The California Air Resources Board (CARB) voted last week to substantially change the state’s cap and invest program. The program requires GHG emitters to purchase allowances and reinvests those funds into climate projects across the state. In a press release, CARB lists the following substantive changes:
- “Establishes more stringent allowance budgets to align with the 2030 and 2045 climate targets: Guarantees the removal of 118 million allowances from allowance budgets, resulting in an 11% cap decline year-over-year for this decade and an average of 7% from 2031 to 2045.
- Dedicates 80% of allowances to directly benefit Californians: Provides $10 billion for electricity bill credits and maintains an estimated $8 billion for the Greenhouse Gas Reduction Fund.
- Stronger support for California businesses and jobs: Doubles the Manufacturing Decarbonization Incentive Fund to $4 billionto support investment in California and help make up for the loss of federal incentives. Eligible entities include manufacturers – food processors, cement plants, and refiners, who make large investment upgrades that reduce emissions at their facilities and reduce future compliance costs.
- $800 million in added compliance support for industry: Enhances near-term stability, supports California businesses and jobs, and ensures no additional cost passthrough at the pump for consumers.”
Not everyone is happy with the changes. The new rules have been criticized by climate activists. They argue that the new rules ease costs for in-state refiners and offer substantial subsidies to fossil fuel companies. California answers these criticisms by citing the cost of living. Estimates indicated that before the overhaul, the cap and invest program would add $1 per gallon to the price of gas by 2030. After the changes, no increase is projected. This is a growing theme as we see climate ambitions scaled back globally. Earlier this year, New York shrunk its climate ambitions. New York also attributed its rollbacks to cost-of-living increases.
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