Continuing the review of emissions trading policy diffusion across different institutional environments within the United States (US) this chapter examines the development of interstate cap-and-trade systems. The efforts in the Northeast and New England region to address the transport of air pollutants across state boundaries through trading mechanisms represent more than 15 years of an evolutionary institutional process. A complex web of local action, multi-state voluntary agreements, state-federal coordination, direct federal intervention, and inter-jurisdictional and inter-agency collaborative efforts supported the emergence of the interstate emissions trading system (ETS) as a more flexible and cost-effective regional air quality management policy tool.