California Governor Gavin Newsom has unveiled a bold $60 billion plan to extend the state’s Cap-and-Invest program through 2045, reinforcing California’s leadership in ESG policy and carbon neutral strategy. The program, which builds on the state’s successful cap-and-trade system, requires major greenhouse gas (GHG) emitters to purchase emissions allowances under a tightening emissions cap, creating a market-driven incentive to invest in low-carbon technologies. 

Despite mounting political pressure from the Trump administration to halt climate-focused state initiatives, California remains firm in its environmental commitments. President Trump recently signed an executive order aimed at blocking state-level ESG and carbon emissions regulations—including California’s cap-and-invest system. Nevertheless, Newsom’s proposed 2025–2026 budget outlines continued investment in “transformative climate projects,” such as the state’s high-speed rail network, funded by the emissions allowance proceeds. 

The Cap-and-Invest program, first launched in 2006, has already funneled $33 billion into clean energy and sustainability initiatives. With this extension, California anticipates generating an additional $60 billion, supporting long-term decarbonization goals aligned with the state’s target of net-zero emissions by 2045. 

The program applies to a wide range of industries, including electricity generation, oil refining, fuel distribution, cement production, and food processing. Emissions allowances are auctioned or traded, gradually decreasing over time to incentivize reduction efforts and clean tech adoption. This market mechanism integrates ESG accountability into corporate operations while funding environmental justice and green infrastructure. 

Newsom attributed a $12 billion budget shortfall to economic uncertainty caused by federal disruptions—a phenomenon his office dubbed the “Trump Slump.” Nevertheless, he emphasized, “California’s fundamental values don’t change just because the federal winds have shifted.” 

California’s recommitment to carbon pricing underlines its role as a climate policy pioneer, advancing ESG leadership and a carbon neutral strategy in the face of federal resistance. 

Sources : 

https://www.esgtoday.com/california-moves-ahead-with-60-billion-carbon-cap-and-invest-plan-despite-pressure-from-trump/  

https://www.latimes.com/environment/story/2025-05-18/trump-is-coming-for-californias-climate-progress-heres-how-the-state-is-fighting-back