The California Air Resources Board submitted the final package of its cap-and-invest rulemaking to the Office of Administrative Law on July 14, 2026, per CARB's rulemaking docket, starting a review clock that requires a decision by August 25 and puts the state's core climate pricing program one step from a revised foundation.
The submission closes a rulemaking that began with workshops in 2024 and 2025 and survived the program's renaming. What lawmakers called cap-and-trade since 2012 is now branded cap-and-invest, a change enacted by the Legislature in 2025 when it extended the program rather than letting its authorization lapse at the decade's end.
What the rulemaking changes
The package rewrites the regulation that covers how emission allowances are distributed, auctioned, and retired. Key elements include updated cap trajectories through 2045, changes to the free allowances industries receive, and rules governing the offsets that companies can use in place of allowances, with tighter limits than the prior design.
The invest half refers to where auction revenue goes. The 2025 extension law committed proceeds to climate programs, tribal and community projects, and utility bill relief, and the rulemaking's mechanics determine how much money auctions raise each quarter.
Related stories: Mid-July Signings Put the Climate Bond Into Motion · CARB Advances Climate Disclosure Rule for Large Companies.
Why the OAL review matters
The Office of Administrative Law checks that agency regulations follow the procedural requirements of the Administrative Procedure Act: adequate economic analysis, response to comments, and internal consistency. It does not second-guess policy choices. If OAL disapproves, CARB must fix the defects and resubmit; if it approves, the regulation proceeds to filing with the Secretary of State and takes effect on the timeline the package specifies.
Auction operations continue under the existing rule in the meantime, so covered industries, which include refineries, power plants, and food processors, keep complying while the revision moves.
The program's record gives both sides their evidence. Allowance prices recovered after each early-year dip, and auction revenue has funded billions in transit, housing, and efficiency spending since 2012, while industry groups argue the added cost lands in fuel and electricity bills. The revised cap will decide which story dominates the next decade.
What to watch
The OAL decision due by August 25, and the first auction under the renewed program afterward, where clearing prices will signal how the market reads the tighter cap.