California Opens the Door to a Three-Way Carbon Market

California has cleared the last legal hurdle before formal rulemaking to add Washington to its carbon market with Québec. Washington finalized its own linkage rules the same week. If California and Québec complete their remaining steps, the three jurisdictions expect to run joint auctions and share one allowance price starting in 2027.

Canada added a second storyline on September 24. Ottawa is now exploring a framework to trade carbon credits between countries under Article 6 of the Paris Agreement, with carbon removal named as a priority.

The two efforts are separate. Together, they point North American carbon markets toward deeper connections and more room for removal projects.

What Did Newsom Approve for Washington's Carbon Market?

California Governor Gavin Newsom made the findings state law requires before linkage rulemaking can begin. He took that action on September 21, 2026, and announced it at Climate Week NYC on September 23.

Senate Bill 1018 requires the governor to confirm that a partner program meets California's standards. The California Air Resources Board (CARB), the state agency that runs Cap-and-Invest, requested those findings in early September.

CARB can now open the public process to accept Washington's compliance instruments. That rulemaking is the final California step before the markets formally link.

The program behind it is large. California's Cap-and-Invest covers sources responsible for 80% of statewide greenhouse gas emissions, according to the Governor's Office in September 2026. To date, it has generated $37 billion for climate investments.

Québec has been California's market partner since January 1, 2014. Washington would join what its governor's office calls the largest subnational carbon market in the world. Cap-and-Invest revenue also funds programs like California's $11 million direct air capture fund.

How Did Washington Finish Its Side of Linkage?

The Washington State Department of Ecology, which runs the state's Cap-and-Invest Program, adopted its linkage rules on September 23, 2026. The amendments take effect October 24, 2026.

The rules align Washington with California and Québec on compliance periods, price containment, registration, corporate associations and auctions. They also set procedures for announcing a linkage effective date.

The three governments signed a non-binding linkage agreement in Seattle on June 25, 2026. That agreement set expectations for cooperation, but it did not activate linkage on its own.

Québec still needs a formal rulemaking led by its Ministry of the Environment. It also needs National Assembly approval of the agreement and ratification by Order in Council.

>> In Other News: Absolute Climate Opens Consultation On EAC Method For Gas Power With CCS

Ecology must give the market at least 90 days' notice before linkage takes effect. If linkage is live before November 1, 2027, eligible California and Québec allowances from vintage 2026 or earlier could cover Washington emissions from 2023 through 2026.

Why Does a Bigger Market Matter for Buyers and Developers?

A linked market gives covered companies a far larger pool of compliance instruments. The joint California-Québec market is almost six times the size of Washington's, based on 2023 through 2026 allowance budgets analyzed by Ecology in October 2023.

Larger markets tend to price more steadily because more buyers and sellers absorb swings. Ecology says that predictability helps companies commit capital to long-term emissions cuts.

Washington allowances have cleared at roughly double the joint market's level this year. Its June 2026 quarterly auction settled at $64.56 per allowance, according to Ecology's Auction #14 summary report.

Market and Auction	Date	Current Settlement Price	Context
Washington Auction #13	March 2026	$65.26	Settled at the 2026 reserve Tier 1 trigger price
California-Québec Joint Auction #47	May 2026	$28.81	Regular quarterly auction, all current allowances sold
Washington Auction #14	June 2026	$64.56	Regular quarterly auction, all current allowances sold
California-Québec Joint Auction #48	August 2026	$32.48	Auction reserve price was $27.94

The August joint auction sold all 49,016,180 current allowances at $32.48, per the California and Québec summary results. That price sat $4.54 above the $27.94 reserve price.

Offset developers gain room too. During Washington's 2023 through 2026 compliance period, up to 50% of offset credits used can come from projects in a linked jurisdiction. That share drops to 25% in later periods.

Emissions impact is part of the case. Linking California and Washington could cut an additional 45 million metric tons of climate pollution through 2045. That estimate comes from Greenline Insights modeling cited by the Environmental Defense Fund in September 2026.

Financing tools are maturing alongside the markets. Carbon insurer Kita has expanded its underwriting capacity by 450%, as our carbon insurance coverage reported.

>> RELATED: Can California's Carbon Market Survive Without Federal Backbone?

Canada Explores Article 6 Trading with Carbon Removal in Focus

Environment and Climate Change Canada announced on September 24, 2026 that Ottawa is exploring a framework for trading internationally transferred mitigation outcomes, or ITMOs. Carbon removal technologies and nature-based solutions are named as activities that could attract new investment.

Minister Julie Dabrusin made the announcement in Ottawa. ITMOs let countries transfer verified emissions reductions and removals toward each other's climate targets.

Canada says traded outcomes must be real, additional, verified and permanent, with no double counting. No final framework, timetable or launch date has been announced. Ottawa will first engage provinces, territories, Indigenous organizations and other partners.

The effort complements Canada's Spring Economic Update, which committed over $13 billion in international climate finance. Ottawa says that makes Canada one of the first countries to pledge climate finance beyond 2026.

Canada has become a base for removal developers, including Deep Sky's planned 500,000-tonne direct air capture facility in Manitoba. Our North American carbon removal year in review tracked that shift.

International buyers could give direct air capture developers another revenue channel. Durable removals already earn premium credit prices in voluntary markets.

Aviation is another possible demand source. Article 6 units can be authorized for international uses such as the CORSIA aviation scheme, which enters its mandatory phase in 2027. In Québec, Boeing's $10 million SAF partnership is also targeting first production in 2027.

How Do the Two Developments Compare?

The West Coast linkage and Canada's Article 6 work run on separate tracks. Canada's framework would not connect to the California-Washington-Québec market.

Factor	California, Washington and Québec	Canada Article 6 Framework
Type	Existing compliance markets moving to direct linkage	Proposed framework for international ITMO transfers
Stage	Formal rulemaking underway, Washington rules adopted	Policy exploration and consultation
Timing	Expected to operate in 2027	No implementation date announced
What Moves	Allowances usable across all three jurisdictions	Verified reductions and removals between countries

Both tracks reward high-integrity accounting. Groups like the Carbon Removal Alliance have also pushed for compliance pathways for durable carbon removal.

The Road to the First Joint Auction

The next milestones sit with CARB's public rulemaking and Québec's regulatory and legislative steps. Once all three governments finish, Ecology's 90-day notice will set the start date.

Officials still target 2027 for joint auctions across California, Washington and Québec. Canada's ITMO framework will move on its own schedule, with carbon removal at its center.

More connected markets could mean more buyers, steadier prices and new doors for carbon removal developers across North America.

For ongoing coverage of carbon removal, BECCS, and corporate CDR procurement, subscribe to Decarbonfuse.com.