Newsom and Legislative Leaders to Seek Extension of Cap-and-Trade Program
Governor Gavin Newsom and legislative leaders announced April 15, 2025 that they will seek an extension of California’s cap-and-trade program during the current legislative year. Unless it is extended, the state’s top climate program is scheduled to expire in 2030.
Newsom and the legislative leaders made this decision after the Trump administration issued an executive order on April 8, 2025 aimed at stopping the “overreach” from “burdensome and ideologically motivated ‘climate change’ or energy policies that threaten American energy dominance and our economic and national security.”
Trump’s executive order singled out California, stating that it “punishes carbon use by adopting impossible caps on the amount of carbon businesses may use, all but forcing businesses to pay large sums to ‘trade’ carbon credits to meet California’s radical requirements.”
California’s cap-and-trade program sets a declining limit on carbon emissions in the state while creating a market to trade emissions credits. The proceeds from the market are used to fund decarbonization projects as well as a utility bill credit known as the California Climate Credit. Governor Arnold Schwarzenegger proposed the program and signed the authorizing legislation into law with the Global Warming Solutions Act of 2006, known as AB 32.
AB 32 required the state to reduce greenhouse gas (GHG) emissions to 1990 levels by 2020 and required the California Air Resources Board (CARB) to develop policies to reach that goal. In 2012, as part of this requirement, CARB implemented the state’s cap-and-trade program, which took effect the following year. It was reauthorized in 2017.
In 2022, California set more aggressive emission reductions targets when the legislature passed AB 1279, known as the California Climate Crisis Act. That law established a target of net-zero GHG emissions as soon as possible but no later than 2045 and set the goal to reduce statewide anthropogenic GHG emissions at least 85% below the 1990 level by 2045. Meeting the accelerated emission reductions targets, however, will depend on the extension of the state’s cap-and-trade program beyond 2030.
Newsom has also recently argued in his proposed budget that “[although the current cap-and-trade program does not expire until 2030, considering extension sooner could provide greater certainty and attract stable investment.”
According to the governor’s office, the program has funded $28 billion in climate investments over the past decade and reduced carbon emissions “equivalent to taking 80% of the state’s cars off the road.”
While Newsom has requested a reauthorization of the existing program, legislators could decide to make changes. Politico reported that a number of environmental organizations have requested changes to the program, including reducing the number of free allowances to industry, ensuring that offsets represent “real, additional, permanent and verifiable emissions reductions,” and prioritizing energy affordability.