Overview
- The California Air Resources Board voted last Friday to adopt rule changes that create a Manufacturing Decarbonization Incentive that could award roughly $3.5 billion in free emissions allowances to manufacturers and oil refiners in exchange for pledged emissions‑reduction projects.
- Board members also reallocated allowance auction revenue to fund about $2 billion in utility bill credits from 2027–2030 and set aside roughly $800 million for business cost relief, moves intended to ease energy costs and keep industry in the state.
- The board agreed to pause actually issuing allowances under the new incentive until the agency’s executive officer reviews the program design and returns with any proposed amendments and public workshops.
- The nonpartisan Legislative Analyst’s Office projects the changes would roughly halve annual revenues for the Greenhouse Gas Reduction Fund, reducing money for transit, affordable housing and community climate programs that have long been financed by auction sales.
- Supporters say the package responds to affordability and refinery closures, while critics and climate economists warn the giveaway lacks strong guardrails, could dilute the cap’s emissions signal, and shift funding away from projects that directly cut pollution.