CARB Adopts Cap-and-Invest Regulations Despite Concerns Over Climate Investment Funding
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On May 29, the California Air Resources Board (CARB) voted 10-3 to approve regulations for the Cap-and-Invest Program, the state’s signature market-based climate policy that was reauthorized through 2045 last Fall. While CSAC supported the Program’s reauthorization, concerns remain regarding implementation and funding for critical climate, housing, transportation, and public health investments relied upon by local communities.
At the center of a variety of stakeholders’ concerns are the April 14 amendments, which expand the allocation of free allowances to certain industrial sectors through the Manufacturing Decarbonization Incentive (MDI). The MDI could reduce auction revenues by billions of dollars through 2030, which would undermine the three-tier funding framework for allocating auction revenues deposited into the Greenhouse Gas Reduction Fund (GGRF) as established by SB 840 (Chapter 121, Statutes of 2025). Reduced auction proceeds could have significant implications for Tier 3 programs established under SB 840, including:
- Wildfire and Forest Resilience programs
- Safe and Affordable Drinking Water Program
- Affordable Housing and Sustainable Communities Program
- Community Air Protection Program
- Low Carbon Transit Operations Program
- Transit and Intercity Rail Capital Program
Local governments have long viewed these programs as essential tools for implementing state climate policies while addressing community needs. These investments have delivered meaningful environmental, public health, and economic benefits throughout California that to-date have achieved 116.1 million metric tons of carbon dioxide equivalent in estimated emissions reductions, over 13,600 affordable housing units under contract, more than 560,000 in rebates for zero emission, plug-in hybrid vehicles, $1.5 billion invested in wildfire prevention efforts, and more.
Counties remain committed partners in achieving California’s climate goals and will continue working with the Legislature, Administration, and stakeholders to advocate for stable, reliable funding for the local investments necessary to build resilient, sustainable communities.
If you have any questions, please contact Jordan Wells at jwells@counties.org.