California’s Cap-and-Trade Program has been the subject of discussion in recent weeks as the Legislature considers options for reauthorizing the program, which is currently set to expire in 2030. In this blog, we examine the strengths and limitations of cap-and-trade as a climate policy. We find that while the program can generate low-cost emissions reductions it is markedly insufficient for delivering a statewide net-zero transition in only two decades. The result is that how cap-and-trade auction proceeds are spent becomes extremely important. Strategic investments in infrastructure, technology and resilience could address the limitations of cap-and-trade and support the state’s climate goals.

California’s Greenhouse Gas Reduction Fund (GGRF) generates roughly $4 billion annually for appropriation by the Legislature to support the state’s climate goals. However, a majority of these investments were set and have been unchanged since 2014. As policymakers consider cap-and-trade reauthorization it makes sense to review current GGRF allocations in light of the latest available science. In this blog we evaluate the alignment between current GGRF allocations and the 2022 Scoping Plan. We find there is a significant mismatch – including that arguably none of the continuous appropriations (65%) are priority investments for the state’s climate goals.

California’s Greenhouse Gas Reduction Fund (GGRF) generates roughly $4 billion per year in cap-and-trade auction proceeds for appropriation by the Legislature to support the state’s climate goals. As legislators contemplate cap-and-trade reauthorization, including the potential to revise current GGRF allocations, we analyze the latest available GGRF data (May 2024).

The Legislature and Governor Newsom recently delivered a game-changing $39 billion climate budget and an important set of new policies to propel California towards its climate goals. In this blog post – the first of a three-part series – we review the central piece to the state’s recent actions: the $39 billion climate budget.