CalChamber Urges Stronger Cost Containment in Cap-and-Trade Updates
The California Chamber of Commerce is urging the California Air Resources Board (CARB) to revise its proposed amendments to the state’s Cap and Trade Program, warning that the current draft risks undermining economic competitiveness, accelerating emissions leakage, and increasing costs for California consumers and businesses.
In extensive comments submitted to CARB on March 9, CalChamber acknowledges the program’s decade-long success in achieving cost-effective emissions reductions while protecting industry through compliance flexibility and safeguards against leakage (when facilities and their emissions are relocated out of California).
However, CARB’s newly proposed emissions cap trajectory— removing hundreds of millions of allowances between 2027 and 2045— moves too far, too fast without corresponding enhancements to cost-containment tools.
The result, CalChamber cautions, is an increased likelihood that production and emissions shift out of state, harming both the economy and global climate progress.
A central concern is the erosion of industrial allocations for emissions-intensive, trade-exposed sectors such as cement, refining, metals, and glass. As allowance budgets shrink, the reduced pool of freely allocated allowances will leave manufacturers more exposed to volatile allowance prices.
Industries with limited near-term decarbonization options may be left with little choice other than to leave California. CalChamber supports updated leakage analyses, adjustments to allocation formulas, and a more flexible Cap Adjustment Factor.
Affordability Risks
The letter submitted also highlights affordability risks tied to dwindling allowance supply and rising administrative price floors. In response, CalChamber urged regulators to preserve stronger price containment reserves, reassess reserve trigger thresholds, and review annual price escalators to avoid compounding cost pressures on consumers.
Additional concerns were raised with the proposed shift of allowance value from natural gas corporations to electric utilities. CARB should ensure the transition does not disproportionately impact households that rely on gas service and those least able to electrify.
Flexibility Needed
CalChamber also supports CARB’s Manufacturing Decarbonization Incentive and offset smoothing mechanism, but notes the need for greater flexibility so facilities can realistically deploy capital and maintain competitiveness.
Delivering long-term climate results requires a framework that is politically and economically durable; that means a program design that puts affordability and keeping businesses in California at its core.