California’s End-of-Session Blitz Is a Ray of Sunshine for Climate Progress

With the Trump administration continuing its attack on climate policies at every turn, it is up to the states to lead on climate progress. California has long been ahead of the game. In 2006, California was the first state to adopt an economy-wide program, then called cap and trade, to reduce global warming pollution through the Assembly Bill 32 Global Warming Solutions Act. Over this time, the program has been responsible for regulating the sources responsible for 85 percent of California’s greenhouse gas emissions and has generated more than $30 billion for the Greenhouse Gas Reduction Fund to support transit, affordable housing, community protections, zero-emission vehicle incentives, and other programs to help communities transition and adapt to the effects of climate change. 

This year, Governor Newsom made it a priority to extend the program, which was set to expire in 2030. Through the package of bills that the legislature just passed (AB 1207 by Jacqui Irwin and SB 840 by Monique Limón), the program was rebranded as the Cap-and-Invest Program, and reauthorized through 2045. The improvements include:

• Lowering electric bills: Gas utility credits will instead be changed to provide rate relief to electric utility costs. This means that Californians will see a much bigger Climate Credit reducing their electric bills when they need it most, especially during the hot summer months.
• Adjustments to free allowances: This requires the California Air Resources Board to update which industries get free allowances after 2031; it will hopefully avoid giving a free pass to industries that don’t need them to stay in business.
• Improving the integrity of offsets: There will be no expansion of offsets (as was proposed in earlier bill drafts), and offsets will be included “under the cap” (i.e., offsets used in one year result in the same number of allowances retired the next year). Plus, there must be an evaluation of how offsets can provide greater in-state benefits going forward.

Additionally, the legislature funded some important priorities this year (in AB 105) with the funds from Cap-and-Invest, including $38 million for heavy-duty zero-emission vehicle charging infrastructure, $25 million for the Clean Cars 4 All program, $95 million for reducing local air pollution, and $368 million to the Transit and Intercity Rail Capital Program.

For almost a decade, NRDC and our partners have been advocating for legislation that would enable California utilities to participate in a regional electricity market that connects the state with the broader West, with the goal of reducing electricity costs, improving reliability, and accelerating the growth of clean energy. This session, we finally saw success. After a tense holdup, AB 825 (Cottie Petrie-Norris, Robert Rivas, Josh Becker) now sports the language (formerly in SB 540) that will allow for California’s participation in a broader regional electricity market. 

AB 825 builds on the West-Wide Governance Pathways Initiative (Pathways Initiative), a multistate effort to create a regional market that respects state authority while improving grid efficiency so that we can more easily share clean electricity across the region. This will help us avoid using expensive and dirty gas plants whenever possible. The Pathways Initiative has broad support from labor and environmental groups, consumer advocates, clean energy providers, utilities, and businesses, and polling confirmed that Californians agree: 80 percent of voters supported this bill. 

Electricity prices are too high in California for many reasons. In addition to directly reducing electric bills with Cap-and-Invest funds, another bill, SB 254 (Becker), makes substantive progress on reducing rates, including through:

• Cheaper transmission: The bill will launch a Transmission Accelerator Revolving Fund Program to speed up projects and tap into lower-cost public financing and the potential of public ownership to reduce costs.
• Smarter wildfire investments: These will improve the oversight and controls over utility wildfire-related spending, which has been the biggest driver of increased bills in recent years.
• Lower-cost financing: This requires utilities to “securitize” $6 billion of utility wildfire-related spending, which means they don’t make a profit on this spending and lowers the cost to customers.
• Solutions for wildfire damages: The bill enhances the Wildfire Fund and requires a hard look at longer-term solutions for reducing the cost of climate disasters and who should pay. Utility shareholders and ratepayers are each required to pay for half of the Wildfire Fund insurance costs. This sharing of contributions is a beneficial deal for ratepayers, who currently pay the full costs of utility insurance and damages when the utility has behaved prudently.

And that’s not all, folks! Here are several other bills the governor signed:

• SB 655 (Henry Stern) establishes a “right to cooling” standard that identifies a safe maximum indoor temperature to protect the health of residents.
• SB 79 (Scott Wiener) allows for more housing to be built near the state’s busiest public transit stations to increase housing affordability, support transit ridership, and cut tailpipe pollution.
• AB 1280 (Robert Garcia) expands the technologies eligible for climate program funding to include industrial decarbonization technologies, including heat pumps and thermal storage.
• AB 39 (Chavez Zbur) empowers local jurisdictions to prepare for California’s transition to zero-emission vehicles and buildings by creating and adopting electrification plans that meet their communities’ needs.
• AB 806 (Damon Connolly) protects the rights of households living in manufactured housing to install air-conditioning systems, including heat pumps.
• AB 1417 (Catherine Stefani) provides support to enable community capacity for participation in offshore wind development processes.
• SB 302 (Steve Padilla) reduces the cost of building renewables by aligning the California tax code with federal law to eliminate the state tax on federal tax credits for clean energy development. 

While it’s nice to pretend that it is always sunny in California, there are a few clouds worthy of mention. Here are two veto-worthy bills that made it through the legislature:

• SB 34 (Laura Richardson) sets a bad precedent by interfering in an ongoing rulemaking on air quality in the South Coast Air Quality Management District. The state should not decide what regional air districts can do to protect the health of their residents. (VETOED)
• SB 237 (Tim Grayson) deems Kern County’s Oil and Gas Ordinance CEQA-compliant for permit approvals, eliminating project-level environmental review and insulating new oil drilling from legal challenges. (SIGNED INTO LAW)

Looking to what needs attention in 2026, it is vital to equity and the health of Californians that the state supplement Cap-and-Invest regulations (which focus just on greenhouse gas emissions, not toxic air pollution) with programs and policies that directly reduce sources of criteria air pollution and toxic exposures. 

The state faces a gaping hole in the regulations needed to reduce pollution from transportation after the recent federal losses. We also must ensure legislators address the rollbacks to environmental protections in SB 131, which exempted “advanced manufacturing” from the state’s long-standing environmental review. Legislators are spearheading a new bill that will be introduced next year to address these rollbacks and protect communities and endangered species’ habitat. Additionally, California needs to provide more resources to support low-income families transitioning to clean electricity to power their homes and vehicles. It’s a matter of fairness that clean energy should be affordable and available to all.

There are significant new wins now on the books for California, and it is astounding how much work got done in the last couple months to ensure that the state continues to lead the way. But with that said, there is a whole lot more work to do to manage the transition away from dirty fuels in an equitable manner. We look forward to continuing to make progress next year.