Richard B. Alley

Atmospheric inversions provide estimates of carbon dioxide (CO 2 ) fluxes between the surface and atmosphere based on atmospheric CO 2 concentration observations. The number of CO 2 observations is projected to increase severalfold in the next decades from expanding in situ networks and next‐generation CO 2 ‐observing satellites, providing both an opportunity and a challenge for inversions. This study introduces the TRACE Regional Atmosphere–Carbon Ensemble (TRACE) system, which employ an ensemble‐based simultaneous state and parameter estimation (ESSPE) approach to enable the assimilation of large volumes of observations for constraining CO 2 flux parameters. TRACE uses an online full‐physics mesoscale atmospheric model and assimilates observations serially in a coupled atmosphere–carbon ensemble Kalman filter. The data assimilation system was tested in a series of observing system simulation experiments using in situ observations for a regional domain over North America in summer. Under ideal conditions with known prior flux parameter error covariances, TRACE reduced the error in domain‐integrated monthly CO 2 fluxes by about 97% relative to the prior flux errors. In a more realistic scenario with unknown prior flux error statistics, the corresponding relative error reductions ranged from 80.6% to 88.5% depending on the specification of prior flux parameter error correlations. For regionally integrated fluxes on a spatial scale of 10 6 km 2 , the sum of absolute errors was reduced by 34.5%–50.9% relative to the prior flux errors. Moreover, TRACE produced posterior uncertainty estimates that were consistent with the true errors. These initial experiments show that the ESSPE approach in TRACE provides a promising method for advancing CO 2 inversion techniques.