New California deal extends cap-and-trade, reforms energy regulation (US)

California lawmakers have reached an agreement on a wide-ranging energy package designed to shape the US state’s long-term environmental and energy strategy. A key component of the deal is the extension of California’s cap-and-trade program through 2045. Rebranded as “Cap and Invest,” the program requires polluters to purchase emission allowances and is intended to drive long-term reductions in greenhouse gas (GHG) emissions. 

In addition, the bill proposes easing certain environmental regulations. The package allows temporary suspension of low-carbon fuel standards during sustained gasoline price spikes, requiring the Governor to act if prices stay high for over 30 days; the measure aims to ease potential price impacts, especially as refinery closures loom. In addition, the bill exempts thousands of oil wells in Kern County from a final review under the California Environmental Quality Act, thereby removing regulatory and legal barriers to continued operations. Lawmakers also approved changes to how utility investments - Pacific Gas & Electric, Southern California Edison and San Diego Gas & Electric - are financed, including the option to issue public bonds for infrastructure upgrades. The plan maintains a cost-sharing structure between utilities and ratepayers to cover wildfire-related damages.

The agreement further sets the stage for California’s potential entry into a regional electricity market, enabling the state to exchange electricity more efficiently with other Western states in an effort to improve grid reliability and lower energy costs. The package now awaits final administrative approval and implementation planning.