California’s Latest Climate Theater: Newsom Signs Another Expensive Illusion

SAN FRANCISCO – According to CBS News, Newsom signs sweeping bills on climate, California energy affordability, oil production – Governor Gavin Newsom once again turned public policy into prime time, signing a sweeping set of bills last week under the domed ceiling of the Morrison Planetarium. The spectacle promised an all-in-one fix: cheaper electricity, more reliable gas supplies, cleaner air, and a green job boom. “After months of hard work with the Legislature, we have agreed to historic reforms that will save money on your electric bills, stabilize gas supply, and slash toxic air pollution — all while fast-tracking California’s transition to a clean, green job-creating economy,” the Governor declared, as though the calculus of energy pricing and infrastructure can be solved by optimism and press releases.

The core of the package is an extension of the cap-and-trade program—rebranded “cap-and-invest”—all the way to 2045. That rebranding glosses over that the structure is largely the same: companies must either reduce their greenhouse gas emissions, buy emission allowances, or invest in offsets. The revenues from auctioning allowances are then redistributed (some), invested (many), or spent (often). In recent years, those auctions have raised between $3 billion and $4.3 billion annually. These revenues fund programs ranging from wildfire prevention to transportation, housing, and utility credits. ¹

Indeed, according to the California Air Resources Board, nearly $33 billion has been raised from polluters and directed into the state’s cap-and-trade / cap-and-invest system since inception, funding 117 “clean-energy and community resilience” initiatives. ² That includes a large slice going into what Newsom and others call “climate credit” refunds to utility customers, some support for disadvantaged communities, and a guaranteed $1 billion annually earmarked for high-speed rail. Yes, the same high-speed rail project that critics have repeatedly flagged for cost overruns, delays, and questionable emissions impacts compared to its price tag.

If one wants concrete examples of where Californians already feel the bite, consider the price of electricity. As of mid-2025, average residential electricity in California runs about 33.52 cents per kilowatt-hour (¢/kWh)—among the highest in the nation, almost double the national average of around 17.47¢/kWh. ³ Monthly bills are high too: many California households pay on average $186/month for electricity, depending on usage levels, which is about 29% higher than the U.S. average residential bill of roughly $144. ⁴ For those using more—heat, air-conditioning, EV chargers, big homes—the numbers are steep.

High prices alone hurt. But when reliability falters, the costs are more than financial—they are socially destabilizing. California has suffered serious blackout events over the past decades, particularly in heat waves. One example: in August 2020, during a severe heat wave, hundreds of thousands of Californians experienced rolling blackouts due to shortages in supply by the California Independent System Operator. ⁵ During the earlier 2000-2001 electricity crisis—fueled by market manipulation, droughts, and curtailed capacity—blackouts affected 1.5 million customers in a single event (March 19-20, 2001), with other events affecting hundreds of thousands more. ⁶ These are not edge cases; they are consequences of pushing generation, grid expansion, and permitting through impossible timelines while expecting perfect outcomes.

The legislation promises up to $60 billion in electricity bill refunds via the expanded California Climate Credit, but that money isn’t free: it comes from the same cap-and-trade revenues which are built into costs for businesses, which then tend to get passed on to ratepayers. It is a feedback loop: regulators add costs, then offer partial relief, then add new mandates, then offer more rebates. Net effect: higher base prices, more volatility, more confusion.

Despite the protestations of “affordability,” the observable trend is increasing burden. For example, since 2015, electricity rates in California have increased sharply, contributing significantly to the overall affordability crisis. ⁷ Many lower- and middle-income households see energy as one of the few costs that cannot be deferred—utilities, heating/cooling, and fueling cars must be paid.

There is also significant recent evidence that cap-and-trade revenue is not growing as planned. A report from Clean and Prosperous California estimates that the state has missed out on approximately $3 billion in revenues over the past year because auction results were weak and credit demand failed to meet supply in some rounds. ⁸ Such revenue shortfalls exacerbate the risks: when the promise of rebates or infrastructure is funded by uncertain revenue streams, the fallback is usually taxes, rate increases, or cuts elsewhere.

While Newsom’s package includes easing drilling restrictions in Kern County to stabilize fuel supply, that looks much more symbolic than structural. California has seen refining capacity erode under environmental and regulatory pressures. Loosening regulation in one county doesn’t replace lost capacity, or immediately reduce the cost of imported fuels or high gasoline prices.

The expanded wildfire fund, boosted by $18 billion financed via ratepayers and utility shareholders, is another band-aid rather than a fundamental structural solution. Utilities are being asked to harden infrastructure, manage aging equipment, and fight fires, but those costs are largely passed on to residents—who already pay among the highest rates in the U.S.

Newsom and legislators frame these policies as “historic,” balanced between climate and affordability. But the track record suggests a pattern: bold promises, political optics, delayed results, and costs that end up concentrated on ratepayers, small businesses, and low-income communities. The extension of cap-and-trade through 2045 secures revenue flows and regulatory cover; the high-speed rail segment gets its guarantee of $1 billion a year; billions more go to wildfire and climate programs. Yet the underlying problems—grid instability, high base rates, fuel supply constraints, long permitting delays—are mostly unaddressed in any meaningful way.

California continues to import electricity from neighboring states when renewables are insufficient, maintain natural gas plants under emergency backup, and tolerate regulatory uncertainty that scares private investment. None of that is reconciled by the words “clean,” “green,” or “equitable.” And when costs rise anyway—as they inevitably do—leaders trot out rebates, credits, and “historic” legislation to mollify public dissatisfaction.

What Californians can realistically expect from Newsom’s bill signing is one more layer of complexity, one more promise to be fulfilled “soon,” and one more set of bills that will raise costs before they contain them. The $33 billion raised here doesn’t erase the decades of bills paid, grid stress felt, or blackouts endured. If leadership means anything, it ought to mean transparent trade-offs, not performances under domes.

Footnotes

1. Legislative Analyst’s Office, “The California Cap-and-Trade Program: Frequently Asked Questions” – cap-and-trade auctions have raised $3-$4.3B/year most recently.
2. CARB, “State invests nearly $33 billion in cap-and-trade dollars to make communities cleaner and healthier.”
3. EIA / ElectricityRates survey: California residential average 33.52¢/kWh, national ~17.47¢/kWh.
4. SolarReviews / state data: CA average residential electricity bill ~$186/month vs U.S. average about $144.
5. ABC News, report on CAISO rolling blackouts in August 2020 during a heat wave.
6. Brattle / historical data on 2000-2001 CA electricity crisis: 1.5 million customers affected in one blackout event.
7. “A Closer Look at California’s Surging Electricity Rates,” Public Policy Institute of California: rate increases since 2015 contributing to affordability crisis.
8. Clean and Prosperous California: about $3 billion in missed revenue due to weak auction performance.