California eases carbon market rules amid affordability concerns

California’s Air Resources Board approved revisions to its Cap-and-Invest program that could provide up to US$4 billion in additional free emissions allowances to refiners and industrial companies through 2035. The changes are intended to ease compliance costs and limit fuel price increases amid inflation concerns and rising energy prices. Regulators will offset the planned removal of 118 million allowances by issuing an equivalent amount of free allocations, while also providing US$800 million in consumer cost relief measures. Critics argue the changes could weaken carbon price signals, reduce auction revenues, and make California’s 2030 and 2045 climate targets harder to achieve. CARB maintains that the reforms balance affordability concerns with long-term decarbonization objectives.
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