Last week, New York approved its 2025 budget, which includes $1 billion to invest in clean energy, energy efficiency and other programs that will reduce pollution and save New Yorkers money. Unfortunately, the benefits of these investments are overshadowed by the delayed launch of New York’s cap-and-invest program, which would provide billions more in savings to New Yorkers every year.
In the face of federal attacks on U.S. climate progress, Governor Newsom recently announced that California was “doubling down on cap-and-trade: one of our most effective tools to cut emissions and create good-paying jobs.” And at the heart of that program is the emissions cap: the firm, declining limit on climate pollution that drives progress on emissions reductions across the state.
With the cap-and-trade program up for reauthorization this year and the California Air Resources Board (CARB) evaluating important program updates, now is a crucial moment to revisit what matters most: the cap.
The cap is the foundation of California’s cap-and-trade program. It sets a binding, declining limit on greenhouse gas emissions from the state’s largest polluters, covering roughly 75% of statewide climate pollution. Each year, California issues a declining number of emissions allowances — each one representing one ton of carbon pollution — and the amount issued is limited to the total allowed under the state’s emissions cap. The allowances are either auctioned at quarterly auctions, or distributed to regulated entities to benefit ratepayers and insulate them from price impacts. Because the total number of allowances declines each year, overall emissions must also fall. The cap is what gives the cap-and-trade program its climate power. The built-in trajectory that the cap represents ensures steady, predictable progress toward California’s climate goals — as long as the cap is properly calibrated to achieve those goals.
California’s emissions cap is designed to help achieve both near- and long-term climate targets. Under the state’s 2022 Scoping Plan, California is aiming to cut emissions 48% below 1990 levels by 2030, and at least 85% below 1990 levels by 2045. Hitting those targets requires consistent and meaningful progress. The design of the cap, and especially how quickly it declines, plays a key role in determining how much pollution is avoided in this critical decade. These cumulative emissions are incredibly important: every ton of pollution we avoid emitting today reduces the long-term buildup of pollution in the atmosphere, limiting warming and the damage of future climate impacts.
Cap-and-trade is part of a broad suite of climate policies in California, including clean air standards, electrification efforts, and clean fuels. But while most policies are designed to incentivize reductions or reduce emissions from specific sectors or sources, the cap ensures that economy-wide emissions stay within the limit of the cap. That makes the cap a critical ‘insurance policy’ — even if other programs don’t deliver the level of emissions reductions they expected, the cap guarantees an upper bound on pollution.
Lawmakers have the opportunity this year to reaffirm their commitment to ambitious, effective climate action by extending the cap-and-trade program. The cap is what guarantees that emissions go down, and reauthorization should reinforce that core principle.
At the same time, CARB is evaluating near-term changes to the program through a rulemaking process. One of the most important choices on the table is how the cap will be structured until 2030. Encouragingly, CARB is considering options that would properly align the cap with emission reductions the 2022 Scoping Plan says are necessary. With reauthorization, lawmakers can ensure that this cornerstone program can keep delivering emissions reductions for Californians while generating billions of dollars in investments for climate resilience, environmental justice priorities and to help address affordability. Also, with the current rulemaking, CARB has the chance to make sure that these reductions are swift enough to avoid the worst impacts of climate change.
These are both necessary and crucial steps — strengthening the cap through long-term reauthorization and the rulemaking will keep California on track for near-term climate success, and create a model for other states to follow. Because — when it comes to California’s climate future — it’s about the cap.
Participants at a carbon markets workshop in Nairobi, Kenya. Facilitators walk through carbon market principles, empowering Indigenous People and local communities to advocate for their rights and interests. Photo by Diego Acosta-López/EDF.
Last week, Environmental Defense Fund (EDF), in partnership with the Ministry of Environment, Climate Change and Forestry of Kenya, MPIDO, and IMPACT, convened a transformative workshop in Nairobi that brought together government officials and representatives from Indigenous Peoples and local communities (IPLCs). The event marked a significant step forward in fostering meaningful dialogue, co-learning, and collaborative planning as Kenya positions itself within the evolving carbon market space.
This workshop equipped IPLC leaders with essential tools and knowledge to effectively engage in carbon markets, ensuring their rights are upheld and that they can benefit equitably from Kenya’s climate initiatives. EDF specialists led sessions on the fundamentals of carbon markets, robust monitoring and reporting systems, and the critical roles that both IPLCs and government institutions play in shaping a fair and inclusive market framework.
By the conclusion of the workshop, participants had collaboratively drafted a preliminary roadmap for IPLC engagement in Kenya’s carbon markets. This roadmap includes strategies for equitable benefit-sharing, participation in decision-making, and adherence to social and environmental safeguards.
Why this workshop came at a critical time
Kenya is at a decisive point in its climate leadership journey. In 2023, the country passed amendments to its Climate Change Act (National Assembly Bill No. 42), laying the legal foundation for participation in international carbon markets. The new framework enables Kenya to engage in bilateral carbon trading as well as global mechanisms under the Paris Agreement. In the same year, Kenya also signed a Letter of Intent (LOI) with the LEAF Coalition, signaling its commitment to pursue high-integrity carbon finance solutions that support forest conservation.
These policy shifts have generated growing interest among IPLCs, who recognize the potential of REDD+ and other climate finance mechanisms to contribute to sustainable development. However, they also raised important questions about rights protections, cultural preservation, and the long-term implications of these initiatives on traditional land-use systems.
The Nairobi workshop served as a foundational moment to ensure that IPLCs are not only well-informed but are active co-creators in the development of Kenya’s carbon market strategies.
Kichwa woman harvesting cocoa in the Ecuadorian Amazon. Photo: Wiñak
Every year, the International Day of Forests reminds us of the indispensable role forests play in sustaining life. In 2025, the theme “Forests and Foods” sheds light on an often-overlooked reality—forests are not just scenic landscapes brimming with wildlife but fundamental to human survival. From food security and nutrition to livelihoods and ecosystem stability, forests are the backbone of our planet’s well-being.
While forests contribute only 0.6% of the global food supply, their importance goes far beyond calories. Forest foods are vital supplements during lean seasons and serve as safety nets for vulnerable households. Moreover, forests support 80% of terrestrial biodiversity, offering an invaluable reservoir of genetic resources that could help communities adapt to climate change. Access to wild foods diversifies diets and income sources, strengthening resilience in the face of environmental and economic shocks.
Forests are far more than economic assets; they are the silent architects of ecosystems and societies. Over a billion people rely on forests for their livelihoods, particularly Indigenous communities, who depend on them for food, shelter, medicine, and water. However, their significance extends beyond material resources. Forests are deeply woven into cultural identities, shaping traditional knowledge, fostering community, and strengthening local values through deep emotional and spiritual connections to the land.
Photo: Pixabay
With climate policy under attack at the federal level, it’s more important than ever that state leaders deliver real action that lowers pollution, creates jobs and expands affordable clean energy. Washington state’s cap-and-invest program continues to show the power of state policies that cut pollution and raise funds for their communities.
Results were released today for California’s first cap-and-trade auction of 2025. Prices decreased from the November 2024 auction, reflecting continued uncertainty among market participants due to the lack of regulatory and legislative clarity. This uncertainty is costing California hundreds of millions of dollars in lost revenue for climate and environmental justice programs at a time when the state needs it most.
First, it is important to understand that the market is functioning as designed. Despite fluctuating prices, the emissions cap remains intact and covered entities must comply with the program’s requirements. However, continued uncertainty surrounding the California Air Resources Board (CARB)’s rulemaking process and the state legislature’s timeline on program reauthorization are introducing unnecessary volatility and costing California critical revenue for climate and community investments.
This latest auction demonstrates the financial consequences of policy uncertainty. With CARB yet to finalize key decisions on pre-2030 allowance budgets and allocation, market participants lack the clarity needed to plan compliance strategies and make long-term investments in emissions reductions. The result? Auction prices that are lower than they might otherwise be, meaning California is leaving huge amounts of revenue on the table — funds that could have been used to invest in clean energy, wildfire prevention, and air quality improvements.
This month’s report from the Legislative Analyst’s Office highlights that the state may need to revise its Greenhouse Gas Reduction Fund expenditure plan if prices continue to trend lower than forecasted, potentially impacting both the 2024-25 and the 2025-26 budgets. Much of the revenue raised through these quarterly auctions is already committed to be spent on important programs statewide and the loss of revenue due to uncertainty could have very real impacts.
The lack of clarity also dampens the incentives for businesses to invest in emissions reductions; investments that often happen over years. If companies aren’t sure what the cap-and-trade market will look like in the next decade, they’re less likely to take proactive steps to decarbonize. Similarly, investors in clean energy and climate technology need confidence in long-term market stability to support new projects.
California has an opportunity to strengthen market confidence and ensure the cap-and-trade program continues driving ambitious emissions reductions while raising urgently needed funding for climate resilience and community investments. That starts with swift action on two fronts:
Market fluctuations like those seen in this auction are a symptom of uncertainty. By committing to ambitious climate action through regulatory and legislative pathways, and reinforcing the essential role of cap-and-trade in delivering emission reductions, California can protect its climate leadership and generate the revenue needed for critical investments.
