An all-electric Proterra bus operated by the San Joaquin Regional Transit District, shown beside its "Fast Charging" station. (Image via Creative Commons, CalMatters)

Some of California’s key environmental programs for battling smog and climate change have lost nearly $105 million as the state grapples with the economic fallout of the coronavirus pandemic.

In a letter shared with CalMatters, the state’s Department of Finance notified lawmakers of reductions to funds from the proceeds of California’s landmark cap-and-trade program.

Millions were scraped away from the 2019-20 budgets of projects that include incentives for purchasing vehicles that produce less greenhouse gases, cleaning up pollution in overburdened communities, tackling methane excreted by cows and reducing smoke during prescribed burns.

These cuts are on top of $168 million squeezed from the original budgets of programs that are automatically allocated a proportion of the proceeds from cap and trade. Included are high speed rail, affordable housing and transit.

In the wake of cap-and-trade auctions generating $280 million less revenue than expected, the cuts are not a surprise to state departments that had been on notice to spend only three-quarters of their 2019 appropriations.

The shortfall fuels a growing fight about whether California’s cap and trade program can be relied upon to both cut carbon emissions and pay for green programs.

“It’s an unsustainable source of funding,” said Assemblywoman Cristina Garcia, a Democrat from Bell Gardens and chair of the Joint Legislative Committee on Climate Change Policies. “Whether it was now or down the road, we knew that this was going to be a declining pot of money.”

In the July 15 letter, the director of the Department of Finance, Keely Martin Bosler, told Assembly and Senate budget committees that the cuts are spread evenly across 10 agencies and departments. Each listed program loses about 14% of cap-and-trade funds appropriated in the 2019-2020 budget. Among those experiencing cuts are the California Environmental Protection Agency and its departments tasked with cleaning up air pollution, assessing environmental health hazards, managing garbage and recycling, and other projects.

The state Legislature has not finalized how to spend the proceeds from cap-and-trade in the current budget year.

Erin Curtis, a California EPA spokesperson, said that the agency is still assessing how the cuts will impact its programs.

The largest cut in terms of dollars is at the California Air Resources Board, the agency responsible for cleaning up the state’s air pollution. It lost $81 million from the $557 million from cap and trade originally budgeted for its low-carbon transportation program, which includes clean vehicle vouchers and grants for new, advanced technologies for cars and heavy-duty engines.

“Whether it was now or down the road, we knew that this was going to be a declining pot of money.”


Last year’s budget banked on cap and trade auctions generating $2.4 billion. But as the coronavirus pandemic rocked the economy, reality fell about $280 million short. The most recent auction in May raised less than $25 million.

Cap-and-trade is a cornerstone of the state’s fight against climate change. It is the first carbon market in the nation to cover all sectors of the economy — including oil refineries, power plants, fuel suppliers and manufacturers. The state is relying on it for nearly half of its promised reductions of planet-warming greenhouse gases in 2030.

The emissions trading program also is a major source of revenue: Companies can meet the declining cap on greenhouse gases by curbing pollution or by buying and trading pollution credits. Since its launch in 2013, cap-and-trade has raised $13.1 billion, with quarterly auctions for pollution credits raking in more than $600 million each over the past two years.

The state funnels the money into a wide range of programs — from fire prevention to high speed rail and safe drinking water. is a nonprofit, nonpartisan media venture explaining California policies and politics.