Climate 411

As the California legislature looks to reauthorize cap-and-trade, they cannot forget the strongest climate safeguard the state has: the cap itself

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. 

What is the cap and why does it matter?

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. 

How can the cap be strengthened?

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.

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Washington’s cap-and-invest program remains strong as first auction of the year delivers essential funds for communities in the Evergreen state

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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.

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Delay and uncertainty around California’s core pollution-cutting program is costing the state millions

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.

February auction results

  • All 51,466,028 current vintage allowances — emission allowances valid for compliance this year – offered for sale were purchased, resulting in the 18th consecutive sold out auction. This is 1,163,584 fewer allowances than were offered at the previous auction, as the number of offered allowances declines annually.
  • The current auction settled at a price of $29.27, $3.40 above the $25.87 price floor and $2.64 below the November 2024 settlement price of $31.91. Today’s settlement price follows a trend of lower settlement prices, similar to the prices seen in the February, May, and November auctions, which settled at $41.76, $37.02, and $31.91, respectively. The last time auction prices dipped below $30 was in February of 2023
  • All of the 6,847,750 future vintage allowances offered for sale were purchased. These allowances can be used for compliance beginning in 2028. This is 363,250 fewer future vintage allowances than were offered at the previous advance auction. 
  • Future vintage allowances settled at $28.00, $2.13 above the $25.87 price floor and $2.16 below the November settlement price of $30.16. 
  • This auction is expected to generate roughly $851 million for the Greenhouse Gas Reduction Fund. This is a notable drop from the peak revenue a year ago, when the February 2024 auction generated over $1.3 billion

What these results mean

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.

Delays and uncertainty have a cost

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. 

The good news: this is fixable

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:

  1. CARB must finalize and implement its rulemaking to ensure the cap-and-trade program is on track to deliver the necessary reductions by 2030. This will provide clear market signals for investors, allow covered entities to plan their compliance strategies, and prevent further unnecessary volatility. CARB should release the Initial Statement of Reasons as soon as possible so that changes can go into effect in the 2026 allowance budget year. 
  2. The Legislature must act this year to reauthorize the program at least through 2045. This will enable long-term investments and planning in emissions abatement, provide clarity about potential program reforms to increase climate ambition and equity outcomes, and send a strong message that cap-and-trade will remain a cornerstone of California’s strategy to meet its 2045 carbon neutrality goal.

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.

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California is on the path to a regional electricity market

Photo: Pexels

California has taken a critical first step towards creating a cheaper, cleaner and stronger grid through the creation of a Western regional electricity market. By working more with its neighbors, California can unlock new clean energy technologies across the West, including offshore wind, long duration energy storage and other clean options that can take a long time to build. This type of cooperation will be essential to keep costs low as California both cleans up its existing electric grid to cleaner options and triple its size to help decarbonize the rest of the economy. 

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Danger ahead: the Trump administration’s attack on EPA’s finding that climate pollution harms public health

On his first day in office, President Trump issued dozens of executive orders attacking the nation’s climate and clean air protections.

Buried in one of these orders is direction to the Environmental Protection Agency to make recommendations by February 19th on the “legality and continued applicability” of EPA’s Endangerment Finding.

The Endangerment Finding is EPA’s science-based determination that greenhouse gases – the pollution that causes climate change – harm public health and welfare.

The directive to reconsider the Endangerment Finding comes straight from Project 2025 and is both cynical and deeply concerning given the mountain of scientific evidence supporting the Finding, the devastating climate harms Americans are experiencing right now, and EPA’s clear obligation to protect Americans’ health and welfare.

Shortly after receiving President Trump’s directive, EPA’s acting Administrator summarily fired the agency’s independent Science Advisory Board – the very scientists who can speak to the extensive scientific basis supporting EPA’s Endangerment Finding.

The real-world consequences of any effort by EPA Administrator Lee Zeldin and the Trump administration to destabilize the Endangerment Finding would be severe and unlawful and would hurt Americans across the country.

What is the Endangerment Finding?

In 2007, the Supreme Court determined that greenhouse gases are air pollutants within the unambiguous meaning of the Clean Air Act and that EPA must make a science-based determination as to whether greenhouse gas pollution endangers public health and welfare.

Following the Supreme Court’s decision, in 2009, EPA issued the Endangerment Finding, which determines that climate pollution threatens the public health and welfare of current and future generations.

Here are a few things you should know about EPA’s finding:

It’s supported by extensive science

The Endangerment Finding is based on a vast amount of scientific evidence that climate pollution harms human health. It was adopted after extensive public process, including multiple opportunities for public input and evaluation of more than 380,000 public comments.

The final Endangerment Finding includes detailed information confirming that greenhouse gas pollution is driving destructive changes in our climate that pose a grave and growing threat to Americans’ health, security, and economic well-being, both now and in the future. These include health harms from increased smog, rising temperatures and extreme weather events, among other things.

Over time, the scientific evidence has only become stronger. The intergovernmental expert body charged by Congress with assessing the impacts of climate change on the United States has issued a series of National Climate Assessments, most recently by the Trump Administration in 2018 and the Biden Administration in 2023. The National Climate Assessments confirm that climate change resulting from greenhouse gas emissions is causing extensive, and increasingly severe harms throughout the country.

EPA has also continued to document the science behind greenhouse gases’ contributions to climate change, including in earlier responses to requests that it reevaluate the Endangerment Finding (here and here) and in multiple actions establishing pollution standards for power plants, cars and freight trucks, and oil and gas facilities – some of which include scientific assessments that were completed within the last year.  And in legal filings supporting these actions, climate scientists have pointed to very recent scientific evidence that even more strongly confirms these climate pollution harms.

In short, the science unequivocally supports what so many Americans are already experiencing – climate pollution is causing harm in communities across the country. There is no question about the Endangerment Finding’s “continued applicability.”

Courts have repeatedly affirmed its Legality

Unsurprisingly, given the extensive evidence supporting it, courts have uniformly rejected legal challenges to the Endangerment Finding.

For instance, the finding was upheld by the D.C. Circuit Court of Appeals in 2012. Industry groups had challenged EPA’s use of scientific assessments, but the court held that EPA’s findings were supported by substantial evidence and that the agency had considered the scientific evidence before it in “a rational manner.”

Then the Supreme Court denied petitions for certiorari (review) that raised challenges to the Endangerment Finding in October 2013.

More recently, the D.C. Circuit again rejected challenges to the finding and the Supreme Court again denied review.

The findings have been the basis of agency decisions across administrations of both parties and have been the basis of numerous judicial decisions. As to the Endangerment Finding’s “legality,” the answer is also a clear and unequivocal “yes.”

Commonsense steps to cut pollution, protect communities

Beyond being grounded in the science, law, and the everyday experience of many Americans, the Endangerment Finding is important because it empowers EPA to do its job – protecting Americans from harmful climate pollution.

EPA has done just that since adopting the Endangerment Finding by taking commonsense steps to reduce climate pollution from large sources like power plants, cars and trucks, and oil and gas operations. These actions have been enormously successful in reducing pollution and delivering immediate benefits to Americans across the country.

It is vital that these commonsense measures remain in place. Recent EDF analysis looks at 11 key actions (including the foundational EPA climate protections mentioned above) that together will reduce more than 28 billion metric tons of climate pollution by 2055. That’s almost five times the total amount of annual emissions from the United States today.

New threats to the Endangerment Finding

President Trump’s efforts to reverse the Endangerment Finding come straight from Project 2025 – the infamous policy playbook crafted in part by Russell Vought, the new head of the White House’s Office of Management and Budget. Targeting the Endangerment Finding is extreme, dangerous, and puts the important benefits mentioned above at risk. It also goes well beyond anything the first Trump administration undertook.

Undermining the Endangerment Finding would be inconsistent with the commitments EPA Administrator Zeldin made during his confirmation hearing. Despite EPA’s recent dismissal of its independent Scientific Advisory Board, Administrator Zeldin affirmed that “I am someone who believes strongly that we should work with the scientists, leaving the science to the scientists … Fortunately, at EPA, we do have many talented scientists who provide that research.” (Senate EPW Committee transcript page 34) He repeatedly committed to “honoring our obligations under the law,” and said that “we will have never done enough to ensure that our water and our air is clean, safe, and healthy. Whatever we do every day to achieve this objective, we need to wake up the next day looking for ways to do more.” (Transcript page 37)

It is simply not possible to square these statements with any effort to destroy a science-based finding, affirmed by the courts, that provides the foundation for EPA’s efforts to protect Americans’ health and well-being from harmful climate pollution today and going forward.

For more information, please see the letter and appendix of relevant documents EDF recently sent to EPA on the Endangerment Finding.

Also posted in Basic Science of Global Warming, Clean Air Act, EPA litgation, News, Policy, Science / Authors: / Comments are closed

In first auction after voters defended the program, Washington’s cap-and-invest brings in record high revenue for the year

Photo: Pixabay

Last month, Washingtonians voted to protect their landmark cap-and-invest program, showing support for the program’s strong limit on pollution and game-changing investments. Thanks to this resounding win, the cap-and-invest program continues to deliver for Washington communities — with today’s results bringing in record revenue for the year.

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