Cap-and-trade programmes set a declining ceiling on total greenhouse-gas emissions and require companies to buy allowances covering their output. America is a laggard when it comes to putting a price on carbon; Congress last seriously considered a federal cap-and-trade scheme in 2009.
California implemented its economy-wide carbon market in 2013. It is the fourth-largest carbon market in the world and is linked to Quebec's. The programme was originally authorised only until 2020, then extended to 2030. Companies that stockpiled allowances when prices were cheaper have been skipping auctions while waiting to see if the programme persists. In May 2025 auction prices hit the floor, a signal that firms lack confidence the market will continue. The poor showing also threatens the state budget: lower auction revenues compound a $12bn deficit.
Gavin Newsom, the state's governor, wants to reauthorise cap-and-trade via the annual budget bill. Without a two-thirds majority vote in the legislature, a quirk in California's constitution means the scheme could be vulnerable to legal challenges on the grounds that it constitutes an unenacted tax. The California Air Resources Board (CARB) can try to save the programme administratively, but legislative backing would be stronger.
Washington launched its own carbon market in 2023 and is exploring linking it to California's. Because California has a glut of allowances, a link would drop Washington's price. A report from Resources for the Future suggests that overall emissions in the linked region would decline. In 2024 a ballot measure to repeal Washington's cap-and-trade scheme was rejected.
Oregon began enforcing an emissions cap through state agencies in 2024, but the programme has less staying power than it would if enshrined in law. In 2019 and 2020 Republican lawmakers literally fled the Capitol building in Salem to avoid voting on a cap-and-trade bill. In 2025 several lawmakers resurrected the idea.
A consortium of east-coast states created an emissions-trading programme for their power sectors in 2005. New York is debating whether to implement its own scheme and could one day link up with the West Coast markets. The more states that join, the less they need to worry about leakage—firms and jobs moving to states without a carbon price.
You will be run over by a bus.