The Role of U.S. States in International Carbon Pricing Efforts

The United States is one of only two countries in the world where subnational governments price carbon but the national government does not. In 2026, as the EU’s Carbon Border Adjustment Mechanism entered its definitive phase and the EU, China, and Brazil launched a coalition to coordinate carbon market design, the U.S. sat out both conversations at the federal level, even as carbon pricing is in place in fourteen states representing over 30% of the population and 36% of GDP.

This research considers the potential role of U.S. states in these global carbon pricing initiatives. It finds that the EU CBAM alone doesn’t provide a sufficient incentive for states to adopt new measures that would reduce their exposure before 2028, such as establishing a carbon price and product-level emissions reporting infrastructure compliant with EU standards. But the risk of fragmentation without a common federal framework is real: states are already building reporting systems and carbon markets on their own. As one state official put it, the longer this goes on, the harder it gets to align.

Drawing on interviews with state climate advisors and trade exposure analysis, this research maps how U.S. states can engage both the EU CBAM and the new Open Coalition on Compliance Carbon Markets, and recommends ways to build multi-level governance on carbon pricing rather than deepen fragmentation.

Read the full research paper or the condensed issue brief below.