OPIS Insights

The U.S. subnational landscape of carbon markets, also known as Cap-and-Invest programs, is undergoing a momentous period of regulatory transition and strategic alignment. From California’s major legislative extension to Washington’s rapid path toward regional linkage with California and Québec under the Western Climate Initiative, and Virginia’s return to the Regional Greenhouse Gas Initiative (RGGI), market participants are navigating complex shifts in compliance carbon markets as we move into 2027.

While uncertainties for key regulatory updates remain, the path forward is getting clearer for how these programs will address their evolving dynamics. To help guide the market through this transition, the International Emissions Trading Association (IETA) and OPIS, a Dow Jones company, have released a joint publication during this year’s Climate Week NYC: 2026 Carbon Market Fundamentals, Pricing Trends and Sentiments: California and US Subnational Markets.

Drawing from OPIS price benchmarks and market intelligence, supported by responses to IETA’s 2026 Mid-year GHG Market Sentiment Survey of its members, the report details historical and forecasted prices, fundamentals and drivers of market behavior and prices, and policy expectations across major North American markets.

California Cap-and-Invest: Bearish Recent Past, Bullish Horizon with Impending Market Linkage with Washington

After experiencing varied trade levels and regulatory delays over the past few years, market sentiment for California Carbon Allowances (CCAs) is turning increasingly bullish through 2030 and beyond. These are some of the leading California carbon market developments we explored in this report.

• Pricing Benchmarks & Expectations: OPIS forecasts the short-term price for V26 Dec 2026 CCAs to reach between $35 and $40/mt by the end of 2026. While the majority of IETA survey respondents anticipated year-end prices in the $30–$35/mt band, recent market activity reinforces an upward trajectory.
• Q3 Auction Signals: The August 2026 CARB Joint Auction #48 saw current-vintage allowances clear at $32.48/mt—the highest settlement price since Q2 2024—with strong demand spilling into advance-vintage 2029 allowances as compliance entities seek to secure lower-cost compliance early.
• Cap Decline Tightening: CARB’s updated regulations set the cap decline rate at 11% for the period of 2027-2030 and ~7% post-2030, shrinking annual allowance budgets by around 118 million allowances between 2027 and 2030, tightening annual budgets down to 158.8 million allowances by 2030 (compared to the previous target of 200.5 million).
• Industrial Decarbonization & Legal Scrutiny: Designed to incentivize energy-intensive, trade-exposed manufacturers to invest in in-state decarbonization rather than relocating to jurisdictions without regulatory carbon pricing, the Manufacturing Decarbonization Incentive (MDI)’s implementation remains subject to ongoing legal scrutiny following a lawsuit filed by Communities for a Better Environment under the California Environmental Quality Act. If the MDI allocation remains paused or restricted, analysts expect a tighter overall allowance supply, supporting higher CCA prices.
• Impending Market Linkage: With regulators from California, Québec, and Washington having signed a formal linkage agreement in June 2026, full operational linkage under the Western Climate Initiative is expected in 2027. Because California’s market represents the vast majority of shared liquidity, CCA pricing is expected to serve as the “center of mass,” drawing WCA prices gradually toward California levels as integration nears.

RGGI’s Resurgence & Program Overhaul

Although the focus of this report is largely on California, RGGI has been the topic of the town for much of Summer 2026 with Virginia’s re-entry to the program in July, triggering sharp price spikes across secondary markets. RGGI has proven to be a structurally mature and resilient program, and is in the process of undergoing significant expansion and rule updates (Model Rule 2025), which take effect in 2027. Notably, RGGI’s cap decline rate accelerates to 10.5% annually (2027–2033), while offset provisions are eliminated and cost-containment mechanisms transition to a two-tiered structure.

Here at OPIS, we believe transparency and price discovery are key to well-functioning markets. As these markets at times have more questions than answers, we’re appreciative of our collaboration with IETA to inform and clarify how carbon pricing regulations are progressing, what work remains, and the sentiment of market participants.

Download the whitepaper: 2026 Carbon Market Fundamentals, Pricing Trends and Sentiments report for expert insights into California and U.S. subnational carbon markets