California lawmakers to decide on extending key climate program and boosting grid reliability

Newsom, a Democrat, and legislative leaders, who said months ago they would prioritize reauthorizing the program, almost ran out of time to introduce the proposal before the statehouse wraps for the year.

“After months of hard work with the Legislature, we have agreed to historic reforms that will save money on your electric bills, stabilize gas supply, and slash toxic air pollution — all while fast-tracking California’s transition to a clean, green job-creating economy,” Newsom said after striking the deal this week.

The proposal would reauthorize the program through 2045, better align the declining cap on emissions with the state's climate targets and potentially boost carbon removal projects. It would also change the name to “cap and invest" to emphasize its funding of climate programs.

The Legislature will vote on another bill committing annual funding from the program's revenues. It includes $1 billion for the state's long-delayed high-speed rail project, $800 million for an affordable housing program, $250 million for community air protection programs and $1 billion for the Legislature to decide on annually.

The votes come as officials contend with balancing the state’s ambitious climate goals and the cost of living. California has some of the highest utility and gas prices in the country. Officials face increased pressure to stabilize the cost and supply of fuel amid the planned closures of two oil refineries that make up roughly 18% of the state's refining capacity, according to energy regulators.

Proponents of the extension say it will give companies certainty over the program's future. The state lost out on $3.6 billion in revenues over the past year and a half, largely due to uncertainty, according to a report from Clean and Prosperous California, a group of economists and lawyers supporting the program. Some environmentalists say the Trump administration's attacks on climate programs, including the state's first-in-the-nation ban on the sale of new gas-powered cars by 2035, added urgency to the reauthorization effort.

Cap and trade is an important cost-effective tool for curbing carbon emissions, said Katelyn Roedner Sutter, the California state director for the Environmental Defense Fund.

“Supporting this program and making this commitment into the future is extremely important — now more than ever,” she said.

But environmental justice advocates opposing the proposal say it doesn't go far enough and lacks strong air quality protections for low-income Californians and communities of color more likely to live near major polluters.

“This really continues to allow big oil to reduce their emissions on paper instead of in real life,” said Asha Sharma, state policy manager at the Leadership Council for Justice and Accountability.

Critics have also said it will increase the cost of living.

“This moving forward, instead of lowering costs, it makes California even more expensive,” Republican state Sen. Tony Strickland said. "They’re raising the price of energy and gas and goods and services.”

Cap and trade has increased gas costs by about 26 cents per gallon, according to a February report from the Independent Emissions Advisory Committee, a group of experts that analyzes the program. It's played “a very small role” in increasing electricity prices because the state's grid isn't very carbon intensive, the report says.

Lawmakers and lobbyists criticized the governor and legislative leaders for rushing the deal through with little public input.

Ben Golombek, executive vice president of the California Chamber of Commerce, said at a hearing this week that the Legislature should have taken more time “to do this right.”

Democratic state Sen. Caroline Menjivar said it shouldn't be par for the course for lawmakers to jam through bills without the opportunity for amendments.

“We’re expected to vote on it," she said of Democrats. "If not, you’re seen to not be part of the team or not want to be a team player.”

Menjivar ultimately voted to advance the bill out of committee.

Energy affordability and fuel supply

The cap-and-trade bills are part of a sweeping package aimed at advancing the state’s energy transition and lowering costs for Californians.

One of the bills would streamline permits for oil production in Kern County, which proponents have hailed as a necessary response to planned refinery closures and critics have blasted as a threat to air quality.

Another would increase requirements for air monitoring in areas overburdened by pollution and codify a bureau within the Justice Department created in 2018 to protect communities from environmental injustices.

The state could refill a fund that covers the cost of wildfire damage caused by utility companies and set up public financing to build electric utility projects.

Lawmakers will also vote on a measure allowing the state's grid operator to partner with a regional group to manage power markets in western states. The bill aims to improve grid reliability. It would save ratepayers money because California would sell power to other states when it generates more than it needs and buy cheaper energy from out of state when necessary, the governor's office said.