California Governor Gavin Newsom revealed the May revision of the state budget proposal for 2025-2026 on Wednesday, which notably includes a plan for the high-speed railway project.
This updated budget proposal integrates a 15-year extension for California’s Cap and Trade Program, established in 2013 to limit greenhouse gas emissions. Politico has reported that while the program is set to expire in 2030, there’s ongoing consideration by the state legislature to extend it. However, this move could lead to increased gas prices for drivers in the state.
The cap-and-trade system requires businesses, including natural gas and coal power plants, to purchase allowances to offset emissions, promoting cleaner technologies. According to the U.S. Energy Information Administration, the program sets emission reduction limits across key sources of greenhouse gases in California.
Analysts are cautioning that Californians might face significant gas price hikes if the program is extended, especially alongside the planned closure of two major oil refineries in the state.
Marlo Lewis Jr., a senior fellow at the Competitive Enterprise Institute, shared concerns regarding the declining capacity of California’s oil refineries. He pointed out that with California having the highest gas tax in the continental U.S., the state would need to either produce its own oil and gas or rely on imports.
For California households, an increase of about 74 cents per gallon of gasoline could occur if lawmakers decide to go ahead with the cap-and-trade program expansion. A recent report indicated that this rise could hit low-income families particularly hard, as they tend to spend a larger portion of their income on fuel compared to wealthier households.
A spokesperson for the cap-and-trade program emphasized that the predictions of price spikes are exaggerated and dependent on hypothetical scenarios. Historical data, they allege, shows that measures are in place to avoid significant price increases.
Back in April, former President Donald Trump issued a presidential order targeting programs like California’s cap-and-trade system, deeming them discriminatory and suggesting they inflate costs for energy producers. Lewis noted that the high fuel prices in California stem from the state’s energy policies rather than corporate mischief.
Kevin Dayaratna from the Heritage Foundation remarked that California’s climate-related policies yield minimal benefits, incurring high economic costs without substantial environmental improvement.
Under Newsom’s revised budget, about $1 billion yearly would be allocated to California’s troubled high-speed rail project. Initially projected to cost $33 billion and completed by 2020, current estimates place the price between $89 billion and $128 billion, with progress delayed significantly.
Mark Joff from the California Policy Center pointed out that, as it stands, there’s a shortfall of roughly $100 billion needed to connect major cities like San Francisco and Los Angeles through the rail project. The potential withdrawal of $4 billion in federal funds compounds these challenges.
The state continues to grapple with a $12 billion budget shortfall, which Newsom attributes partly to the economic impact of Trump’s tariffs. Since he took office, California’s state budget has risen over 63%, complicating fiscal management as many residents leave the state, often citing the high cost of living as a primary concern.
CHSRA CEO Ian Choudri expressed appreciation for Newsom’s commitment to high-speed rail, hoping the continuous funding will draw in private investment to expand the project.
Newsom’s office emphasized that since the inception of the cap-and-trade program, thousands of jobs have been created and billions returned to Californians, reflecting concerted efforts to address climate-related issues.
In a recent statement, Newsom reaffirmed California’s dedication to tackling climate issues and ensuring polluters contribute to solutions, all while trying to provide essential funding for projects like high-speed rail.
