Cap-and-Trade reauthorization is, in fact, still on the table

By Melissa Sparks-Kranz, legislative advocate (environmental quality)

With many priorities coming down to the wire in the final days of the legislative session, lawmakers finally landed on a two-bill Cap-and-Trade deal this morning with AB 1207 (Irwin) and SB 840 (Limón). The proposal would fund some, but not all, of Cal Cities' priorities. However, the framework provides flexibility for continued discussions on key funding areas.

All bills must be in print for 72 hours, kicking the final vote to Saturday morning - past the adjournment deadline. The Legislature will have to waive its own rules to finalize the package, among a swath of bills amended earlier today.

The Cap-and-Trade Program has generated roughly $30 billion over the last ten years, often distributed to cities and others as grants for transit, rail, transportation, air quality, affordable housing, safe drinking water, and organic waste programs. Since last fall, Cal Cities has urged lawmakers to reauthorize the program until 2045 and invest in local efforts to carry out statewide housing and climate goals.

A mixed bag of results

AB 1207 would create structural changes to the program, including reauthorizing it through 2045. SB 840 would provide a framework for funding distribution that, if passed, would take effect starting Fiscal Year 2026-27.

In a win for cities, the framework includes specific funding for affordable housing and sustainable communities efforts, along with wildfire resilience. Explicitly not included is money for local clean transportation, organic waste infrastructure, and climate adaptation efforts, such as sea level rise and flood infrastructure improvements.

However, SB 840 would allow the Legislature to allocate $1 billion at its discretion during the annual budget process. Cal Cities will continue to fight for the unmet priorities that were not included in the framework in future budget years.

What's next?

Cities should stay tuned, as the threshold is high. Both bills need to clear a two-thirds majority in the next 72 hours - and it remains to be seen how the vote will land.