Gov. Gavin Newsom discusses his revised 2024-25 state budget during a news conference in Sacramento, California, on May 10, 2024. Gov. Gavin Newsom and state legislative leaders announced plans on Tuesday to pursue an extension of California’s landmark cap-and-trade program — currently set to expire in 2030 — as a direct response to renewed threats from the Trump administration aimed at undermining the state’s climate policies. (Rich Pedroncelli/AP Photo)
Cap-and-trade sets limits on emissions from high polluters such as power plants, oil refineries and large factories. Those that exceed the limits must buy an allowance, like a permit to emit more carbon dioxide, or an offset, which is a greenhouse-gas reducing project.
Under the program administered by the California Air Resources Board, the total emissions cap declines each year along with the number of allowances. It is currently set to expire in 2030.
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Newsom, State Senate President Pro Tem Mike McGuire, D-Healdsburg, and Assembly Speaker Robert Rivas, D-Salinas, said Tuesday that they would work to extend cap-and-trade this legislative year.
“It’s generated significant results over the last decade,” McGuire said. “$14 billion has been invested, reducing energy bills for Californians.”
McGuire also said the program has added hundreds of thousands of jobs in clean energy and energy efficiency, and funded wildfire mitigation projects, housing near transit, and investments in energy solutions like battery storage.
California state Senator Mike McGuire (D-Healdsburg, right) talks to reporters at the Capitol in Sacramento on Aug. 28, 2023. (Rich Pedroncelli/AP Photo)
Last week, Trump issued an executive order specifically calling out the program as one that “punishes carbon use.” It directs Attorney General Pam Bondi to evaluate whether state and local climate laws violate the Constitution or federal authority.
In the order, he wrote that California’s caps on carbon dioxide pollution are “impossible … all but forcing businesses to pay large sums to ‘trade’ carbon credits to meet California’s radical requirements.”
Barbara Haya, director of the Berkeley Carbon Trading Project at UC Berkeley, views Newsom’s announcement as a signal he’s boldly defending state climate efforts.
“I was thrilled to hear Governor Newsom double down on California’s climate policy,” said Haya, who focuses on carbon trading and offsets and has followed the state’s cap-and-trade program for years. “California leadership couldn’t be more important given what’s going on in D.C.”
“We have this narrow window of time to rein in emissions globally, and it’s simply unconscionable for the federal government to give away our future to short-term profits of the fossil fuel industry,” Haya said.
Haya hopes that the new iteration of cap-and-trade puts a price on carbon and reforms the offset program.
Stakeholders in the cap-and-trade program had hoped it would get extended, said Meredith Fowlie, an economist and professor at UC Berkeley who studies energy markets and climate change.
“The uncertainty around the future of the cap and trade program past 2030 has been causing uncertainty in the market,” Fowlie said. For years, “we have been trying to underscore the importance of having this reauthorization conversation because there’s lots of market participants holding on to permits, making investment decisions that depend on the future of the cap and trade program.”
Newsom and his colleagues said they will release details of their proposal in the coming weeks.
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