News
30/05/26
CARB adopts cap‑and‑invest changes: Update
Updates with final vote and details throughout Houston, 29 May (Argus) — The
California Air Resources Board (CARB) late Friday adopted amendments to the
state's cap-and-invest program, though not without first reaching a compromise
on the next steps for a contentious proposal to help industry reduce emissions.
The 9–4 board vote begins the process of implementing the long-awaited changes
to the program that sets a declining limit on greenhouse gas (GHG) emissions
from sources like power plants and transportation fuels. The board approved its
decision resolution after hours of debate, largely focused on a proposed
decarbonization incentive program for industry, potential impacts on state
revenues and the timeline for implementation. "When I was appointed chair, it
was a few weeks after governor Gavin Newsom signed the cap-and-invest extension
into law, and this was one of the items I was most looked forward to
deliberating on," CARB chair Lauren Sanchez said. "Little did I know ... how
difficult the trade-offs would be." One element that drew the most scrutiny was
a CARB staff proposal to take 118.3mn metric tonnes of carbon allowances
originally slated for removal and instead use them as industrial incentives
under the proposed Manufacturing Decarbonization Investment (MDI) program. The
MDI program was part of an updated amendments package staff released in April ,
which also proposed increasing allowance allocations to state utilities and
industrial entities from the original January draft . At least four board
members questioned whether the program would deliver guaranteed emissions
reductions and they raised concerns about its potential impact on state revenues
that fund emissions-reduction programs. "I'm looking not just for teeth, but
bigger and sharper teeth in terms of making sure that this program does what
it's supposed to do," former assembly member Miguel Santiago (D) said. However,
removing the MDI program — or reverting to the agency's January proposal — would
trigger additional regulatory requirements under state law, according to CARB
deputy executive director Rajinder Sahota. Both options would require a new
15-day public comment period and could necessitate further analysis under the
California Environmental Quality Act (CEQA) and other state laws. That extra
time would make the agency's planned 1 September implementation deadline
unattainable. If the board had decided to remove the MDI, the allocation levels
for industry, utilities and auctions would have stayed consistent with the April
proposal — meaning there would not be any increase to the proposed number of
allowances for state auctions, Sahota said. However, reverting to the January
version would cut free allocations to utilities and industrial sectors. "Which
would result in impacts to utilities and industrial entities that they were very
opposed to in the January proposal," CARB executive officer Steven Cliff said.
Balacing politics, economics Staff have framed the April amendments as a
response to mounting political and economic pressure, aimed at ensuring the
cap-and-invest program delivers emissions reductions while reducing the risk of
industries relocating to less-regulated states. Sanchez said she had some
concerns with the proposal as well, but sought a compromise with members on
language for the board's resolution that would allow for development of MDI
guardrails. The final resolution directs staff to return to the board prior to
issuing MDI allowances. That step will allow for additional analysis of board
and public concerns and further deliberations, which could inform a future
rulemaking for changes to MDI regulations, Sanchez said. Much of the day's
debate focused on whether to move forward now to provide regulatory certainty
and stabilize allowance values, or to take more time to evaluate the latest
staff proposal, including the MDI program, and risk running out the one-year
clock on finishing the rulemaking. Or, alternatively, take a path that straddles
both options, and allows board members to retain authority over the design of
the MDI. Despite the revisions to the resolution, four board members voted
against the proposal, citing public concerns raised by speakers on Thursday
about the MDI program and the limited ability to influence the final amendment
package. "I don't think we should be backed into a corner and expected to vote
‘yes' on something we have serious reservations about and lots of unanswered
questions about," board member Lynda Hopkins, a Sonoma County supervisor, said
before casting her "no" vote. Ultimately, the measure passed not because of
overwhelming support for the amendments, but due to concerns that further delays
could undermine market certainty and disrupt industry planning if the agency had
to start over. "I am going to support moving forward," said board member John
Balmes, a professor of medicine at the University of California, San Francisco.
"As much as I'd like to dump MDI — and, if it were up to me, I would." By Denise
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