Cap-and-Invest Program 2026 Amendments

CARB's 2026 rulemaking amends the California Cap-and-Invest Program — tightening allowance budgets and revisiting the industrial allocation that shields emissions-intensive, trade-exposed (EITE) manufacturers from carbon costs their out-of-state competitors don't face.

What we filed

CLECA's formal 45-day comments (March 2026) focused on industrial allowance allocation and leakage protection:

• The proposed cap-adjustment factor trajectory reduces leakage protection, contrary to AB 1207's direction — CLECA urged CARB to revise the trajectory, supported maintaining assistance factors at 100 percent through 2035, and recommended suspending further CAF reductions for EITE industries pending implementation of a border carbon adjustment.
• California's industrial compliance coverage is lower than competing jurisdictions, and policy-driven industrial cost pressures — including industrial electricity rates — intensify the need for robust leakage protection.
• The transition of purchased-electricity allocation should be value-neutral, with a holistic review of emissions leakage and adequate information for covered entities to evaluate the change.
• The Manufacturing Decarbonization Incentive (MDI) should be workable: expand eligible projects, extend the expenditure period from five to at least seven years, start the clock when allowances are withdrawn, moderate the decline schedule, include project development costs, and extend eligibility to facilities below the 25,000-tonne threshold.

Comments continued through the 15-day modification stage in spring 2026 as CARB refined the MDI and allocation provisions.

Why it matters

For a steel, cement, or industrial gas producer in California, allocation design is measured in millions of dollars a year — and it stacks on top of the nation's highest industrial electricity rates and concurrent CPUC rate proceedings. Carbon, energy, and rate exposure have to be managed as one portfolio.

This summary is drawn from documents on the public record and is provided for general information. It is not legal advice, and it does not disclose any confidential client matter.