Cap-and-Trade Crossroads: Getting It Wrong Will Cost Californians

California’s flagship climate policy, the cap-and-trade program, is still awaiting progress for renewal.

Governor Gavin Newsom wants the program extended to 2045 and reauthorized before the legislature adjourns September 12. But behind the scenes, negotiations have stalled over how the program should operate in its next chapter. Environmental activists want a tighter cap and fewer credits. This move would increase costs for energy producers. Industry leaders warn that such changes could further drive refineries out of California entirely, sending fuel prices soaring and threatening thousands of jobs.

Two refineries, Valero and Phillips 66, have already announced closures.

The stakes aren’t abstract. Since its inception, cap-and-trade has raised roughly $31 billion, paid ultimately by Californians through higher costs on goods, fuel, and energy.

If extended to 2045, it’s expected to generate between $70 billion and $260 billion more. This is money that, as history shows, often funds political pet projects like high-speed rail.

Even the Legislative Analyst’s Office is urging lawmakers to slow down, warning of the economic and political fallout of a rushed decision. The latest auction in May left nearly $1 billion worth of credits unsold.

The oil and gas industry supports a well-designed, market-based system, but affordability must be a priority. If cap-and-trade’s costs spiral out of control, California won’t just lose companies; it will lose jobs and tax revenue, while forcing consumers to pay more for the fuel and energy they depend on.