California Cap-and-Invest Claims $36.2 Billion in Climate Revenue as Rule Changes Threaten Future Auction Income
A new CARB retrospective touts 13 years of program gains, but regulatory revisions passed in May could cut annual auction revenues by up to $2 billion from 2027 onward.
A report from the California Air Resources Board, released Wednesday (2026-07-30), puts cumulative revenue from the state's Cap-and-Invest carbon program at $36.2 billion since its 2013 launch. The number is significant. It is also backward-looking, and the program it describes has since been substantially revised in ways that cast doubt on whether that revenue trajectory continues.6
The Greenhouse Gas Reduction Fund, the main conduit for Cap-and-Invest proceeds, receives roughly $3 billion to $4 billion a year from the sale of pollution permits. That money funds high-speed rail, Cal Fire, clean transportation subsidies and a range of environmental justice programs across the state. CARB's report credits the program with $44.4 billion in cumulative cost savings from reduced fuel consumption, lower transit costs and smaller household energy bills, alongside 130.5 million metric tons of carbon dioxide equivalent in emissions reductions.6,3
CARB voted on Friday (2026-05-29) to approve substantial changes to the program, partly designed to ease compliance costs for oil refineries and other heavy industries. Legislative analysts and climate advocates warned at the time that those changes could reduce auction revenue by up to $2 billion a year going forward.4,3
Kyle Meng, a professor at the University of California at Santa Barbara, co-authored an analysis projecting that a market distortion instrument inserted into the revised rules could result in $2.3 billion less for the GGRF and $1.7 billion less for the California Climate Credit between 2027 and 2030. Against annual inflows of $3 billion to $4 billion, that is a material reduction, not a marginal one.5,3
California state senators signalled their opposition on Thursday (2026-05-28), voting to reject Governor Gavin Newsom's proposed spending plan for the carbon auction revenues. E&E News reported the vote was widely read as a protest against the rule changes rather than the program's underlying structure.3
The program covers around 80% of the state's greenhouse gas emissions, applies to facilities emitting 25,000 metric tons of carbon dioxide equivalent or more annually, and is authorised through 2045. To hit California's 2030 target — a 40% reduction in emissions relative to 1990 levels — CARB determined in January 2026 that the program would need to remove allowances equivalent to 188 million metric tons from circulation.6,5
Environmental groups that opposed the May revisions warned the changes could put the 2030 target out of reach. CARB and Newsom argued the updated rules still deliver the necessary reductions while reducing pressure on fuel costs. Neither position has been tested by actual auction data under the new framework.4,5
Globally, carbon pricing revenues are growing. EU ETS revenues rose 11% in 2025 to EUR 43.2 billion, accounting for 62% of all earnings raised from carbon pricing schemes worldwide, Montel reported, citing an International Carbon Action Partnership study. Global governments collected $107 billion from carbon pricing schemes in 2025 in total, according to edie.net.1,2
California's program sits within that broader expansion, but its own revenue trajectory is now contested. The CARB report released Wednesday (2026-07-30) anchors its headline figures in history; the more consequential number comes from 2027 auctions onward, when the revised rules take full effect and the actual gap between projected income under the old framework and revenue delivered under the new one becomes quantifiable. If Meng's projections prove accurate, the GGRF will be absorbing a cut of close to half its annual inflow — at the same moment the state is counting on that fund to close the distance to its 2030 emissions target.6,53