What you need to know: California, Québec and the State of Washington today officially took an initial step towards linking their carbon markets, bringing increased efficiency, market stability, and driving further investment in cleaner fuels and technology. 

SACRAMENTO – Today, officials from California and Québec signed an agreement with the State of Washington, marking an advancement in the process of linking their Cap-and-Invest with the already linked programs in California and Québec. 

The signing follows an earlier announcement (https://ecology.wa.gov/about-us/who-we-are/news/2024/california-quebec-and-washington-to-begin-linkage-agreement-discussions?utm_medium=email&utm_source=govdelivery) that the governments would begin discussing a linkage agreement and sustained discussions among the governments to ensure alignment on key program and market design elements that would support potential future linkage.  

Representatives of the three governments released the following statements about the significance of the agreement: 

Lauren Sanchez, Chair of the California Air Resources Board  

“Signing this agreement is an important milestone as each government works through our own processes to enable linkage — a move that can help boost climate outcomes, enhance compliance flexibility, and deliver even greater benefits to our residents.”  

Governor Bob Ferguson, State of Washington 

“This is a big moment—not just for Washington and our partners, but for the world. It shows that it’s possible to work together across borders to solve this global problem. This is the type of collaboration we need to reduce emissions at a lower cost and capitalize on the growing demand for clean energy so that we can create prosperous and resilient communities for decades to come.” 

Pascale Déry, Québec Minister of the Environment, the Fight Against Climate Change, Wildlife and Parks   

"This agreement strengthens a climate partnership already recognized worldwide and will provide even greater stability, predictability, and economic efficiency to our shared carbon market. We were among the first governments to demonstrate that it is possible to reduce greenhouse gas emissions while supporting economic growth. The revenues generated by this system are fully reinvested here in Québec to support businesses, communities, and citizens in building a stronger, lower-carbon, and more resilient economy. Our carbon market is at the heart of Québec’s climate and energy transition." 

In California, several additional steps must be completed before linkage can occur: 

• CARB must notify the Governor of its intent to link.  
• CARB will also conduct specified analyses and provide them to the Governor. 
• The Governor must make required findings considering the advice of the Attorney General, including that the potential partner jurisdiction has program requirements equivalent to or stricter than California’s, that under the linkage California may enforce its climate laws to the maximum extent permitted under laws, that the linkage provides for enforcement of applicable laws by California or the linking government, and the linkage does not impose significant liability on the state. 

Should the Governor find that these requirements have been met, CARB may then complete a formal regulatory process to link the programs. 

How we got here 

First authorized by Assembly Bill 32 in 2006, California’s Cap-and-Invest Program remains the most cost-effective way for California to reduce greenhouse gas emissions in covered sectors. It is part of the larger suite of programs California has been deploying for two decades to address climate pollution and achieve the state’s statutorily mandated climate goals. 

California linked with Québec’s Cap-and-Trade System on January 1, 2014. Linkage lets California and another carbon trading program accept each other’s compliance instruments. This means entities subject to the programs can use allowances and credits from the other systems to meet compliance requirements.  

To date, Cap-and-Invest has: 

• Helped California reach its 2020 climate target six years early 
• Generated $35 billion dollars for climate investments 
• Funded more than half a million projects statewide 
• Supported 30,000 jobs 
• Cut millions of tons of carbon 
• Delivered $16 billion in utility bill credits directly to Californians 

Last month, the CARB Board adopted updates (https://ww2.arb.ca.gov/news/carb-adopts-updates-californias-cap-and-invest-program-support-affordability-and-align-climate)to the program to maintain California’s path toward meeting its 2030 and 2045 climate targets while supporting affordability for Californians by managing costs and maintaining a clear long-term signal for clean energy investment in the state. 

The changes are expected to generate $10 billion in electricity bill credits for Californians and $8 billion for the Greenhouse Gas Reduction Fund. They also provide a $4 billion incentive fund for California businesses and jobs and $800 million in added support for industry.