Govind Tekale
Governor Gavin Newsom signed a comprehensive climate and energy package last Friday that extends California’s cap-and-invest program through 2045 while addressing rising energy costs for residents.
The legislative package reauthorizes the state’s carbon market program and includes measures to lower electricity bills, stabilize fuel prices, and reduce air pollution while balancing environmental goals with economic concerns.
“We’ve got to manifest our ideals and our goals. And so this lays it out, but it lays it out without laying tracks over folks…the issue of affordability, as you heard, is top of mind,” Newsom said during the signing event.
The package comes as California faces potential price increases from refinery closures and wildfire risks. These concerns about fuel supply have driven some of the compromise measures in the legislation.
A key component of the legislation allocates $18 billion to the California Wildfire Fund, aimed at preventing electricity bill spikes following disasters. The package also reforms how investor-owned utilities finance transmission and wildfire prevention projects, which lawmakers say will reduce monthly electric bills.
The cap-and-invest program, previously known as cap-and-trade, will now run until 2045, aligning with the state’s carbon neutrality goals. The program requires polluters to pay for emissions, with that money funding climate initiatives, affordable housing, and transit projects.
Notably, the package includes approximately $4 billion in annual cap-and-invest revenues from the Greenhouse Gas Reduction Fund, with $1 billion guaranteed yearly for the state’s high-speed rail project, which recently lost federal grants under the Trump administration.
In a sign of bipartisan compromise, Newsom also approved Republican-backed legislation to support more oil drilling in Kern County. Republican State Senator Shannon Grove, who represents the area, praised the governor “for being willing to listen and to understand the situation that we have before us, and his courage to act immediately to stabilize fuel prices for all Californians.”
Environmental advocates largely praised the package despite concerns about increased drilling. “We applaud Governor Newsom and California legislators for leading the way in cutting pollution, lowering bills, and building more resilient communities,” said Evergreen Action vice president for states Justin Balik.
The legislation also creates a pathway for California to join a West-wide energy market, which Newsom claimed would provide the most energy savings. The regional integration aims to more efficiently use existing electricity infrastructure and reduce reliance on fossil fuel plants during peak demand.
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For communities disproportionately affected by pollution, the package strengthens air quality monitoring and creates stronger protections for residents from environmental harms.
Katelyn Roedner Sutter, California director for the Environmental Defense Fund, contrasted California’s approach with federal inaction: “D.C. has not led; California will. As our nation blocks clean energy progress, digs in on failed policies fueling higher prices and the climate crisis, we are doubling down on collaboration to bolster climate action, sustain climate action, and increase access to cheaper, cleaner energy.”
The package also improves the integrity of carbon offsets under SB 840 and provides strategic flexibility for cap-and-invest revenues to meet future climate investment needs.
“California leads the way again. The state’s leadership on climate action is even more crucially important during this period of climate denial at the federal level,” said Manish Bapna, president and CEO of NRDC (Natural Resources Defense Council).
Newsom emphasized the practical approach of the legislation: “So finding a balanced approach, setting forth strategies to achieve audacious goals that simply no other large-scale jurisdiction in the world can lay claim to, and doing it in a way that reduces the burden on ratepayers and taxpayers.”
