Overview
- The California Air Resources Board voted 10-3 on Friday to adopt broad changes to the state’s cap-and-invest system that create a roughly 118 million‑allowance Manufacturing Decarbonization Incentive and expand some free allocations for industry.
- The board agreed to pause issuing allowances from the new incentive until the agency’s executive officer reviews the design and reports back, and it committed to additional public workshops before implementation.
- Analysts including the Legislative Analyst’s Office say the incentive and other changes will cut roughly $2 billion a year from the Greenhouse Gas Reduction Fund, which pays for transit, affordable housing, drinking water and community air programs.
- Environmental and frontline groups warn the extra allowances weaken the cap by adding permits outside the declining limit, while CARB leaders and Governor Gavin Newsom say the changes respond to affordability and aim to keep manufacturers and refineries from leaving the state.
- The package is slated to take effect Sept. 1, 2026, the cap was reauthorized through 2045 by the Legislature last year, and debate over guardrails and long-term certainty past 2030 continues.