Newsom proposes 15-year extension of California’s cap-and-trade climate program

Sacramento, California – California Governor Gavin Newsom unveiled a proposal on Wednesday to extend the state’s landmark cap-and-trade program for greenhouse gas emissions by 15 years. This signaled a major commitment to long-term climate policy as the state faces pressure from both federal opposition and economic uncertainty.

Newsom’s proposal, first reported by POLITICO, would keep California’s cap-and-trade market running through 2045. The system requires polluting companies to purchase emissions permits in quarterly state-run auctions, which currently generate about $4 billion annually. Newsom also proposed renaming the program “cap-and-invest,” aligning it with similar climate programs in Washington and New York.

“California won’t bend the knee to a federal administration hellbent on making America polluted again,” Newsom said in a statement. “Cap-and-invest is the next chapter for one of our most effective tools to clean the air and keep our communities healthy.”

The extension comes just weeks after former President Donald Trump issued an executive order attacking California’s environmental regulations, including cap-and-trade and high-speed rail. Newsom’s plan also shores up the high-speed rail initiative, transforming its current 25% share of auction revenue into a guaranteed $1 billion annual minimum.

Another significant change would shift $1.5 billion in auction revenue to support Cal Fire, California’s firefighting agency. Cal Fire’s general fund share has doubled over the past decade due to increasing demands due to record-breaking wildfires. In 2023, its budget reached $4.2 billion.

“We’re going to make polluters pay for solutions to the climate crisis they helped create,” Newsom said, echoing a broader push to hold fossil fuel companies accountable for environmental damage.

Though the proposal outlines spending priorities and broader goals, it does not address controversial elements within the cap-and-trade system, such as free emissions allowances provided to some industries. These allowances have been a sticking point in ongoing climate policy debates.

Newsom’s plan launches formal negotiations with state legislators, who have already signaled support for extending the program. The key legislative proposals are Assembly Bill 1207, authored by Assemblymember Jacqui Irwin, and Senate Bill 840, from Sen. Monique Limón.

While details remain under discussion, the reauthorization could restore investor confidence in the market, which has seen declining revenues due to legal uncertainty. With this proposal, Newsom sets the stage for California to solidify its role as a climate leader in the face of renewed federal resistance.