On May 6, 2026, the California Senate Joint Budget Committees and the Environmental Quality Committee held an informational hearing on the state’s Cap and Invest program. California’s Cap and Invest program, formerly called Cap and Trade, is a market-based system intended to reduce climate pollution and generate funds to invest in climate solutions. But as it’s currently structured, the program gives polluters far too much license to continue polluting.
The following testimony was given to the committee by Allison Hilliard, Legislative Manager for The Climate Center:
To improve the Cap and Invest program, we recommend:
- Remove the Manufacturing Decarbonization Incentive (MDI) mechanism until it can be better defined and placed under the cap, and retire at least 118.3 million allowances to protect cap integrity and meet 2030 and 2045 climate targets.
- Support efforts to make electricity more affordable and accelerate the transfer of fossil gas auction revenues to electric utilities.
- End post-2030 free industry allocations pending updated leakage analysis and revised economic conditions.
- Require regular allowance supply evaluations to strengthen accountability, transparency, and emissions outcomes under Cap and Invest.
The integrity of the Cap and Invest market must be maintained by ensuring that budgeted allowance allocations align with the target emissions reduction goals. We need ambitious, bold policies that prioritize affordability and cost containment for California consumers and align with the state’s climate goals.
Thank you for your consideration.
