Press Release: Uncertainty over the Future of California’s Cap-and-Trade Program Results in Undersubscribed Auction

FOR IMMEDIATE RELEASE 
Contact: Amy Thoma Tan 
amy@cobaltpublicaffairs.com 

May 29, 2025. Persistent uncertainty over the California Cap-and-Trade Program’s pre-2030 allowance supply and post-2030 legislative extension has caused a steady decline in recent auction revenue, falling well below estimates previously projected by the Department of Finance for this fiscal year.   

According to results released today by the California Air Resources Board (CARB), the May 21, 2025 current auction was undersubscribed, with only 43,865,000 of the 51,069,285 in available allowances sold at the price floor of $25.87. When auctions are undersubscribed, fewer allowances are purchased than offered, signaling a decline in demand.    

The last time California had an undersubscribed auction was in August 2020, during Covid. California also saw undersubscribed auctions in the leadup to the 2017 legislative extension culminating in AB 398. The current auction sale price represents a 38% decline in the current settlement price since an all-time high of $41.76 in February 2024.    

The Department of Finance assumed a roughly $38 price for its California’s cap-and-trade expenditure plan, implying a $450 million revenue shortfall for this auction alone. “Over the last year, California has foregone over $1.5 billion in cap-and-trade revenue, similar to the Administration’s recently proposed budget shift from GGRF to support CAL FIRE” said Clayton Munnings, Executive Director of Clean & Prosperous California. “Today’s auction results indicate that California must reauthorize the program and raise program ambition to avoid systemic lack of market confidence.”   

California’s Cap-and-Trade program, a pillar of the state’s climate strategy, is designed to reduce greenhouse gas emissions through market-based mechanisms. It serves as a major funding source for climate and clean energy initiatives and is increasingly being relied upon as a source of discretionary funding to address the state’s budgetary deficits. “When auction revenues fall short, Californians lose,” said Emily Wimberger, board member of Clean & Prosperous California. “These revenues fund direct investments in local communities, provide electricity rebates, and reduce wildfire risk.”   

The program’s ability to fulfill these multiple objectives depends heavily on market confidence. Ambiguous policy signals, pending regulatory updates, and uncertainty around post-2030 program design have emerged as key drivers of recent auction performance.   

For more information about Clean & Prosperous California, visit www.cleanprosperousca.org