Senators grill CARB over April ‘Cap and Invest’ amendments as critics warn $4 billion MDI could cut GGRF funding

A joint hearing of the Senate Environmental Quality Committee and the Senate Budget and Fiscal Review Subcommittee No. 2 on May panel considered Air Resources Board (CARB) staff’s April amendments to the Cap and Invest regulations, focusing on an expanded Manufacturing Decarbonization Incentive (MDI), changes to allowance allocations and the potential impact on the Greenhouse Gas Reduction Fund.

CARB Chair Lauren Sanchez told senators the April changes respond to stakeholder feedback and legislative direction. Staff propose increasing the California Climate Credit from $8 billion to $10 billion through 2030 by redirecting more free allowances to electric utilities, expanding industry compliance support by roughly $800 million, and enlarging the MDI to $4 billion while preserving the program’s annual declining caps, she said. “These adjustments together accomplish several important outcomes,” Sanchez said, adding the board will consider the package on May 28 and that, if adopted, the amendments would take effect Sept. 1.

Why it matters: Senators and the Legislative Analyst’s Office warned the allocation changes could substantially reduce auction revenues that flow to the GGRF, a primary funding source for programs the legislature prioritized—including…