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The California Air Resources Board (CARB or Board) has posted preliminary regulatory proposal documents for the Regulation for the California Cap on Greenhouse Gas Emissions and Market-Based Compliance Mechanisms (Cap-and-Invest Regulation, formerly Cap-and-Trade Regulation) and the Regulation for the Mandatory Reporting of Greenhouse Gas Emissions (MRR).
Links to the rulemaking materials, including the Staff Report (Initial Statement of Reasons) and proposed regulatory text for each regulation, are now available on the Cap-and-Invest Regulation webpage and Mandatory GHG Emissions Reporting Regulation webpage.
CARB will be submitting these rulemaking materials to the Office of Administrative Law (OAL). CARB anticipates that OAL will publish the Notice of Public Hearing (Notice) for each regulation on January 23, 2026, commencing a 45-day public comment period that will end on March 9, 2026. Rulemaking documents may be modified based on OAL feedback prior to the start of the formal 45-day comment period. Written comments on the regulatory proposal and associated documents may be submitted into the 45-day comment docket, which will be linked in the forthcoming Notices for each regulation.
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Cap-and-Invest Background
On September 19, 2025, Governor Newsom signed into law Senate Bill 840 (SB 840, Limón, statutes of 2025) and Assembly Bill 1207 (AB 1207, Irwin, statutes of 2025), both of which were passed by a supermajority in the Legislature. AB 1207 extends the program previously known as the Cap-and-Trade Program through 2045, providing investment and regulatory certainty for clean energy and technology, uplifting affordability for Californians, and giving additional direction to CARB. Now that the new legislation is law, CARB is working on updating the Regulation to reflect the direction and process in AB 1207. This work will build on the public process to update the Regulation that CARB started in 2023. The previous public process materials are available at the Cap-and-Invest Meetings and Workshops webpage. The formal rulemaking process will follow the Administrative Procedure Act with formal comment periods.
CARB first formally adopted the Cap-and-Trade Regulation in October 2011. The Cap-and-Trade Regulation establishes a declining limit on major sources of GHG emissions throughout California, and it creates a powerful economic incentive for significant investment in cleaner, more efficient technologies. The regulation is one of the measures adopted by CARB, pursuant to Health and Safety Code Sections 38500-38599 (AB 32) to reduce California’s greenhouse gas emissions and advance the State’s climate goals. It complements other measures to ensure that California cost-effectively meets its goals for GHG emissions reductions. The Board subsequently amended the Regulation in June 2012, October 2013, April 2014, September 2014, June 2015, July 2017, March 2018, and December 2018. The California Cap-and-Invest Program and Québec Cap-and-Trade System have participated in a linked carbon market since January 2014. In 2017, AB 398 was passed by a supermajority in the Legislature and included prescriptive direction on the design of the program from 2021 through 2030.
Mandatory GHG Emissions Reporting Background
One of the requirements of AB 32 is that CARB must adopt a GHG reporting regulation. To comply with this requirement, the Board approved the Regulation for the Mandatory Reporting of Greenhouse Gas Emissions (reporting regulation or MRR) at its December 2007 Board meeting. The initial reporting regulation became effective on January 2, 2009. Under the program, approximately 800 entities annually submit to CARB their GHG emissions data reports, the majority of which are verified as accurate and complete by CARB-accredited third-party verifiers. The Board subsequently approved amendments to the reporting regulation in 2010, 2012, 2014, and 2017 to support Cap-and-Trade Regulation data requirements, align with the Western Climate Initiative (WCI) reporting structure, streamline and avoid duplicate GHG reporting, integrate AB 32 Cost of Implementation (COI) Fee Regulation reporting requirements, and collect additional information to support CARB’s various climate change programs, such as the statewide GHG emissions inventory.
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