Climate change: market-based compliance mechanism: extension.

With Assembly Members Irwin and Rivas and Senators Limón and McGuire at the helm, the measure extends California’s market-based emissions program and channels its proceeds toward direct consumer rebates and targeted investments, while recalibrating utility support and governance to align with stated emissions goals. It preserves the California Cap-and-Invest Program as the framework for regulating greenhouse gas emissions and requires the state board to design regulations that transition support from gas corporations to electrical distribution utilities to minimize ratepayer impacts and meet the act’s objectives. The proposal also keeps the program in force through 2046 and designates it as the rule governing emissions reductions for petroleum refineries and related facilities, subject to ongoing regulatory oversight. It emphasizes affordability, cost-effectiveness, leakage minimization, and compatibility with broader air quality and energy goals.

Key mechanisms in the measure center on how allowances are managed, priced, and used to fund policy goals. It requires the state board to maintain a price ceiling and a system of price containment points, with additional allowances available at the ceiling if needed for compliance and to be deposited into a new California Climate Mitigation Fund for direct household energy-cost rebates and related investments. The bill imposes offset-credit limits, starting at 4 percent of a covered entity’s obligations through 2025 and rising to 6 percent from 2026 through 2045, with at least half of credits sourced from projects that provide direct environmental benefits in the state; it also requires that a portion of offset credits retired each year be removed from future budgets. The creation of the Compliance Offsets Protocol Task Force and the Independent Emissions Market Advisory Committee adds governance layers, with annual reporting obligations and public meetings to assess environmental and economic performance and to advise on statutory changes to reduce leakage and improve program design.

The measure introduces additional funding and distribution changes that affect utilities, ratepayers, and state priorities. It directs 15 percent of revenues from allowance auctions to clean energy and energy efficiency projects until mid-2026, after which 5 percent of those revenues would be remitted to the State Treasury for the California Transmission Accelerator Revolving Fund, available to the California Infrastructure and Economic Development Bank for related programs. It also specifies that local publicly owned electric utilities receiving additional allowance allocations must provide credits to ratepayers and report on revenue uses, with annual reporting to the state board and the Legislature. In conjunction with these changes, credits allocated to residential customers would appear on bills in up to four high-billed months per year, with adjustments as directed for affordability or emergencies, and a parallel provision allows credits to be directed to small businesses and certain other customer categories when appropriate. The measure also adds procedures for legislative oversight and public involvement in major regulatory updates, including targeted hearings and public agendas, without delaying the rulemaking process, and it contemplates immediate effect as an urgency statute.