California lawmakers will pursue reauthorizing the state's cap-and-trade program to control major emissions sources this legislative session, a move that could give market participants greater legal certainty.
AB 1207, a bill filed 21 February by state representative and chair of the Joint Legislative Committee on Climate Change Policies Jacqui Irwin (D), would reauthorize the California Air Resources Board (CARB) to operate its cap-and-trade program to reduce greenhouse gas (GHG) emissions from sources such as power plants and transportation fuels. A 2017 law already extended the program out to 2030, but this new bill could allay concerns from the market amid a sluggish regulatory update to the rules and growing pressure from the federal government.
CARB began weighing amendments to its cap-and-trade program in 2023, following the adoption of its 2022 scoping plan, which highlighted a need for increased program ambition to keep the state on track for its target of net-zero by 2045.
Stakeholders have petitioned CARB to seek a formal reauthorization in the legislature to aid compliance planning and add legal certainty throughout its ongoing rulemaking procedure to potentially move the program to a 48pc GHG reduction target from 1990 levels by 2030, rather than the current 40pc.
With CARB experiencing ongoing delays in twin rulemakings with market partner Quebec, a formal reauthorization represents a significant step in outlining the program's future, after months of uncertainty.
This legislative action dovetails with the focus of the governor Gavin Newsom's (D) administration and budget writers, as they work to navigate growing tension with the federal government and projected multi-year deficits in the state's budget.
Newsom announced his intent for lawmakers and the administration to focus on reauthorizing the state's program in January in his 2025-26 budget proposal, highlighting the revenue from the program. Cap-and-trade auction revenue enters the Greenhouse Gas Reduction Fund (GGRF), which supports the state's clean economy transition through programs targeting GHG emissions reductions.
In recent budget talks appropriations of GGRF funds have come under scrutiny, with state Assembly Budget Climate Crisis, Resources, Energy and Transportation Subcommittee chair Steve Bennett (D) in a informational hearing on 19 February highlighting the need for lawmakers to ensure the revenue supports projects that will fulfill needed GHG reductions, as the chamber discusses reauthorization.
Lawmakers have until 6 June to pass the bill out to the state Senate.
