Transform is leading a coalition of over 50 advocacy groups in housing, transportation, climate, and equity to urge California’s legislature to improve the state’s landmark Cap-and-Trade Program, closing loopholes that subsidize our most polluting industries and reinvesting additional revenue in sustainable transportation and affordable housing programs that center frontline communities. 

What is Cap-and-Trade?

California’s Cap-and-Trade Program puts a limit on overall carbon emissions each year by charging large polluters based on their emissions. The allowed emissions limit, or cap, lowers over time and the price of carbon emissions, at least in theory, increases. 

This incentivizes polluters to reduce their emissions via a market trading system. The program generates $4 billion a year that is reinvested in programs that further reduce emissions, such as new affordable housing near transit and sustainable transportation options. 

With the program set to expire in 2030, a diverse movement of organizations spanning issues of housing, transportation, climate, and environmental justice are uniting against the interests of extractive carbon-spewing industries. The carbon lobby is strong and well-funded after decades of profiting from lax regulation and externalized harms, so the voices advocating for a cleaner, greener, more equitable Cap-and-Trade Program must be loud.

Current status of Cap-and-Trade

California’s Cap-and-Trade carbon market has provided funding for many worthy projects. For example, the Affordable Housing and Sustainable Communities (AHSC) Program, which provides grants for infill housing and sustainable transportation, is a smart way to reduce vehicle miles traveled by providing affordable housing close to transit and amenities. Cap-and-Trade also funds vital transit through the Transit and Intercity Rail Corridor Enhancement Program (TIRCP) and the Low Carbon Transit Operations Program (LCTOP), as well as California High-Speed Rail.

However, from the start, the carbon lobby has gotten loopholes in Cap-and-Trade. Over 50% of all pollution allowances are given free to utilities and carbon-intensive industries like oil, gas, and cement production. While these free allowances are intended to protect Californians from price hikes, they are effectively massive subsidies for polluting industries. In fact, a Pro Publica investigation showed that, in the initial years of the program, emissions from the oil and gas industry rose rather than declined. 

Astroturf “green” groups are already lobbying in Sacramento for a “clean” reauthorization that would continue billions of dollars of oil and gas subsidies via these free pollution allowances. 

Full funding for frontline communities

The lack of affordable housing and sustainable transportation options in California are major contributors to the climate crisis and increasing unaffordability, and significant investment is needed. At the same time, frontline communities have seen very few greenhouse gas emissions reductions or air quality improvements since the advent of Cap-and-Trade, and many of our top priorities, like Transformative Climate Communities and Equitable Building Decarbonization, remain underfunded. 

Rather than fighting over scraps of the revenue from Cap-and-Trade, Transform and our allies have come together around a set of recommendations rooted in shared solidarity across different funding areas. By removing free allowances and offsets, another subsidy that allows polluters to keep polluting, we can not only achieve additional reductions in pollution that damages climate and health, but we can also increase the Greenhouse Gas Reduction Fund, adding revenue to support existing and additional expenditures that prioritize frontline communities, affordable housing, and sustainable transportation. 

A better Cap-and-Trade Program

The reauthorization of the Cap-and-Trade Program is a critical opportunity to enhance its structure. Transform will continue to campaign for a more effective program that truly reduces carbon emissions, reduces the pollution burden on environmental justice communities, and advances California’s sustainable transportation and affordable housing goals.

Read the full letter.