Governor Newsom announces key step forward in California plan to link carbon markets with Washington State
“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 California is taking this critical next step toward linkage.”
“Linking California’s and Quebec’s carbon markets with Washington’s strengthens our collective ability to cut pollution and protect public health, while also keeping our economies strong,” said California Secretary for Environmental Protection Yana Garcia. “Our Cap-and-Invest program has helped us slash emissions in California while still growing our economy and generating billions of dollars in investment for our state. Further linking our market with other aligned programs will strengthen our program and keep delivering climate improvements for the people of California.”
“When the federal government stalls, states step up,” said California Air Resources Board Chair Lauren Sanchez. “By welcoming Washington State into our carbon market, we’re cutting costs for families while California keeps slashing emissions. This is what climate leadership looks like — states and regions proving that bold action and affordability aren’t a trade-off, they’re a partnership. Together, we’re building the clean economy the world needs.”
California law requires that the Governor make specific findings about a partner state’s carbon market before CARB may proceed with linking markets. Earlier this month, CARB requested that the Governor make those findings. Today, the Governor announced that, on Monday, September 21, he took action to do so, consistent with advice he received from the Attorney General as required by law.
The Governor’s action allows CARB to begin the public regulatory process needed to formally link the markets — the final step before the markets are formally linked. The proposed linkage would create a larger, more stable carbon market to help California continue cutting climate pollution efficiently while supporting investments in cleaner transportation, affordable housing, wildfire resilience, and other community priorities.
How we got here
California’s Cap-and-Invest Program is part of the larger suite of programs the state has been deploying for two decades to address climate pollution. It establishes a declining limit on emissions from the largest polluters, including large factories, energy companies, and oil and gas suppliers, accounting for 80% of the state’s total climate emissions, and requires polluters who go beyond this limit to invest in projects that benefit Californians.
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—making it even more efficient and economical for entities to meet their obligations, and thus allowing each state to reduce emissions even more effectively.
Last year, the Governor and Legislature extended California’s Cap-and-Invest Program through AB 1207 (Irwin) and SB 840 (Limon), underscoring the program’s central role in California’s leading work cutting climate pollution while growing the state’s economy.
The legislation also provided long-term certainty and statutory direction for program updates to address affordability, protect jobs, and keep California industries competitive. CARB adopted those updates in May, providing greater regulatory certainty and sending a strong signal for continued investment.
As we continue advancing towards our climate goals, linking our program with other jurisdictions can make the program even stronger and more durable, while also expanding opportunities for many industries to reduce their emissions even more cost-effectively. Following CARB’s May action and with an updated and durable program in place, California and Québec signed a linkage agreement with the State of Washington in June to begin the early process of linkage.
About Cap-and-Invest
Cap-and-Invest is estimated to be 4–6 times more cost-effective than traditional prescriptive regulations. Over its 13 years of implementation, the program has undergone eight regulatory updates and has achieved nearly 100% compliance.
It stimulates both direct and indirect investment of tens of billions of dollars into the state’s economy with investments in clean energy, natural and working lands, local transit and rail projects, affordable and sustainable housing, clean water, healthy forests and wildfire prevention and response, and more.
To date, Cap-and-Invest has:
- Helped California meet its first major statewide goal to reduce climate pollution, six years ahead of schedule
- Generated $37 billion dollars for climate investments
- Funded 600,000 projects statewide
- Supported 143,000 jobs
- Cut millions of tons of carbon pollution
- Delivered $16 billion in utility bill credits directly to Californians
Recent updates to the program 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 estimated to provide $10 billion in direct relief to electricity customers through bill credits and generate an estimated $8 billion for the Greenhouse Gas Reduction Fund through 2030.
California at Climate Week NYC
Climate Week NYC convenes government leaders, businesses, investors, advocates, researchers, philanthropies, and community leaders from around the world to advance practical climate solutions.
Governor Newsom is participating to highlight California’s record of cutting pollution while growing the economy, strengthen partnerships with international and subnational leaders, and accelerate progress on clean energy, zero-emission transportation, climate resilience, and economic opportunity.
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