Cap-and-Invest Rulemaking Undermines the State’s Ability to Meet its Climate Goals & Fund Community Climate Programs
Cap-and-Invest Rulemaking Undermines the State’s Ability to Meet its Climate Goals & Fund Community Climate Programs
For Immediate Release: June 2, 2026
Contact: Chloe Ames, chloe.ames@nextgenpolicy.org
California Air Resources Board’s (CARB) adopted rule severely limits one of the state’s core emissions and affordability programs
SACRAMENTO – Last Friday, May 29th, the California Air Resources Board (CARB) voted to adopt the regulatory changes championed by Big Oil to the state’s Cap & Invest program, undermining one of the state’s key climate pollution reduction programs. The Board’s actions came over the strong objections of a vast coalition of community based organizations, environmental and environmental justice groups, local government officials, transit agencies, and affordable housing advocates in opposition to the rulemaking. CARB’s decision will not only harm the state’s efforts to reach our 2030 climate goals but redirect billions of dollars in critical affordability funding for California communities – affordable housing, public transit, and relief on energy bills – to instead subsidize our state’s biggest polluters. Simply put, California regulators have capitulated to fossil fuel interests and significantly walked back our carbon market policies – a disturbing move as Big Oil rakes in record profits from high gas prices due to President Trump’s war in Iran.
“We are disappointed with the California Air Resources Board’s decision on Friday to capitulate to the oil industry’s lobbyists and push through a suboptimal rulemaking that may undermine our state’s ability to reach our 2030 climate goals and invest in community climate programs. This was a move to protect the fossil fuel industry, not California’s communities or our climate,” says Chloe Ames, Policy Advisor at NextGen California.
California was the first state to launch an economy-wide carbon market with Cap-and-Trade (now Cap-and-Invest) almost 15 years ago. Last year, in partnership with NextGen California and a broad coalition of stakeholders, the state legislature voted with a two-thirds majority to enact AB 1207 and SB 840 to extend the program to 2045, triggering a new rulemaking process. In April, the Air Resources Board subverted the legislative intent of those laws by introducing a novel and untested mechanism in last–minute changes to the proposed rulemaking — the Manufacturing Decarbonization Incentive, or MDI.
The MDI – which the board voted to approve Friday – undermines the central pollution-reducing mission of Cap-and-Invest by flooding the program with free emissions allowances above the cap. The MDI is bad news for the climate and is forecasted to result in a several billion dollar giveaway to one of the most profitable industries in the world – Big Oil. To make matters worse, those dollars come at the expense of everyday Californians, individuals and families who were set to benefit from public investments in community air protection programs, reliable transit, affordable housing, and energy bill relief, until Big Oil derailed this rulemaking.
“In my opinion, with this move, CARB has chipped away at California’s claim that it is a climate leader, all in the name of protecting big oil’s profits,” says Jamie Pew, Policy Advisor at NextGen California. “We still have some time before the MDI is officially implemented and we need public officials to push back on the oil industry’s lobbyists and stand up for our climate and California communities. Specifically, we must continue pushing to ensure that the Air Resources Board implements Cap-and-Invest as it was intended: with a strong, declining cap on emissions that generate revenues that help the bottom line of Californians, not Big Oil.”
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NextGen California is a nonprofit advocacy organization that breaks down barriers and rebalances power in the State Capitol on behalf of all Californians.