On March 9, 2026, CLECA commented on CARB’s proposed amendments to the Cap-and-Invest Program, as described in the Initial Statement of Reasons (ISOR) released January 20, 2026, ahead of the May 28, 2026 public hearing. The comments address industrial allowance allocation, the transition of indirect allocation administration, and the proposed Manufacturing Decarbonization Incentive (MDI).
The proposed CAF trajectory cuts leakage protection
CLECA warned that the proposed Cap Adjustment Factor path conflicts with AB 1207’s leakage mandate, built around a 2032 allocation “cliff.”
CARB’s proposed CAFs include an allocation “cliff” for budget year 2032 with substantially reduced allowance allocation coverage through 2035… Industrial activities with the standard CAF would decline to only 27.9% coverage of compliance costs by 2035.
Costs are already high and coverage already low
CLECA set the trajectory against California’s cost gap and its low coverage relative to peer programs.
industrial electricity rates in California have risen to more than two-and-a-half times the U.S. average.
According to Table 6 of the ISOR, industrial sectors in California received 62 percent of their covered emissions as free allowances, while carbon programs in other jurisdictions provided coverage ranging from 72 to nearly 100 percent.
Suspend further CAF reductions until a BCA is in place
CLECA pointed to the European Union’s sequencing of a border adjustment alongside a phase-down of free allocation.
CLECA therefore recommends that CARB suspend further CAF reductions for EITE industries to preserve effective leakage mitigation until longer-term market solutions can be implemented… the sequencing of an effective BCA (should one be adopted) followed by a gradual ramp-down of industry assistance is critical to avoiding industrial leakage.
Make the CPUC-to-CARB transition value-neutral
On moving indirect (electricity) allocation administration from the CPUC to CARB, CLECA asked the Board to demonstrate that no protection is lost.
CLECA therefore respectfully requests that CARB document the analytical approach used to evaluate value neutrality between the CPUC-administered framework and the proposed allocation methodology and confirm that no EITE sector experiences a reduction in effective leakage protection as a result of the administrative transition.
Evaluate direct and indirect allocation together
CLECA warned that treating the two allocation streams separately would penalize the electrification CARB wants to encourage.
If direct and indirect allocation are evaluated independently, facilities pursuing electrification may experience a reduction in total leakage protection as emissions shift from direct to indirect sources… Electrification and other electricity-intensive decarbonization technologies should not inadvertently reduce the level of leakage protection available to facilities that are actively lowering their emissions.
Make the MDI workable
CLECA supported the Manufacturing Decarbonization Incentive but sought fixes on baselines, eligible technologies, and timing.
CARB should calculate emissions reductions against a conventional fossil fuel baseline, rather than against a facility’s current fuel mix. Setting baselines based on existing renewable fuel purchases would inadvertently penalize early actors…
Extend the allowable expenditure period from five to at least seven years to reflect the extensive California permitting and approval process.
An analysis specific to the California cement industry shows that WHR [waste heat recovery] could supply 20 to 40 percent of a plant’s power needs, yielding energy savings of roughly 40 to 60 million kWh annually per facility.
Read the filing
The excerpts above are drawn from CLECA’s filing. Read the complete comments here: