California leaders race toward deadline for cap-and-trade deal

Kate Wolffe, The Sacramento Bee on Sep 9, 2025

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SACRAMENTO, Calif. — California lawmakers are running down the clock to craft a deal to renew the state’s influential cap-and-trade climate policy.

Representatives from the state Assembly, governor’s office and state Senate have been meeting near-daily over the past few weeks to hammer out a deal. Since bills need to be in print for 72 hours before they can be voted on, any related legislation would need to be in print by Tuesday night to be approved by the end of the legislative session on Friday.

The race to the finish line has worried industry groups and oil companies, who are urging lawmakers not to pass whatever legislation emerges. Environmental groups warn that further delays to reauthorization would get California further off-track with its climate goals, and endanger ‘linkages’ with other domestic and international cap-and-trade programs. A reauthorization would cement the program until 2045.

On Monday, Gov. Gavin Newsom’s office said the governor remained “committed” to advancing a cap-and-trade extension through 2045, and looked forward to continued constructive conversations. Neither Assembly Speaker Robert Rivas’ office nor President pro Tem Mike McGuire’s office responded to a request for comment about the negotiations.

The cap-and-trade program was passed in 2006 and sets an overall limit on carbon emissions for major polluters. Companies must hold allowances for the pollution they produce, and both companies and investors can buy and sell those allowances in a market.

The program doesn’t phase out until 2030, but investors are already skittish, said Clayton Munnings, a climate economist who leads the climate advocacy group Clean and Prosperous California.

“Any notion that the Legislature might not be committed to the program beyond 2030 has a huge impact on today’s allowance prices,” he said.

However, the last-minute nature of the negotiations prompted statements of concern from oil companies and business groups Monday night. These groups are among those that are required to buy allowances.

“No proposal is better than a bad proposal,” said California Chamber of Commerce President & CEO Jennifer Barrera. Leaders from the Western States Petroleum Association and the California Manufacturers & Technology Association suggested the proposals in the Legislature would drive up prices for everyday Californians.

Uncertainty threatens climate goals

A report Munnings’ group issued in June estimated the state had lost out on over $3 billion due to uncertainty over the future of the program.

The money raised by selling allowances goes toward the Greenhouse Gas Reduction Fund, which puts billions toward climate-friendly projects, and the California Climate Credit, which gives people money back on their utility bills.

Without a renewal, Clean and Prosperous California estimates allowance prices will remain at their minimum, sacrificing billions in revenue, and the state will have significant difficulty reaching its climate goal of reducing greenhouse gas emissions to 40% below 1990 levels by 2030.

Passing the reauthorization is only one part of the puzzle. Reuven Carlyle, a former Washington state senator and representative and current consultant, said the California Legislature’s moves could have far-reaching impacts. If lawmakers choose to structurally change the program when they reauthorize it, that could pose risks to an existing ‘link’ with Quebec and a future ‘link’ with Washington state.

“If the Legislature does make radical structural changes in the integrity of the program, it makes the relationship with Quebec very stressful,” Carlyle said.

Carlyle visited some California legislators last week to urge them to reauthorize the program in much the same form it has existed previously.

“I feel strongly about the policy,” he said. “California should be proud of it, but truthfully, it’s hard to be a prophet in your own land. That’s what this program is facing right now.”

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