes linkage

OLYMPIA - Today, Washington Governor Bob Ferguson and California Governor Gavin Newsom announced they have taken the next steps toward Washington joining the California-Québec carbon market in 2027. Together, these three jurisdictions would rank as the third-largest economy in the world.

Washington crossed a major milestone. The state concluded its linkage process by finalizing regulatory changes that make Washington's market compatible with the California-Québec carbon market, such as aligning rules for how auctions are conducted. With that, Washington completed the steps it needs to take in order to link markets, the culmination of three years of rigorous analysis and public engagement.

Governor Newsom shared today that he has authorized California to move forward with linkage, making the formal findings legally required for California to move ahead with the final step to link the two markets. California law requires that the Governor make specific findings about a partner state's carbon market before the California Air Resources Board (CARB) may proceed with linking markets.

California's action allows CARB to begin the public regulatory process in that state - the final step before the markets are formally linked. Québec is also working toward regulatory updates this year. Earlier this year, the three jurisdictions signed a linkage agreement that laid the groundwork for joint operations. The jurisdictions are expected to link markets in 2027.

"States and subnational governments are stepping up and leading at a time when the federal government is trying to dismantle U.S. climate policy," said Governor Ferguson. "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. We're excited to be moving forward."

"California has long shown climate action means a stronger economy, cleaner air, and billions of dollars of investment back into communities across our state," Governor Newsom said. "Meanwhile, Donald Trump and his big-polluter cronies are hell-bent on doing the opposite: more pollution, more uncertainty, and higher costs for working families. California is choosing a different path. We're choosing certainty, partnership, and clean energy. 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 of the future."

California was the first U.S. state to launch a carbon market in 2013. In 2014, it joined with the Canadian province of Québec. In 2023, Washington became the second U.S. state to launch a carbon market. Washington's market was designed to link so businesses could access the benefits of a larger market. This unprecedented climate partnership means businesses in all three jurisdictions can make more predictable, long-term investments in reducing greenhouse gases. With greater investment, the cost of emission-reducing technologies will go down, leading to even higher rates of adoption and local economic benefits like job growth.

Putting an economy-wide price on greenhouse gas emissions is widely seen as the best policy tool for addressing climate change, and carbon markets are the most affordable way to do it. In this market-based system, the state sets an overall limit on emissions that declines each year, but it does not set the price of emissions. Instead, the price is set through auctions where companies compete to purchase allowances for every metric ton of greenhouse gases they emit. The price can easily adapt to changes in market conditions, and companies that can reduce emissions at the lowest cost move first.

In a linked market, each jurisdiction will contribute their supply of allowances to joint auctions, creating a single carbon price across all three. Larger markets provide more stable prices, and price stability is a key part of accelerating decarbonization because it gives businesses the certainty they need to plan for long-term, capital-intensive projects. Over time, as more companies invest in emissions-reducing technologies, those technologies become cheaper, making it easier for others to take action.

The Washington-California-Québec carbon market is expected to lead to greater total emissions reductions across the three jurisdictions. Washington's addition to the market also creates momentum for other states and other subnational governments to implement linkage-ready carbon markets by paving a clear pathway for others to follow.