Cap And Trade Debate Includes Controversial Proposals

Here are the morning’s top stories on Thursday, May 22, 2025…

• Governor Gavin Newsom is proposing an extension of the state’s landmark climate program known as cap-and-trade. The program limits greenhouse gas emissions and raises money from polluters. And the governor has some controversial ideas for how to spend that money. 
• The US senate is moving ahead with plans to block California’s electric vehicle mandate. Late Wednesday night, Republicans sidestepped the filibuster and voted using a simple majority to clear a path to revoke California’s unique clean air rules.

How California Cap-And-Trade Works — And How Newsom Wants To Change It

Gov. Gavin Newsom’s proposal to reauthorize California’s cap-and-trade program has kicked off high-stakes negotiations over the state’s landmark climate initiative.

Cap-and-trade, which Newsom proposed renaming Cap-and-Invest last week, limits greenhouse gas emissions and raises billions of dollars annually through auctions where companies buy credits that allow them to pollute. But the system has come under fire, from both President Donald Trump — who targeted the program in an executive order last month — as well as progressives who argue it hasn’t been strict enough on oil and gas companies.

Extending cap-and-trade, which sunsets in 2030, raises key questions for state leaders: Should money raised from the program pay for environmentally-friendly projects or help Californians manage the mounting costs of climate change? Will key decisions about the emissions cap be made by state lawmakers, many of whom are just learning the intricacies of the program, or by unelected state regulators with deeper expertise?

Newsom is not advocating for any major alterations to the design of the program as he seeks to extend cap-and-trade to 2045. A Newsom spokesperson said he “is focused on the program’s stability in an increasingly uncertain world.” Newsom is seeking to change where cap-and-trade revenues are spent. The governor is proposing to set aside $1.5 billion — it could grow to $1.9 billion by the 2029–30 fiscal year — from the GGRF to pay for Cal Fire, which Newsom billed as a way to direct money paid by carbon polluters toward fighting fires made more powerful by climate change.

Senate Clears Way To Block Clean Air Standards In California

Senate Republicans on Wednesday voted to establish a new precedent that will allow them to roll back vehicle emission standards in California, including a rule phasing out the sale of new gas-powered cars by 2035.

The winding series of Senate procedural votes that went late into the evening could have profound implications for California’s longstanding efforts to reduce air pollution. It also established a new, narrow exception to the Senate filibuster even as Republicans have insisted that they won’t try to change Senate rules.

At issue are the three California rules — phasing out gas-powered cars, cutting tailpipe emissions from medium- and heavy-duty vehicles and curbing smog-forming nitrogen oxide pollution from trucks. Republicans say the phase out of gas-powered cars, along with the other rules, is costly for consumers and manufacturers, puts pressure on the nation’s energy grid and has become a de facto nationwide electric vehicle mandate. Democrats charge that Republicans are acting at the behest of the oil and gas industry and say that California should be able to set its own standards after obtaining waivers from the Environmental Protection Agency.