California Legislature Introduces Cap-and-Trade Reauthorization Bills
The California Legislature this month introduced two spot bills—Senate Bill 840 (SB 840) and Assembly Bill 1207 (AB 1207)—that signal the state’s early legislative engagement on the future of its cap‑and‑trade program. Although the bills contain limited substantive language at this stage, they are positioned to serve as vehicles for potential reauthorization and reform of the market-based compliance mechanism, which is currently authorized through 2030.
Context: Cap-and-Trade Program and Upcoming Expiration
California’s cap-and-trade program was established under AB 32 (2006) and reauthorized by AB 398 (2017), with its current legal authority set to expire in 2030. The program places a declining cap on greenhouse gas emissions and allows entities to trade allowances, with the goal of meeting statewide climate targets.
As the California Air Resources Board (CARB) continues to evaluate the state’s long-term emissions strategy—potentially raising the 2030 emissions reduction goal to 48% below 1990 levels—legislators have begun laying groundwork for program continuity.
SB 840: Proposed Removal of Sunset Provisions
Introduced by Senators Monique Limón and Mike McGuire, SB 840 proposes to make permanent two oversight mechanisms associated with the cap-and-trade program:
Legislative Analyst’s Office (LAO) Annual Reports: The bill would eliminate the current January 1, 2030, sunset on LAO’s reporting requirements regarding the program’s economic and environmental performance.
Independent Emissions Market Advisory Committee (IEMAC): It would also remove the January 1, 2031, expiration date on IEMAC’s review of the cap-and-trade program.
AB 1207: Statement of Legislative Intent
Authored by Assemblymember Jacqui Irwin, AB 1207 expresses the Legislature’s intent to reauthorize the cap-and-trade program beyond 2030. The bill includes a provision directing CARB to apply the federal government’s most recent full estimate of the social cost of carbon—published in November 2023—when establishing a price ceiling on emissions allowances.
Spot Bills
At this stage, AB 1207 and SB 840 do not propose modifications to the design or operation of the program itself. As spot bills, they provide a procedural placeholder for more detailed policy language that may be introduced later in the legislative process.
Legislative Perspectives on Program Extension and Uncertainty
Several legislators have addressed the issue of program reauthorization and the potential risks of legislative inaction:
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Next Steps
Both bills now move through respective various committee hearings while the houses work to formulate extension language with which to populate the bills.