Home    |   State Legislature Unveils Plans for Cap-and-Trade Extension, Allocations

State Legislature Unveils Plans for Cap-and-Trade Extension, Allocations

Sep 12, 2025   Advocacy   |   Air Quality
Power plant factory chimney emissions

On Wednesday, the California State Legislature released language outlining a proposed deal with the Administration to extend, rename, and allocate funds derived from the state’s Cap-and-Trade program. The proposal is a result of negotiations between the Legislature and Governor Gavin Newsom, which have been taking place behind closed doors over the past several weeks.

The reauthorization plan, found in Assembly Bill 1207 (Irwin), would extend the program through the year 2045, with the goal of providing certainty for covered industries and bolstering the price of Cap-and-Trade auction credits. AB 1207 would also rename the program to “Cap-and-Invest,” and transition the availability of credits to ultimately prioritize electricity producers over oil and gas companies.

The bill allocating funds from the resulting Greenhouse Gas Reduction Fund (GGRF), Senate Bill 840 (Limón), alters the way GGRF funds will be allocated in the future by prioritizing $1 billion annually for the High-Speed Rail project and another $1 billion for legislators to appropriate through the annual state budget process. SB 840 maintains allocations to account for the State Responsibility Area (SRA) fee, but pushes forest resilience, safe drinking water program, and other continuous appropriations to the bottom of the priority list for funding based on annual Cap-and-Invest revenues.   California will need somewhere over $4 billion in annual Cap-and-Invest revenues to fully fund the continuously appropriated pots, including forest resilience.

The two bills will be eligible for votes on Saturday, a day later than the legislative session technically ends, due to the 72-hour in print rule established by Proposition 54.

For more information, contact RCRC Senior Policy Advocate, Staci Heaton.