California may have lost up to $3 billion in potential revenue from a signature emissions reduction program over the past year, a new report has found.
The Golden State’s cap-and-trade program — a system that sets emissions caps and distributes tradable credits within that framework — has incurred these losses in response weak auction results, according to the report, published on Monday by nonprofit research group Clean and Prosperous California.
The poor auction outcomes stem from a plunge in so-called “allowance prices,” the cost of the permits that polluters can purchase in exchange for emissions they generate.
Allowance prices have plummeted from an all-time high of $42 per metric ton of carbon dioxide emitted to near-historic lows this year of $26 per metric ton, per the report.
“These funds would have otherwise been directly invested into communities and used to lower utility bills for ratepayers,” Clayton Munnings, executive director of Clean and Prosperous California, said in a statement.
These allowance prices also show no signs of recovering ahead of an upcoming auction on August 20 — a situation that the authors attributed to legislative uncertainty surrounding the program’s future.
Bolstering future revenue would require several actions, including urgent action from the state legislature to extend the program’s shelf life beyond its current 2030 end-date, the researchers noted.
The California Air Resources Board (CARB) would then need to resume relevant rulemaking processes that would allow for the reduction of available permits, the authors added.
Without such legislative and regulatory action, California could continue losing between $600 million and $1 billion in revenue from each quarterly cap-and-trade auction — as likely occurred at the last event in May, the report concluded.
Yet if auction revenues were restored, the authors observed, these funds could help insulate California’s climate change initiatives from setbacks the state is expected to incur from the federal government’s “one big, beautiful bill.”
Following the recent passage of President’s Trump sweeping legislation, Gov. Gavin Newsom (D) warned that California’s wildfire-prone communities could suffer from significant cuts to forest management services and to the firefighting workforce.
The bill, according to the governor’s office, could end up slashing forest management services and eliminating the personnel capable of fighting fires.
The governor’s office also said that the bill “unfairly targets green vehicles,” presumably referring to the decision to do away with electric vehicle tax credits.
To revive revenues and reinforce California’s ability to maintain its climate targets, the authors suggested a “swift legislative extension” of the cap-and-trade program. The subsequent rulemaking, they continued, would ideally include permit supply cuts, which in turn would help the Golden State achieve its and 2045 carbon neutrality goals.
The current low allowance prices, the researchers stressed, may “jeopardize California’s ability to achieve its ambitious climate targets.”
Copyright 2025 Nexstar Media, Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
For the latest news, weather, sports, and streaming video, head to The Hill.
