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League of California Cities


  • In addition to the League's Cap-and-Trade Guide, more resources are available at the Institute for Local Government's Cap-and-Trade Resource Center.
    In July 2017, the Legislature and the Administration enacted a plan to extend the state’s cap-and-trade system beyond its current authority to operate through 2020. This action represents a compromise among stakeholders advocating for environmental causes, environmental justice, business, agriculture, and other interests. As part of the extension negotiations, lawmakers and the Governor agreed to certain reforms, including a new air quality program and a constitutional amendment giving voters a chance to consider expenditure priorities for the cap-and-trade revenues.
    The state’s cap-and-trade system remains a cornerstone of the state’s plan to meet its greenhouse gas (GHG) emissions reductions targets, first implemented by AB 32 (Núñez, Pavley, Chapter 488, Statutes of 2006) and expanded by SB 32 (Pavley, Chapter 249, Statutes of 2016). SB 32 requires the Air Resources Board (ARB) to ensure that statewide GHG emissions are reduced to 40 percent below the 1990 level by 2030. However, the authority of the ARB to operate a cap-and-trade program expires in 2020. 

    Cap-and-Trade Extension

     Governor Brown, administrative officials, and legislative leaders negotiated a compromise deal to extend the state’s cap-and-trade system with several reforms. To ensure to state can meet its GHG emissions reductions targets set by AB 32 and SB 32, AB 398 (E. Garcia, Chapter 135, Statutes of 2017) extends the state’s cap-and-trade system through December 31, 2030 with declining emissions limits. The bill also requires the Air Resources Board (ARB) to set new cost containment measures to prevent allowance prices from rising too quickly.
    In addition, AB 398 establishes legislative priorities for how the revenues will be spent until January 1, 2031 as follows:
    • Air toxic and criteria pollutants from stationary and mobile sources;
    • Low and zero-carbon transportation alternatives;
    • Sustainable agricultural practices that promote the transitions to clean technology, water efficiency, and improved air quality;
    • Healthy forests and urban greening;
    • Short-lived climate pollutants (such as methane); and
    • Climate adaptation and clean energy research.

    Greenhouse Gas Reduction Fund Expenditure Plan for Fiscal Year 2017-18

     New state revenues are created from the cap-and-trade auction for the purchase of allowances to emit GHGs. Revenues from the cap-and-trade auctions are deposited into the state’s Greenhouse Gas Reduction Fund (GGRF), which have been appropriated on an annual basis. 
    This year, two bills work together to enact the $1.5 billion GGRF expenditure plan: AB 109 (Ting, Chapter 249, Statutes of 2017) and AB 134 (Comm. on Budget, Chapter 254, Statutes of 2017). Together, AB 109 and AB 134 appropriate funding for a number of priorities, including the new air quality program enacted by AB 617, healthy forests and fire protection, sustainable agriculture, vehicle replacement programs, and other competitive grant programs. Continuous appropriations of GGRF funds are also made to the Affordable Housing and Sustainable Communities program, transit capital and operations, and High Speed Rail.
    Local governments are eligible recipients of many of the programs that have traditionally been funded with GGRF funds. The state also relies heavily on actions taken by local governments in quantifying progress toward meeting climate change goals. Cities stand to benefit from a number of programs that receive funding from AB 109 and AB 134. Below are some of the highlights for local governments:
    • $284 million continuous appropriation projection for the Affordable Housing and Sustainable Communities Program;
    • $213 million continuous appropriation projection for transit capital and operations;
    • $26 million to the Natural Resources Agency for urban greening programs;
    • $20 million to CalFIRE for urban forestry programs;
    • $220 million to CalFIRE for fire prevention and forest health;
    • $40 million to CalRecycle for waste diversion;
    • $18 million to the Dept. of Community Services and Development for low-income multifamily, solar, and farmworker weatherization programs;
    • $180 million to the Air Resources Board for the Hybrid and Zero Emission Truck and Bus Voucher Incentive Program (HVIP);
    • $140 million to the Air Resources Board for the clean vehicle rebate program;
    • $100 million to the Air Resources Board for enhanced fleet modernization, the plus-up pilot program, to replace school buses, clean vehicle rebates for low-income;
    • $10 million to the Strategic Growth Council for the Transformative Climate Communities Program; and
    • $11 million to the Strategic Growth Counsel for clean energy, adaptation and resiliency research grants.
  • Download the guide in .pdf format.

    This guide contains an overview of programs relevant to city funding that utilize Cap-and-Trade Auction Revenues. Though other programs, like high-speed rail, will impact California cities, this guide is being compiled with eye toward funding for which cities are most likely to apply.

     These information sheets attempt to guide readers toward more complete information on program guidelines, application procedures and other important information. This guide will be periodically updated, as new information becomes available.

    For more complete information about Cap and Trade -- including an explanation of how Cap-and-Trade functions and variety of other programs being funded with auction revenue -- see the California Environmental Protection Agency’s Cap-and-Trade Page.

  • SB 535 (De León, Chapter 830, Statutes of 2012) requires that 25 percent of all non-utility cap and trade revenues be used to the benefit of disadvantaged communities.  The bill required CalEPA to identify disadvantaged communities based on geographic, socioeconomic, public health, and environmental hazard criteria.  This bill led to the development of CalEnviroScreen.

    CalEPA has produced a spreadsheet identifying the census tract, overall CalEnviroScreen score, the CalEnviroScreen percentile, the pollution burden, population characteristics, total population, the county, zip code and nearest city. For more information about disadvantaged communities, including interactive maps, please see

    Some new programs include specific requirements to meet the requirements of SB 535, and are discussed in the program information sheets.

© League of California Cities