California’s legislature has voted to extend the state’s flagship cap-and-trade climate programme through to 2045, sending the measure to Governor Gavin Newsom, who has championed the scheme as a cornerstone of the state’s climate strategy.
The programme, first authorised in 2006 under Republican governor Arnold Schwarzenegger and launched in 2013, sets a declining cap on emissions from major polluters. Companies can comply by cutting their emissions, buying allowances, or funding offset projects. Revenues raised are channelled into climate mitigation, housing, transport and consumer utility credits.
Under the new legislation, the scheme will be renamed “cap and invest” to highlight its funding role. It will also better align the cap on emissions with California’s climate targets and potentially expand support for carbon-removal projects. Lawmakers approved a separate bill to commit annual revenues, including US$1 billion for the long-delayed high-speed rail project, US$800 million for affordable housing, and US$250 million for air-quality initiatives.
Assembly Speaker Robert Rivas, a Democrat, hailed the deal as “historic”, saying: “We extended California’s cap-and-trade programme, the cornerstone of our climate strategy, balancing ambition with affordability.”
The extension comes amid concern over rising living costs and energy affordability. California has some of the highest utility and fuel prices in the United States, with planned refinery closures threatening supply. Officials are under pressure to secure affordable energy while pursuing ambitious climate goals.
Business groups argue the extension will provide certainty, after the state lost an estimated US$3.6 billion in revenues due to market uncertainty. But environmental justice organisations said the bill fails to protect low-income communities disproportionately affected by air pollution. “California’s leaders gutted basic public health and safety protections,” a coalition of groups said in a statement.
Republicans criticised the move as a hidden tax. “Cap and trade has become cap and tax,” said Assembly Republican leader James Gallagher. “It’s going to raise everybody’s costs.” An advisory committee estimated the programme has already increased petrol prices by about 26 cents per gallon.
The cap-and-trade extension was part of a broader legislative package aimed at advancing the energy transition while managing costs. Other measures include speeding up oil production permits in Kern County, strengthening air-quality monitoring, funding wildfire damage liabilities, and authorising California’s grid operator to work more closely with regional partners in western states to improve power market reliability.
Governor Newsom is expected to sign the package into law.
