Cap and Trade Program Reauthorized Through 2045

In the final days of the 2025 legislative session, California lawmakers approved a sweeping reauthorization of the state’s landmark cap-and-trade program, now rebranded “cap-and-invest.” The program, which was set to expire in 2030, will now run through 2045, providing long-term certainty for businesses and regulators as the state pushes toward its ambitious climate targets.

The legislation—anchored in AB 1207 and SB 840—tightens rules on carbon offsets, capping their use at six percent, and directs the California Air Resources Board to manage allowance prices to protect consumers from sharp energy cost increases. It also reshapes how billions in auction revenues are spent. Annual allocations include $1 billion for high-speed rail, $800 million for affordable housing, and $250 million for community air protection, along with major investments in clean transportation, wildfire prevention, and sustainable agriculture. Also, as part of the legislative “package” of bills connected, a companion measure was approved that allows more permits to drill oil in California to head off refinery shutdowns that could send gas prices soaring.

Supporters argue the extension secures vital resources for climate action and disadvantaged communities, while opponents warn of potential consumer cost impacts and criticize the rushed process that left little time for public input. Regardless, the reauthorization ensures cap-and-trade—first launched in 2013—remains a central pillar of California’s climate strategy for the next two decades.