California lawmakers set to vote on extending cap-and-trade, boosting grid reliability

SACRAMENTO, Calif. — California lawmakers are preparing to vote Saturday on a high-stakes package that would reauthorize the state's cap-and-trade program through 2045 and advance measures intended to shore up the electric grid and stabilize fuel supplies as the state pursues aggressive climate goals.

The cap-and-trade program, created in 2013 and currently scheduled to expire after 2030, allows major greenhouse gas emitters to buy allowances from the state; the number of allowances available declines over time. The proposal agreed to this week would rename the program "cap and invest," align the declining emissions cap with California's long-term climate targets, and expand support for carbon removal projects. Revenues from the program would be committed to climate mitigation, affordable housing and transportation projects, community air protection, and utility bill credits for residents.

Governor Gavin Newsom, who has championed the program as a tool to counter federal rollbacks on environmental policy, said the deal reached with legislative leaders will lower electricity bills, stabilize gasoline supply and cut toxic air pollution while accelerating a transition to a clean economy. The agreement came after months of negotiations and just before lawmakers were set to adjourn for the year, a timeline that prompted criticism from some who said the process was rushed.

The package includes a separate bill committing annual program revenues to specified uses. Among the allocations are $1 billion for the state's long-delayed high-speed rail project, $800 million for affordable housing, $250 million for community air protection programs and $1 billion that the Legislature would allocate annually. Supporters say the funding will help meet climate and community needs while providing certainty to businesses that participate in the market.

Proponents argue reauthorization will provide clarity and stability for companies and investors. A report from Clean and Prosperous California, a coalition of economists and lawyers backing the program, said the state lost about $3.6 billion in potential revenues over the past 18 months largely because of uncertainty about the program's future. "Supporting this program and making this commitment into the future is extremely important — now more than ever," said Katelyn Roedner Sutter, California state director for the Environmental Defense Fund.

But the deal has drawn criticism from environmental justice advocates who contend it falls short on air quality protections for low-income communities and communities of color that are disproportionately affected by pollution. "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.

Republican critics have framed the measure as a cost driver for consumers. "This moving forward, instead of lowering costs, it makes California even more expensive," said Republican state Sen. Tony Strickland. A February report from the Independent Emissions Advisory Committee found cap-and-trade has added roughly 26 cents per gallon to gasoline prices and has played a very small role in increasing electricity prices because California's grid is not highly carbon intensive.

Lawmakers and business groups also faulted the timing and speed of negotiations. Ben Golombek, executive vice president of the California Chamber of Commerce, told a hearing that the Legislature should have taken more time to review and amend the proposal. Democratic state Sen. Caroline Menjivar said lawmakers were under pressure to accept the package quickly and that the fast pace should not become routine; she ultimately voted to advance the bill out of committee.

The cap-and-trade bills are part of a broader legislative package that includes measures aimed at maintaining fuel supplies and improving grid reliability. Lawmakers will consider a bill that would allow the California Independent System Operator, which manages the state's bulk electricity grid, to partner with a regional group to manage power markets across western states. Officials say the regional coordination would let California sell surplus power to neighboring states when generation is abundant and buy cheaper energy when needed, lowering costs for ratepayers and strengthening reliability.

The push for those reliability measures comes as energy regulators and state officials contend with planned closures of two oil refineries that together account for roughly 18% of California's refining capacity. Lawmakers included a provision to streamline permitting for oil production in Kern County to help address potential shortfalls; supporters call it necessary contingency planning, while critics warn it could worsen local air quality.

Other elements of the package would increase air monitoring in overburdened communities, codify a Justice Department bureau created in 2018 to protect communities from environmental injustices, replenish a fund that covers wildfire damages caused by utilities and create public financing options for electric utility projects.

The legislative votes come as California balances ambitious climate commitments — including a first-in-the-nation ban on the sale of new gas-powered cars scheduled for 2035 — with concerns about affordability and energy security. Supporters say reauthorizing cap-and-trade and advancing regional market coordination are needed to sustain emissions reductions and maintain reliable, affordable energy as the state phases out fossil fuels. Opponents say the measures do not do enough to ensure real-world emissions reductions or protect frontline communities.

Lawmakers were expected to cast final votes on Saturday as the Legislature neared the end of its session, leaving the fate of the reauthorization and related reliability measures to the Democratic-majority chamber.