California Legislature Deadlocks on Energy, Climate Priorities

California lawmakers and Governor Gavin Newsom are struggling to finalize a comprehensive energy package that includes reauthorizing the state's cap-and-trade program, securing crude oil supplies, advancing a West-wide electricity grid, and funding utilities liable for wildfire damages. The primary sticking point is the cap-and-trade program’s reauthorization, with Assembly and Senate proposals differing significantly on program structure, including the use of carbon offsets, free allowances, and price ceilings, making a deal before the session deadline unlikely and raising the prospect of a special session or extending negotiations into next year. The Assembly favors a plan that increases offsets and permit reserves to support auction revenues, while the Senate seeks to limit offsets and free allowances and reduce the price ceiling, mirroring a 2017 proposal. Despite the billions in auction proceeds at stake, the divide between moderates and other Democrats remains too wide for a compromise. This impasse highlights ongoing challenges in balancing environmental goals with economic and political realities in California’s climate policy framework. The situation underscores the complexity of state-level climate legislation amid competing priorities and legislative dynamics.