Bill paying (Photo – kizzzbeth)
California’s decades-long role as a climate action pioneer is facing serious headwinds. While the Trump administration and its allies have launched a full-scale attack on clean technologies, state leaders are also grappling with an electorate increasingly focused on lowering prices rather than prioritizing environmental protection. Energy costs sit at the heart of this dynamic.
By Ethan Elkind
This tension is playing out as state leaders debate the future of California’s cap-and-trade program post-2030. The program generates billions of dollars in proceeds from businesses that opt to buy pollution allowances instead of reducing their carbon emissions. Affordability concerns are top of mind as leaders discuss how to allocate these funds—especially to help alleviate high electricity rates, which have doubled in the past five years.
But state leaders may be missing an opportunity to simultaneously reduce utility bills and achieve environmental goals. Specifically, the latest Assembly proposal to extend cap-and-trade through 2045 re-ups and modifies the California Climate Credit, an annual rebate to electricity ratepayers funded by the sale of emission allowances.
In 2025, the climate credit will consist of two payments (distributed in April and October) ranging from $56 to $81 for customers of investor-owned utilities. These relatively small payments mostly serve to mask high utility bills without providing a long-term solution to rising rates.
The Assembly’s proposal includes three key reforms to the program: prioritizing residential customers over small businesses, basing the credit on a household’s electricity use, and timing payments to coincide with high-bill months (typically the summer, when households use more air conditioning).
However, instead of simply distributing more cash payments to ratepayers, the legislature could use the same funds to create a far greater impact on both rates and the environment. The state is already moving in this direction with the Assembly’s proposal to dedicate some cap-and-trade proceeds to a much-needed Clean Energy Infrastructure Investment Fund. This fund would finance essential grid investments, like new transmission lines to serve renewable energy areas, as outlined by Net-Zero California and recommended by the Center for Law, Energy & the Environment (CLEE) in a report last year.
Expanding on this proposal, state leaders could redirect the climate credit to help ratepayers access low- or no-cost financing for energy efficiency upgrades, community solar and energy storage deployments, and home electrification (i.e., converting natural gas appliances to higher-efficiency electric heat pumps, cooktops, clothes dryers, and water heaters). Ratepayers could repay these loans via on-bill payments that would be less than their monthly savings. These programs have a proven track record in other states, enabling California to leverage a modest amount of public funds to stimulate significant residential investment.
These dollars could be pivotal in helping ratepayers reduce their overall utility bills in the long term, especially since the high upfront costs of many upgrades make them inaccessible for lower-income residents. They would also cut pollution and help the state meet its environmental goals, while supporting lower-cost clean energy deployment, like community solar and storage. For lower-income renters who can’t make permanent upgrades, state leaders could design the programs to share some of the benefits with landlords, who ultimately control these decisions.
While the climate credit provides important energy bill relief for many Californians, legislators should consider using these hard-fought polluter proceeds to fund long-term home energy improvements—unlocking even greater value for both ratepayers and the environment. In these challenging times for both environmental protection and household budgets, such a move would be a true win-win for California.
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