September 22 – It has been a rough year for clean energy and climate policy in the United States.
At the federal level, clean energy tax credits have been rolled back, new regulatory barriers are stalling energy projects, and even nearly completed projects are being halted –unnerving investors, jeopardizing jobs and raising costs. In addition, the Trump administration is moving to repeal the core policy for regulating climate pollution, a step that threatens both public health and U.S. leadership in fast-growing global technologies.
It is a moment of backsliding that is sowing uncertainty and raising costs. But not everywhere. California, with the fourth-biggest economy in the world, is instead pushing forward – and is on the verge of making a 20-year commitment to its most signature climate policy.
This month, California lawmakers passed a long-term extension of the state’s cap-and-trade program. First implemented in 2013, the program sets carbon pollution limits in the transportation, energy and industrial sectors, covering about 85% of emissions in the state.
To date, the cap-and-trade program has played a central role in reducing emissions across the state. It puts a price on the vast economic risks of climate change, encouraging the private sector to reduce the pollution that causes it in the most efficient and cost-effective way, while driving billions in revenue that is invested directly into California’s economy and communities – including in climate solutions that help further cut pollution. And it has demonstrated that market-based policies – long championed as a bipartisan solution and seen by many private sector leaders as the best way to address climate change – are the most efficient and affordable way to meet the challenge.
The program, however, was scheduled to end in 2030, and the uncertainty about its future had already begun to rattle the market, putting billions of dollars in revenue at risk. Moreover, despite the program’s success, it was not fully aligned with the state’s long-term climate goals, because the pollution cap was not projected to meet the state’s deadline to achieve net-zero emissions by 2045.
Those combined factors made it urgent for lawmakers to strengthen and reauthorize the program all the way through 2045, and in the waning days of the legislative session, they reached an agreement to do just that. Governor Gavin Newsom signed it into law the following week.
At a time that demanded leadership, California answered the call. So, too, did private sector leaders. More than 40 business entities – including Dignity Health, Franklin Energy, Grove Collaborative, IKEA U.S., REI Co-op, Rivian and Sierra Nevada Brewing Company – spoke out in support of the legislation, emphasizing the need for policy certainty, the efficiency of the program in achieving its results and the investment it would drive into local communities.
Importantly, California lawmakers were not blind to the changing economic and political landscape around climate issues. In state houses across the country, cost-of-living and affordability remain dominant issues, with inflation still lingering after spiking earlier this decade and utility bills rising even faster. California is no exception.
Opponents of the legislation – including some who had previously supported cap-and-trade – argued the reauthorization would make energy more expensive in a state where it is already costly. It also had critics from the political left, who do not trust market-based programs to reduce local air pollution.
To address affordability concerns, the cap-and-trade extension was paired with other legislation, notably including measures to relieve pressure on oil refineries to mitigate looming gas price spikes. Another bill will allow the state’s grid operator to participate in regional electricity markets. And lawmakers tweaked the cap-and-trade program itself to further address affordability, including through twice-yearly credits applied to Californians’ peak-season electricity bills.
While these measures did not fully satisfy some critics, a number of industry groups removed their opposition as the package came together. The final package marked a pragmatic approach to addressing real-world, consumer-facing economic concerns while still advancing one of the nation’s most important state climate policies.
As a result, California has shown states that efforts to address cost-of-living, an issue so front of mind for voters right now, can be merged with climate and clean energy action, which voters care about, but tend to think of as more abstract and distant.
With the federal government moving in the opposite direction, that example is invaluable.
Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias. Ethical Corporation Magazine, a part of Reuters Professional, is owned by Thomson Reuters and operates independently of Reuters News.
Kelly Trombley is senior director of state policy at Ceres. Her team supports businesses and investors in advocating for climate and clean energy policy in states across the U.S.