Balancing climate ambition and affordability: Reflecting on California’s 2025 legislative session 

Last month, Governor Gavin Newsom wrapped up bill actions for the 2025 legislative session, signing into law a suite of measures that together comprise one of California’s most comprehensive climate and energy packages in recent years. This year’s session was defined by efforts to pair climate ambition with affordability, with major bills aimed at cutting costs, stabilizing markets, and advancing clean energy deployment.  

CATF’s advocacy, expertise sharing, and policy development helped shape several of these wins. While the legislature advanced a broad set of climate and energy-related measures, the following bills reflect areas of most direct CATF engagement and alignment with current priorities — ensuring strong climate ambition, supporting durable market frameworks, enabling policies that help meet the state’s Scoping Plan targets, and advancing energy affordability for Californians. 

Electricity Affordability 

Electricity affordability is one of California’s biggest clean energy challenges, with rates far outpacing inflation over the last several years. A key legislative priority this session was to advance policies to address near-term and long-term drivers of rising rates. SB 254 establishes financing reforms for a portion of wildfire mitigation expenditures — a major near-term driver of rate increases. To address costs of grid infrastructure over the next several decades, the bill contains a lower-cost alternative to utility financing by enabling public financing for transmission infrastructure. Analysis from CATF and Net-Zero California found that Californians could save $3 billion per year, or approximately $123 billion over 40 years, by replacing high-cost equity with lower-cost public debt financing in the form of a public-private partnership. SB 254 turns this research into action by establishing the California Transmission Infrastructure Accelerator to coordinate transmission planning, facilitate public financing, reduce project costs, and develop a public-private partnership plan to maximize public financing and ratepayer benefits. The bill also establishes the Transmission Accelerator Revolving Fund, seeded with $325 million from Proposition 4 and a five-year allocation of 5% of Cap-and-Invest revenues from utility allowances as established under AB 1207 (Irwin). 

Looking ahead: SB 254 lays a strong foundation for delivering real savings and accelerating grid expansion. Its success will depend on how effectively the Accelerator can structure and deploy public financing to lower capital costs and demonstrate measurable ratepayer benefits. 

Extending Cap-and-Invest and Strengthening Market Integrity 

California’s Cap-and-Invest program is the cornerstone of the state’s economy-wide approach to cutting greenhouse gas emissions, providing a market signal for clean investment and generating billions in annual revenue for climate priorities. The program’s authorization was set to expire at the end of the decade; AB 1207 (Irwin) reauthorizes California’s Cap-and-Invest program through 2045, while companion legislation SB 840 (Limón) outlines a plan for allocating revenues from the Greenhouse Gas Reduction Fund.  

Both bills contain provisions around the use of offsets. SB 840 directs CARB to update all existing compliance offset protocols by 2029 to reflect the best available science, with reviews every five years starting in 2034. AB 1207 caps the use of offsets at 6% of an entity’s compliance obligation, requiring that half of those offsets deliver environmental benefits in-state, and permanently retires an equal number of allowances so that their use effectively translates into a tightening of the overall cap.  

SB 840 also directs CARB to consider new carbon-removal protocols and for the first time, earmarks funding for climate-focused technological innovation — a yet-to-be-fully-defined category of technologies that could range from carbon dioxide removal and storage to industrial decarbonization solutions.  

Looking ahead: The reauthorization of California’s Cap-and-Invest program marks a pivotal moment for aligning long-term climate goals with durable market design. As implementation begins, attention will turn to ensuring that the Cap-and-Invest program maintains a high bar for climate ambition and that the offset protocols reflect best-available science. Recent research from CATF and leading U.S. forest carbon scientists found that while high-quality forest carbon credits are possible under California’s current protocol, the protocol needs to be strengthened to ensure credits deliver their promised climate benefits. The assessment offers a roadmap for incorporating new data and scientific advances to improve accuracy, durability, and transparency for forest carbon offsets.   

Modernizing Permitting and Regulatory Frameworks for Geothermal Energy 

California is home to some of the nation’s richest geothermal resources, which offer a vital source of clean, firm power that can operate around the clock to complement the state’s growing portfolio of renewables and battery storage. Yet development remains constrained by fragmented permitting processes, outdated well regulations, and high development costs. AB 531 (Rogers),expands eligibility for geothermal projects of all sizes to use the California Energy Commission’s “one-stop-shop” permitting process, providing an additional option to streamline project approvals. A companion bill, AB 527 (Papan), was vetoed and would have exempted exploration wells from CEQA under certain conditions and required the state to modernize its well regulations for enhanced geothermal systems.  

Looking ahead: The veto underscores the need for modernizing the state’s geothermal regulations through administrative action and evaluating whether additional permitting streamlining measures are needed to accelerate project development. As outlined in CATF’s recent report, “Unlocking California’s Geothermal Potential: A Strategic Opportunity for Clean, Firm Power,” these are important components to unlocking the state’s full potential for clean, reliable, around-the-clock power.  

Lifting the Moratorium on CO₂ Pipelines 

California’s current strategy to achieve carbon neutrality calls for capturing or removing 100 million metric tons (MMT) of CO₂ annually by 2045. To help operationalize this pathway, SB 905 (Caballero, 2022) directed CARB and other state agencies to develop a regulatory framework for carbon capture, utilization, and storage  and carbon dioxide removal to support the safe and effective deployment of these technologies. SB 905 also established a moratorium on pipeline transport of CO₂ until updated federal safety regulations were finalized.   

With the timing of federal rulemaking still uncertain, the state has now taken action to pass SB 614 (Stern), which gives California the authority to define safe CO₂ transport. The bill lifts the moratorium on intrastate CO₂ pipelines and directs the State Fire Marshal to adopt safety regulations by 2026 that meet or exceed federal standards proposed by PHMSA in January 2025. SB 614 builds on the framework established under SB 905, ensuring that transport infrastructure for carbon management can be developed safely and consistently. 

Looking ahead: Coordination across agencies will be essential to align safety, permitting, and public engagement processes. Effective implementation of both laws will help California advance carbon management projects responsibly and transparently. 

Indirect Source Review for Mobile Source Pollution 

Under the Clean Air Act, states and localities have the authority to regulate emissions from stationary facilities that attract mobile sources of pollution. In California, mobile sources contribute the majority of the state’s NOx emissions (a precursor to ozone and particular matter), and the transportation sector accounts for 40 percent of California’s greenhouse gas emissions. Indirect Source Review (ISR) can be a powerful tool to regulate mobile sources of pollution at facilities like airports, warehouses, ports, and distribution centers, and several districts in California have promulgated rules for warehouses and new development. This session, lawmakers considered two ISR bills. AB 914 (Garcia) sought to affirm the CARB’s authority to promulgate statewide ISR rules and clarify a pathway for state-wide regulation of pollution from major transportation hubs. The bill ultimately stalled, but the debate underscored the importance of using every available state policy tool to cut harmful emissions in the face of federal attacks on California’s mobile source regulations. 

SB 34 (Richardson) would have imposed restrictions on the South Coast Air Quality Management District’s ISR rule for the Ports of Los Angeles and Long Beach, establishing a harmful precedent of legislative constraint on air district ISR authority. Governor Newsom vetoed the bill, citing the need for the state to maintain every tool at its disposal to reduce air and climate pollution.  

Looking ahead: As federal efforts to weaken mobile-source regulations continue, California’s leadership will depend on leveraging its full suite of policy tools — including ISR — to advance clean, reliable, and equitable transportation decarbonization. Clarifying statewide authority to adopt ISR rules could enable the state to drive deeper emission reductions across transportation and industrial corridors, accelerate the deployment of zero-emission technologies, and deliver cleaner air for communities most affected by mobile source pollution. 

Other Key Measures 

The legislature also advanced several major measures with broad implications for reliability, affordability, and the state’s long-term energy transition. 

• Regional Grid Integration – AB 825 authorizes California’s participation in a western regional electricity market, paving the way for greater coordination across state lines. Regional integration is expected to enhance grid reliability, lower costs for ratepayers by hundreds of millions annually, and enable more efficient use of renewable and clean firm generation resources across the West. This marks an important step toward building the transmission and market structures needed for a decarbonized, resilient power system. 

• Refinery Transition – With two of California’s refineries announcing closure, concerns had been mounting regarding potential gasoline supply shortages that could increase prices at the pump. SB 237 (Grayson) sought to mitigate potential fuel supply disruptions and price volatility during the state’s clean energy transition. The bill streamlines permitting for certain in-state oil projects, authorizes the Governor to suspend summer-blend fuel requirements if gasoline prices rise sharply, and directs the California Energy Commission to study alternative fuel blends and explore a regional approach to stabilizing prices across western states. The measure underscores the complexity of sustaining climate progress while maintaining affordability. 

The Path Forward 

This session demonstrated California’s ability to pair ambitious climate policy with practical solutions for affordability and reliability. With landmark measures now on the books, the challenge ahead lies in implementation — translating statute into durable progress, sound regulation, and tangible results for households and businesses while sustaining momentum toward the state’s 2045 climate and energy goals.