CARB chair urges reauthorization of cap-and-trade as senators press for clearer spending and market rules

SACRAMENTO — California Air Resources Board Chair Liane Randolph told a joint Senate hearing that cap and trade remains "a foundational part of California's climate policy portfolio" and must be extended to help the state reach carbon neutrality by 2045.

Randolph and a panel of analysts and advocates appeared before the Senate Budget and Fiscal Review Subcommittee No. 2 and the Senate Environmental Quality Committee for a wide-ranging oversight hearing on cap-and-trade reauthorization, auction revenues and how the state spends the proceeds from allowance sales and consigned allowances into the Greenhouse Gas Reduction Fund (GGRF).

Why it matters: Cap and trade both sets a declining cap on emissions from major sources and generates substantial auction revenue that the state directs to climate programs. Lawmakers said they want certainty for investors and regulated entities, while advocates and local officials asked for stronger, continuous funding for community air protection, nature-based climate projects, agricultural programs and transportation investments.

Randolph emphasized the program's track record. "Cap and trade establishes a declining limit on major sources of climate pollution throughout California," she said, listing auction proceeds, linkage with Quebec and a string of legal defenses the program has survived.

But senators quickly focused on program design and spending: how many allowances should be removed from future budgets, whether offsets should be allowed and how to protect consumers from a sharp rise in allowance prices. Several senators urged CARB to publish a draft regulatory package promptly to give market participants clarity.

Legislative analyst and outside experts urged lawmakers to weigh trade-offs. Helen Christian of the Legislative Analyst's Office (LAO) said policy choices fall into two main buckets: program design (caps, price ceiling, allowance allocation) and how the allowance value is used (rebates, free allowances, continuous appropriations). Danny Cullenward, a researcher with long experience on carbon markets, noted the potential scale of allowance value: "We're looking at potentially several hundred, maybe more than $300 billion worth of allowances being allocated over the next 20 years," he said, urging a shared approach between the Legislature and CARB on price and allocation to reduce uncertainty.

Environmental justice groups pressed lawmakers to redirect subsidies now going to oil and gas companies toward front-line communities. Connie Cho of Asian Pacific Environmental Network said the coalition rejects a straight reauthorization and called for eliminating or reducing free allowances to fossil fuel companies and increasing direct investments for low-income and overburdened communities.

Panelists and local officials also debated which GGRF programs should be continuous appropriations (set amounts available year to year) and which can remain discretionary. Advocates asked for multi-year, reliable funding for programs such as affordable housing and sustainable communities (AHSC), community air protection under AB 617, organic waste/composting to meet SB 1383 goals, and agricultural climate solutions.

What's next: Senators repeatedly urged CARB and the administration to publish at least a draft Initial Statement of Reasons (ISOR) and regulation text so that stakeholders and markets can plan. No formal votes occurred; the hearing was framed as an informational step in a legislative process expected to include statutory decisions about the cap, price collar and funding priorities.

Ending: Lawmakers and witnesses left the hearing with clear areas of disagreement — especially over offsets, free allowances for trade‑exposed industries, and whether more revenue should be dedicated to communities — but also with a common refrain: reauthorization must provide both regulatory clarity and a defensible spending plan that advances greenhouse gas reductions without worsening affordability.