Problem Solvers Caucus Presses CARB to Put Affordability Back into Cap-and-Invest

In Sacramento, a rare thing happened. Lawmakers from both parties and both houses decided that California’s climate policy cannot survive if Californians cannot afford to live under it.

On April 8, a bipartisan, bicameral group of legislators organized through the California Problem Solvers Caucus sent a detailed letter to CARB urging major changes to the proposed 2026 Cap-and-Invest amendments, arguing that the program’s durability depends on affordability, leakage protection, and plain old economic realism. For CIPA, this mattered for another reason as well: lawmakers specifically sought CIPA’s position and participation in the discussions that helped shape this action. That is not a small detail. It means operational reality made it into the room before the letter went out.

That process fits the caucus’ model. The California Problem Solvers Caucus describes itself as a bipartisan, bicameral forum that brings together legislators, issue experts, and stakeholders to work through difficult policy questions and build practical consensus. The caucus had already laid down Cap-and-Trade principles last August centered on affordability, comprehensive cost analysis, oversight, and certainty, arguing that free allowances and offsets help cushion costs for fuel, food, utilities, building materials, jobs, and investment. In other words, this week’s action did not come out of nowhere. It is the product of a longer effort to drag California’s climate debate back toward reality and away from ideological autopilot.

The lawmakers’ message to CARB is blunt: the proposed amendments would tighten the screws at exactly the wrong moment. The attached caucus letter says CARB’s proposal would remove roughly 118 million allowances from the 2027-2030 budgets, nearly doubling the annual cap decline from about 4.6 percent under current rules to about 11 percent under the proposal. The caucus argues that this would land in an economy already strained by high electricity costs, high fuel costs, high housing costs, and the continuing erosion of in-state industrial capacity. The one-pager is even plainer. CARB’s decisions do not stay in Sacramento, it says. They show up on utility bills, at the gas pump, and in the prices of food, housing, and everyday goods, while threatening family-supporting and union jobs in working-class communities.

The caucus’ core case is that California does not have to choose between climate goals and affordability, but it does have to design the program like adults are in charge. The lawmakers propose three main corrections. First, protect electricity ratepayers by increasing free allowances so consumers are not hit with higher utility costs. Second, moderate the transition of natural gas allowances to electric utilities and reserve 30 percent of those allowances for low-income residential gas bills. Third, strengthen leakage protection for sectors at risk of losing production, jobs, and economic activity to other states or countries, including food, building materials, transportation, and refining. According to the caucus materials, those reforms could prevent roughly $10 billion in ratepayer costs, reduce broader consumer cost pressure by as much as $15 billion, and protect more than 300,000 head-of-household union jobs.

One of the most striking sections of the letter deals with the proposed shift of natural gas supplier allowances to electric distribution utilities. The caucus lays out a transition schedule beginning in 2029 and shows just how punishing the current design could become for households that still rely on natural gas. Under the caucus’ analysis, the value of the residential gas climate credit could fall from about $152 per customer in 2027 to about $18 by 2035. Worse still, the 2032 “cliff” combines a sharp Cap Adjustment Factor drop with a 50 percent transfer of allowances, producing an estimated one-year decline in gas credit value from about $897 million in 2031 to about $542 million in 2032. For a dual-fuel household that has not electrified, the caucus estimates a net annual loss of roughly $76 by 2035, while renters in multifamily housing could fare even worse if the electric-side credit flows to the landlord rather than the tenant. That is not a careful transition. That is a policy booby trap.

The refining piece is just as important, and it is where the caucus’ letter comes closest to saying the obvious thing Sacramento too often refuses to say out loud: you cannot regulate California into losing supply and then act surprised when consumers pay more. The letter argues that petroleum refining is being misclassified as only a medium leakage-risk sector even after the closure of Phillips 66’s conventional crude processing at Wilmington and Valero’s planned Benicia shutdown, while the California Energy Commission has already warned that gasoline imports could rise to 25 to 35 percent of statewide demand by summer 2026 and up to 50 percent in Northern California after anticipated refinery closures. The caucus therefore urges CARB to reclassify petroleum refineries and food processing from medium to high leakage risk, lock in a minimum 0.858 Cap Adjustment Factor floor through at least 2035, and extend CAF and Assistance Factor values through 2045 so companies making long-term capital decisions are not staring into a regulatory fog bank.

The numbers in the caucus letter put real weight behind that argument. Its analysis says the proposed 2032 cliff would force refineries to absorb materially higher compliance costs just as California is becoming more dependent on imported fuel. The letter estimates that a 0.858 floor would preserve about $1.12 per barrel, or 2.7 cents per gallon, for petroleum refining in the 2032 cliff year, and avoid about $1.72 billion in refinery compliance cost exposure over 2027-2035. The broader point is hard to miss: California’s current approach punishes in-state production first and asks questions later. The caucus is telling CARB that if the state wants a lower-carbon future, it cannot get there by accelerating production displacement, shrinking refinery margins toward closure, and outsourcing both jobs and emissions. That is not decarbonization. That is self-sabotage with a rulemaking notice attached.

What makes this development especially significant is that the lawmakers are not attacking Cap-and-Invest itself. Quite the opposite. The April 8 letter explicitly calls the program a genuine achievement and says the caucus is not trying to dismantle it. The argument is that the program must be recalibrated so climate policy and economic life can move together. That is a more serious position than the usual Sacramento habit of pretending every cost is proof of moral virtue. The Problem Solvers Caucus is arguing that affordability is not a retreat from climate ambition, but the condition for making that ambition politically and economically durable. That is exactly right. A policy that collapses public support, drives out industry, and punishes households is not durable. It is merely fashionable until it breaks.

For CIPA, there is real value in this moment. The caucus did not act in a vacuum. It asked for CIPA’s views, drew from stakeholder engagement, and produced a letter that speaks the language of affordability, supply, investment certainty, leakage, and working-family economics rather than the usual abstraction and slogan fog. That is an excellent outcome. It means lawmakers are hearing from people who understand what happens when in-state production is discouraged, when refining is squeezed, when allowance design is detached from market realities, and when cost pressures compound across the economy. In a Capitol too often captured by theory, this was a useful burst of contact with the real world.

CARB should listen. The warning lights are not subtle anymore. California is already dealing with refinery attrition, rising import dependence, utility bill pain, and broad consumer exhaustion. The Problem Solvers Caucus has now handed the Board a serious, bipartisan blueprint for making Cap-and-Invest more affordable, more durable, and less destructive to the industries and workers that keep this state running. Sacramento does not often reward common sense. But this time, common sense showed up anyway.