California extends its key climate program, but critics say it’s being weakened

In a high-stakes decision that will shape California’s economy for years to come, weather officials approved a sweeping overhaul of the state’s climate program, cap and investment, late Friday.

The California Air Resources Board’s 10-3 vote determines how aggressively the Golden State will limit planet-warming greenhouse gas emissions in coming years and how billions of dollars in revenue will flow through communities, businesses and public programs across the state.

Cap and investment was national-leading when it was launched in 2013. The program forces big polluters to pay their share of emissions by purchasing allowances at auctions or allocating them for free. It uses the revenue to fund public transportation projects, wildfire prevention, affordable housing, clean energy, electric vehicles and safe drinking water.

The pollution limit — or cap — falls each year, reducing overall emissions in the state and helping California meet ambitious climate goals, including 100% carbon neutrality by 2045.

Parliament voted last year Extend cap and investment to 2045. CARB officials then spent the last several months drafting and revising the plan that was voted on this week. received significant feedback From oil and gas companies to environmental groups, lobbyists and lawmakers, they are all vying for different priorities.

Nearly 200 people testified in person at a two-day marathon meeting before the vote and the final proposal was received More than 1,000 written comments.

Industry groups have warned that limiting emissions too much and too quickly would push refineries out of state and increase already high energy costs. But environmentalists and other stakeholders said making too many concessions to fossil fuel interests would defeat the program’s purpose: to drive emissions down along a path consistent with what scientists say could maintain a recognizable climate.

The program was planned to become stricter over the years to give businesses more time to cut their emissions more strongly.

. Officials were under legal, market and budget pressure to pass a plan without delay, and also said it was important for California to signal market certainty.

“It is no secret that climate policy is at a crossroads, under attack from an openly hostile and well-funded opposition, and upended by global economic turmoil,” CARB chair Lauren Sanchez said during the meeting. “At a time of uncertainty at the federal and international level, California has an opportunity to lead with consistency.”

Major updates to the program include removing 118 million pollution permits or allowances from the market by 2030 and 900 million after 2030. That would mean a rapid reduction of the cap by 11% annually by the end of this decade and 7% from 2031 to 2045, in line with the government’s mandated targets, officials say.

But crucially, the update will also create a new pool of 118 million allowances that polluters can apply for, above the cap they can receive if they invest in decarbonization projects. Production Decarbonization Incentive.

The incentive program aims to prevent regulated industries from leaving the state. Two major refineries have announced exit plans in recent years, including Valero’s Benecia refinery and Phillips 66’s Los Angeles refinery, which will close in 2025.

But many critics, including transportation, affordable housing, environmental justice and clean water groups, said this amounted to eliminating the program.

“CARB proposed creating exactly 118.3 million additional allowances…beyond the cap, the exact number of allowances that would need to be removed from the cap to ensure we move toward our 2030 goals,” said Caroline Jones, a senior analyst at the nonprofit Environmental Defense Fund. “This undermines the cap’s role in limiting climate pollution, which is the core function of this program.”

The board approved the decarbonization incentive but committed to additional workshops and evaluations of the program before making any allocations.

Other updates include more free allocations for industrial plants and refineries, which regulators say will help ease pressure on gasoline prices. Critics have characterized the furloughs as subsidies for oil and gas.

The update would also shift some funding from gas to electric utilities and increase funding for the California Climate Credit, a discount that automatically appears on people’s electric bills.

But perhaps most controversial is how the update will affect the program’s billions of dollars in revenue flowing into the state budget. Greenhouse Gas Reduction Fund It is distributed to various programs every year. Cap-and-invest has provided $35 billion to climate projects in California since its inception.

According to one report, the new incentive pool would mean the fund would lose $2 billion a year, about half the amount it has received in recent years. analysis From the Legislative Analyst’s Office.

Although CARB does not specify how the fund will be apportioned (the legislature), opponents have warned that it could lead to significant cuts to the fund. Affordable Housing and Sustainable Communities Program, Low Carbon Transit Operations Program, SAFER drinking water program And Community Air Protection Programamong many other things based on the cap and the income from the investment.

“This could have serious consequences, including resetting the state’s support for critical emissions reduction programs,” said Phillip Fine, executive officer of the Bay Area Air District. “Striking the right balance is critical, but all consequences need to be fully considered.”

This was a sentiment echoed by many who commented during the board meeting.

“These additional allowances will not only jeopardize our emissions targets, they will also flood the auction market and depress cap and investment revenues,” said Pam Odell of the group California Climate Action. “These revenues fund vital programs, support climate resilience, clean transportation and transportation, and public health, especially in the most exposed frontline communities.”

However, some groups have come out in support of the update, including Southern California Edison and Pacific Gas & Electric. During the meeting, PG&E air and climate policy manager Fariya Ali said the plan “strikes a balance between program rigor and affordability.”

Assemblywoman Jacqui Irwin (D-Thousand Oaks), who wrote the bill reauthorizing the program last year, offered cautious support and said she would like to see more guardrails around the incentive program to ensure it aligns with state climate goals. But he said delaying the update at a time when the Trump administration has already rescinded clean energy funding and revoked California’s authority to set clean vehicle standards would only create more uncertainty.

“If we fail to pass the proposed changes to cap-and-invest now, this will undoubtedly be the biggest victory the Trump administration can hope to achieve against California’s climate policies this year,” Irwin said.

The oil and gas groups were lukewarm. Jodie Muller, chief executive of the Western States Petroleum Assn., said the update provides some short-term relief for refiners but leaves too much uncertainty to ensure continued investment after 2030.

Brian McDonald, Marathon Petroleum Corp.’s director of regulatory affairs, similarly said the oil company is “deeply concerned that the current proposal is not sufficient to provide the regulatory certainty needed to sustain in-state fuel production.”

In a briefing before the vote, California climate economist Danny Cullenward said the update threatened both the “cap” aspect of the program, by introducing a new funding pool, and the “investment” aspect, by threatening to reduce the program’s revenues.

He said the proposal “despite being presented as a compromise, it actually compromises both of the program’s core objectives.”

The new plan is planned to come into force on September 1.