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The Economic Equity of California’s Cap-and-Invest Program
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Volume 33, 2026Abstract
Climate change requires urgent, comprehensive, and effective solutions to mitigate impacts to people and the planet. California is a leader in climate policies that address this issue, with its most prominent policy being the Cap-and-Invest Program, aimed to lower greenhouse gas (GHG) emissions. This program has faced opposition from environmental justice advocates for disproportionately impacting disadvantaged communities based on the distributional inequities of GHG and co-pollutant emissions. This policy brief expands upon this topic by exploring the economic equity implications of the California Cap-and-Invest Program throughout the state. While policy initiatives have been adopted to address equity issues of the program, economic inequities remain. The program imposes high energy costs on producers, which are transferred to consumers, acting as a regressive tax that pushes disadvantaged communities into energy poverty. The program does not exacerbate nor alleviate distributional inequities of GHG and co-pollutant emissions. This policy brief identifies and discusses actionable policy recommendations, including producer and consumer-side subsidies and incentives, restructuring the allowance, offset, and quantity constraint requirements, and investing in research and development to promote equity within this program and beyond.