California Governor Gavin Newsom has proposed a 15-year extension of the state’s landmark cap-and-trade programme for greenhouse gas emissions, a major component of its climate strategy and a dependable source of public revenue. The scheme, currently due to expire in 2030, would be reauthorised under Newsom’s plan, with key changes to how its proceeds are allocated.
The proposal follows months of anticipation and comes shortly after President Donald Trump targeted the state’s climate policies in an April executive order. Newsom also aims to rebrand the 13-year-old scheme as a “cap-and-invest” programme, mirroring models adopted by Washington and planned by New York.
“California won’t bend the knee to a federal administration hellbent on making America polluted again,” Newsom said in a statement to the media. “Cap-and-invest is the next chapter for one of our most effective tools to clean the air and keep our communities healthy.”
The revised programme would maintain quarterly auctions of emissions permits and guarantee a minimum of $1 billion annually for the state’s contentious high-speed rail project — shifting from the current 25% earmark model. Additionally, Newsom proposes redirecting $1.5 billion of programme revenues into the state’s general fund to support wildfire prevention and firefighting efforts, amid surging costs due to escalating wildfire seasons.
Cal Fire’s budget has doubled over the past decade, reaching $4.2 billion last year, driven by rising climate-related fire risks and increased staffing and equipment needs.
Newsom’s plan also continues funding for utility bill credits, though it avoids addressing some of the more technical aspects of the programme, such as whether regulators should eliminate free emissions allowances for businesses.
The proposal comes at a time when auction revenues have begun to decline, due to legal uncertainties about the programme’s future. Nonetheless, revenues are expected to rise over time as the emissions cap tightens and price floors increase. The initiative now enters the legislative phase, with Assemblymember Jacqui Irwin’s AB 1207 and Senator Monique Limón’s SB 840 serving as the vehicles for reauthorisation. Both leaders have signalled their support for extending the cap-and-trade mechanism, marking the beginning of formal negotiations over the programme’s future.
