Water Equity Clearinghouse

California’s Cap-and-Trade Program


While climate adaptation is a key component of the response to climate impacts, mitigation can also play an important role in strengthening vulnerable communities. In 2006, California passed AB 32, creating a cap-and trade system in which entities can purchase allowances when they exceed state regulations limiting greenhouse gas emissions. Along with measures lowering overall emissions, cap-and-trade systems are a common approach to climate mitigation

Efforts to Advance Water Equity

In California, emissions allowances generate significant revenue for the state. SB 535, passed in 2012, amends AB 32 to give the system an equity focus. It requires that 25 percent of the funds raised by cap-and-trade be spent on projects that benefit disadvantaged communities, with 10 percent dedicated to projects within the communities themselves.

California’s cap-and-trade program is the first in the country to explicitly target funding to vulnerable communities. The state EPA identifies disadvantaged communities using a tool called CalEnviroScreen, which compiles environmental and demographic data to assess a community’s overall vulnerability and determine where funding is most urgently needed. Factors include environmental hazards like groundwater contamination, toxic sites, and traffic density, as well as socioeconomic factors like unemployment, poverty, and populations with limited English proficiency. Funding is allocated to affordable housing and public transit programs that benefit communities found to be the most vulnerable.

While California’s cap-and-trade program is not focused on water-related climate mitigation, it provides a promising model of how states can both generate funding to increase resilience, and target these resources to those who are most vulnerable. CalEnviroScreen is a successful tool for incorporating socioeconomic factors into vulnerability assessments, and could be applied to climate planning in the water sector.

Geographic Scale:
Type of Organization:
Government Agency
Pillar 3
Approach to Advancing Water Equity:
Funding and Finance
Policy Development and Advocacy