OPIS Insights

The 14th Annual OPIS LCFS and Carbon Markets Workshop was held Jan. 13–15 in San Diego, with the Carbon Markets Day occurring on Jan. 13. The timing was serendipitous. CARB’s Initial Statement of Reasons (ISOR) was released midway through the day just as California is entering the first full year following the extension of C&I to 2045, major rulemaking decisions are underway and federal pressure on state climate authority is intensifying. 

A keynote from former CARB Chair Liane Randolph set the tone for the day, and the panels that followed translated those signals into concrete market questions around supply, demand, linkage and price behavior. 

CARB’s Climate Strategy: Institutional Durability, Market Mechanisms and the Road Ahead

Randolph described 2025 as being shaped by overlapping pressures, including extreme wildfires and a more adversarial federal posture toward California climate policy. California intends to defend its authority, sustain policy momentum and continue relying on market based mechanisms as a central emissions reduction tool, she added.

A central theme was institutional durability. Randolph traced CARB’s mission back to its public health origins, adding that it has had  long-standing bipartisan support. California’s air quality history explains why its climate framework has endured across political cycles, she said, that that foundation allows the state to maintain direction even as external conditions grow more volatile. 

California has grown into the world’s fourth-largest economy while significantly reducing emissions. Carbon intensity has declined sharply since 2000, statewide GHG emissions are at their lowest level this century and clean energy employment has expanded alongside these gains.

Randolph then turned to transportation, highlighting emission reductions across both light-duty and heavy-duty vehicles. She attributed much of this progress to cleaner fuels and vehicle electrification, pointing to the Low Carbon Fuel Standard (LCFS) as a driver of both emissions outcomes and private investment. She emphasized that California cannot fund the energy transition on its own; programs like the LCFS and C&I are designed to mobilize private capital by offering long-term policy confidence. She also noted the extensive effort CARB undertook to ensure lawmakers understood the LCFS and its role in delivering results.

On C&I, Randolph tied the 2045 extension directly to market stability and investor confidence. She stressed the importance of maintaining flexibility around offsets, including carbon dioxide removal, while remaining attentive to energy costs and household impacts. The upcoming rulemaking, she said, would focus on stabilizing the market and providing clarity around how the program evolves over time.

Looking ahead, Randolph confirmed CARB’s continued work on linkage, citing California’s longstanding partnership with Quebec and interest in future engagement with Washington. She said regulatory sequencing matters and that the internal rulemaking must come first. She also previewed work on clean transportation through the Drive Forward initiative, upcoming rules on carbon dioxide removal and storage and GHG disclosure requirements aimed at improving transparency and accelerating emissions reductions.

She also underscored that legal defense is part of governance. CARB, she said, is accustomed to defending its authority and views that work as essential to preserving regulatory certainty for markets and communities alike.

Key Policy and Market Considerations for the Next Phase of Cap-and-Invest

Following the keynote, a California Cap-and-Invest Pricing and Policy panel explored what certainty looks like in practice for compliance entities, investors and traders as the program enters its next phase. The panel featured Clayton Munnings, executive director of Clean and Prosperous California; Richard Corey, a partner at AJW and former executive officer of CARB; Mike Taylor, president of Emissions Experts; Teresa Lang, senior director of policy at Anew Climate; and Katelyn Roedner Sutter, California state director at the Environmental Defense Fund.

Panelists recapped  the extension of C&I to 2045 and the political dynamics that shaped it. Affordability emerged as a central concern during legislative negotiations, with panelists describing tensions between the Senate, Assembly and CARB. Those dynamics continue to influence expectations for the current rulemaking.

The discussion then shifted to the rulemaking process and timing. The speakers  emphasized that clarity around rulemaking milestones is as important as the substance of the rules. When asked what market participants most want from CARB, the answer was consistent — predictability. Compliance entities want to understand how free allocation will change and on what timeline, particularly because budgeting and risk management become more difficult when allocation shifts occur close to compliance years.

Linkage surfaced repeatedly as both a policy objective and a market catalyst. Panelists agreed that California needs to complete its internal rulemaking before any expansion of linkage can proceed. 

Federal uncertainty was also addressed. Panelists acknowledged that additional legal and political challenges are likely, but expressed confidence in the program’s legal footing. The program’s long operating history, prior litigation outcomes and broad stakeholder support were cited as reasons the market has remained intact through past challenges. 

The ISOR Effect: Conversations Shifted to Supply, Demand, Prices and Program Design 

The release of CARB’s Initial Statement of Reasons (ISOR) at 12 pm PST was a key moment in the conference’s first day.  Conversations across the workshop shifted toward the rulemaking, with many stakeholders spending the remainder of the afternoon unpacking what the proposed framework could mean for supply, demand, prices and program design through 2045. After years of anticipation, this was the rulemaking package the market has been waiting for since the 2022 Scoping Plan update – a consequential moment for California’s carbon market. 

The ISOR opens a door to a new phase of debate, analysis and adjustment, and signals that the years ahead will bring meaningful shifts in how C&I operates. Please find our CAMIRO analysis of the ISOR here.