Cap and trade is dead. Long live ‘cap and invest.'

Politico

15-05-2025

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WHAT'S IN A NAME?: Gov. Gavin Newsom's cap-and-trade proposal — at least one page of it — is officially on the table. Dig in.
After a monthslong will-he-won't-he, Newsom came through today with a bid to reauthorize the state's bedrock emissions trading program through 2045.
And, in line with his rebrand of it as 'cap and invest,' he put a heavy focus on its revenues — particularly against the backdrop of a $12 billion overall deficit.
'The taxpayer will be happy to hear about that $60 billion that will go back into people's pockets, if we are successful in getting that program extended,' he said, referring to a credit on utility bills.
He also echoed an idea state lawmakers have been pushing with little success so far — making oil and gas companies pay for climate damages — to explain his proposal to use $1.5 billion of the cap-and-trade revenues to backfill general fund cuts to Cal Fire.
Backers of a pair of stalled 'polluters pay' bills in the Legislature had pitched the concept as a budget savior, though some grumbled on Wednesday that they had meant for oil and gas companies to pay up even more.
'Cap-and-trade is one piece of the puzzle, but we cannot lose sight of the fact that what is fair and just, particularly for front line communities, is for polluters to make up for what they have done,' said Assemblymember Dawn Addis, author of AB 1243.
Business groups were quick to get on board, praising Newsom's steering clear of thornier questions on how the program should look.
'A clean reauthorization of the cap-and-trade program through 2045 means that California will continue to balance compliance costs for businesses and consumers while encouraging investments into the state,' said CalChamber President and CEO Jennifer Barrera in a press release.
Environmentalists, meanwhile, bristled at the lack of mention of potential reforms to the program they've floated, like eliminating free credits designed to stop major polluting industries from leaving the state and emissions caps on individual facilities.
'What the governor is proposing is reauthorization, not reform,' said Ryan Schleeter of the Climate Center.
Also bummed: public transit agencies, who had been hoping for a shout-out, if not their entire $2 billion ask for cash-strapped systems.
'Staying silent on continued investments in transit, even as a starting position for the 'cap-and-invest' plan, is a blow to all who rely on essential transit service and throws into doubt the future of public transit in California,' said Michael Pimentel, executive director of the California Transit Association.
Still quiet: labor unions, who'd pushed for an extension of the 25 percent carveout for high-speed rail and got roughly that: a guaranteed funding stream of at least $1 billion annually, which would be about equivalent to 25 percent of current annual revenue.
The fight is now in the Legislature, where key members are being circumspect.
'I don't think everybody is on the exact same page just yet, other than the idea that we are going to get something done,' Assembly Natural Resources Committee Chair Isaac Bryan told us. 'We will get our say, and we'll get our input, and if there's enough consensus among us to go further than the governor then we will, and we have before.'
Stay tuned. 'My expectation is that by the end of the month, you'll see a proposal from the Assembly, a proposal from the Senate, and that conversations will unfold from there,' Assembly Utilities and Energy Committee Chair Cottie Petrie-Norris said in an interview.
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WATER WARS: Newsom is aligning himself with President Donald Trump's demands for more water deliveries — and picking a fight with Delta lawmakers — by asking the Legislature to fast-track a proposed $20 billion, 45 mile-long tunnel to route water around the Sacramento-San Joaquin River Delta to farmers and cities south.
He teased the ask, which will take the form of a trailer bill, during his annual revised budget presentation Wednesday morning, when he called the Delta Conveyance Project 'one of the most important climate adaptation projects in this country.'
'We have got to move that project forward and learn the lessons from the high-speed rail,' Newsom said, referring to delays and ballooning costs plaguing the high-speed rail project.
The effort to speed judicial reviews echoes an infrastructure streamlining package Newsom got lawmakers to sign two years ago — which notably did not include the Delta Conveyance Project after heavy pushback from environmental groups and Delta lawmakers.
Sen. Jerry McNerney, who represents the area that would bear the construction impacts of the project, immediately panned Newsom's latest proposal as a 'poorly conceived plan that the Legislature should reject.'
'You're going to see all hands on deck to protect the Delta,' added Assemblymember Rhodesia Ransom, from Tracy. She said she would launch an audit of the Department of Water Resources and the tunnel project in the Legislature.
'I just want to make sure we have a handle on how this project is going to impact farmland, farmers and Indigenous communities as well as our ecosystems,' she said in an interview.
The group of water agencies that would get the water from the new tunnel, meanwhile, cheered the proposal.
'The State Water Project is California's largest water infrastructure and is in dire need of modernization to secure water supplies for generations to come,' said Jennifer Pierre, the general manager of the State Water Contractors. 'Gov. Newsom's proposal marks a critical step in reducing barriers to innovation while creating efficiencies that will save time and billions of dollars as construction of the DCP moves forward.' — CvK
DUFFY'S DEFENSE: The Trump administration is hitting back at Democratic state attorneys general who are challenging a freeze on federal electric vehicle charger grants in court.
Transportation Secretary Sean Duffy blasted the effort, spearheaded by California, Colorado and Washington, arguing that the administration's hold on funding is lawful as the Department of Transportation reviews the program.
'The Biden-Buttigieg Administration failed miserably to deliver EV chargers despite their promises,' Duffy said in a statement today. 'Congress gave the Secretary the authority to issue program guidance and ensure money is being spent efficiently, and that's exactly what we are doing.'
Duffy also used the statement to hit directly at California, calling out the high-speed rail project his department is currently investigating.
'It's rich that California has joined this lawsuit, given that California has spent billions of taxpayer dollars on a boondoggle rail project that has yet to lay a single piece of track,' he said. — AN
WHERE THERE'S SMOKE: Insurance Commissioner Ricardo Lara is launching a task force to figure out whether and what public health standards should exist to guide insurance claims on wildfire smoke damage, he announced today at an event hosted by Capitol Weekly.
People who've seen their homes filled with wildfire smoke have complained about a confusing patchwork of coverage from their insurance companies, who will sometimes pay out smoke claims but don't have a standardized way of measuring damage. A group of Angelenos with smoke damage from January's fires have even sued the state's insurer of last resort, the FAIR Plan, for not paying for repairs.
'The lack of consistent public health standards for smoke damage has led to confusion, delays and uneven treatment for California homeowners,' Lara said today. 'This is a health and safety issue first and foremost, and that needs to be led by experts who know the issues best.' — CvK
— Salton Sea communities are fighting to keep lithium mining profits in the region.
— Bay Area nonprofits are scrambling for new funding after the Trump administration nixed their grants.
— Tesla sales are cratering, but the company is weighing whether to give CEO Elon Musk a new pay package.