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CARB 15-Day Package Overview and WCI/WCA Q2 2026 Auction Expectations and Rulemaking Update

CARB 15-Day Package Overview and WCI/WCA Q2 2026 Auction Expectations and Rulemaking Update

Key Takeaways

cCarbon hosted its Q2 2026 WCI and WCA Pre-Auction Outlook webinar on 21st April 2026; primarily covering CARB’s 15-day package and provide our expectations for the upcoming auctions.
For CCAs, 15 day package is adding additional allowances with increased CAFs, and a potential 118M inflow over 2028-35 with the new Manufacturing Decarbonization Incentive Allocation.
Price expectations in the short term are muted, we expect the upcoming auction to clear at or close to the floor.
In Washington, fundamentals will continue to persist throughout 2027. Any increased trading activity will trigger when Ecology initiates their HB1975 rulemaking for amending program caps and expanding APCR allocation
cCarbon’s base case for linkage between Washington and California remains 2028.
cCarbon expects WCI Joint Auction #47 to clear at the floor price of $27.94, while we expect Auction #14 in Washington to settle at the APCR 1 price level of $65.26.

Executive Summary

cCarbon hosted its Q2 2026 WCI and WCA Pre-Auction Outlook webinar on 21st April 2026, primarily covering the California Air Resources Board’s (CARB) 15-day regulatory package and providing expectations for the upcoming Western Climate Initiative (WCI) and Washington Cap-and-Invest (WCA) auctions.

The 15-day package introduces additional allowance availability through increased Cap Adjustment Factors (CAFs) and a potential 118 million allowance inflow between 2028–2035 to run Manufacturing Decarbonization Incentive allocation program (MDI).

We expect the near-term price expectations to remain muted and expects WCI Joint Auction #47 to clear at or near the floor price of $27.94.

In Washington, underlying fundamentals are expected to persist through 2027. Increased trading activity is anticipated only upon initiation of HB 1975 rulemaking by the Department of Ecology, particularly relating to cap amendments and expansion of the Allowance Price Containment Reserve (APCR).

cCarbon’s base case for Washington–California linkage remains 2028.

California: 15-Day Package and Allowance Implications

The main focus of the webinar was CARB’s 15-day package and cCarbon’s demand- supply outlook for the CCA market. The 15-day package introduced several changes, including increased Cap Adjustment Factors (CAFs) in response to public comments and EDU Allocations for 2027-2030. CAFs for Natural Gas and Oil and Gas Extraction have been spun out into their own category, with legacy contract generators and public facilities, and a CAF kept at the current/BAU level. However, the post 2030 CAF proposal has been rescinded because CARB needs more time for evaluation. The NG to EDU allocations have significantly accelerated, starting in 2028 whereas ISOR proposed them for 2029.

Additionally, a Build Up California Account is proposed with 118M allowances to support the Manufacturing Decarbonization Incentive (MDI), but Oil and Gas Extraction is ineligible, unless used for CCUS. The timeline for usage/disbursement ranges from 7 to 8 Years.

CARB also proposed changes to Direct Environmental Benefits (DEBs) to ensure that only unretired credits issued since the last full verification are subject to DEB revocation, preventing the replacement requirement for retired credits.

Near-Term CCA Price Expectations

Despite structural adjustments to allocation design, near-term price expectations remain muted. With additional allowance availability now visible, there is no immediate driver to push prices. As a result, cCarbon expects the upcoming WCI Joint Auction #47 to clear at the floor price of $27.94. In the near term, we expect the secondary prices to trade near the floor.

Washington: Market Fundamentals and Policy Triggers

In Washington, current supply-demand fundamentals are expected to continue through 2027. A meaningful increase in trading activity is expected only when the Department of Ecology begins rulemaking under HB 1975. That rulemaking is expected to address:

Amendments to program caps
Expansion of APCR allocation

Until rulemaking begins, the market is likely to remain range-bound, with activity driven more by compliance needs than structural repricing.

Washington Auction Expectations

For Auction #14, cCarbon expects settlement at the APCR Tier 1 price level of $65.26. This reflects prevailing program conditions and the absence of a near-term policy catalyst that would materially tighten supply beyond current reserve dynamics. A shift above this level would likely require either earlier-than-expected rulemaking action or stronger demand pressure.

Linkage Outlook

cCarbon’s base case for linkage between Washington and California remains 2028.

This expectation continues to shape medium-term market positioning and forward expectations.

Conclusion

The Q2 2026 Pre-Auction Outlook highlights a clear difference between medium-term structural changes and near-term price behaviour.
In California, changes in CAFs and the potential 118M allowance inflow under the MDI framework increase overall supply flexibility. This added supply reduces immediate price pressure, and we therefore expect the upcoming auction to clear at or close to the floor.
In Washington, existing market fundamentals are expected to continue through 2027. Policy developments under HB 1975, particularly amendments to program caps and expansion of the APCR, will be the main trigger for stronger trading activity. Our expectation for linkage between Washington and California remains 2028.
cCarbon will continue to monitor regulatory developments and auction outcomes across both markets.