A looming overhaul of California’s cap-and-trade program is raising alarm among transit advocates, affordable housing organizations, and environmental justice groups, who warn the state could weaken a key climate funding source at a moment when cities already face transit funding crises and worsening housing pressures.
At the center of the debate is a proposal to reshape the state’s carbon market, commonly known as “cap-and-trade” but rebranded as “cap-and-invest” by Governor Gavin Newsom. The program would be retooled in ways critics say would expand free pollution permits for oil companies and other major emitters. At the end of this week, the California Air Resources Board is expected to vote on a proposal to allocate $4 billion in new free emission permits to companies with half slated for the fossil fuel industry in exchange for commitments to invest in clean energy. The putative goal is to reduce the cost of gas at a time when the war on Iran has cause nationwide gas price spikes, with California gas prices slightly higher than most states.
The Greenhouse Gas Reduction Fund – funded and budgeted annually by cap-and-trade proceeds – has become a major financing stream for climate-related transportation investments statewide. Transit agencies, active transportation programs, affordable housing near transit, and the state’s high-speed rail project all rely heavily on cap-and-trade revenues. Anyone interested in the details of how the program currently generates funds and/or what specific changes are proposed should read this Calmatters article.
Under legislation approved last year, high-speed rail is guaranteed $1 billion annually from the carbon market through 2045, with another $1 billion per year set aside for “legislative priorities” i.e. the state’s general fund. What’s left is divided up for housing and transit funding at the local level. A giveaway of billions in permits would likely decimate those funds for local projects.
The timing of the state’s retreat on cap-and-trade funding couldn’t be worse. Federal subsidies to help transit agencies during the COVID-19 pandemic ended last year, and while ridership is increasing across the state, nearly no transit lines/agencies have fully recovered to pre-pandemic ridership levels.
While Californians are showing they are willing to support transit, it was announced earlier this week that 305,895 Bay Area residents signed a petition to place a measure on the ballot to do just that, a further rollback of state transit funding will both undermine enthusiasm for these types of measures and blunt their ability to head-off transit service cuts.
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