Captain Drawdown’s daily logbook on every CDR story, paper, and expert voice — so you don’t have to read them all.

Why this matters now

California just rewrote the rules of the largest US carbon market, and the rewrite quietly weakens the compliance demand that durable carbon removal was supposed to inherit. On May 29, Governor Newsom signed a reauthorization extending cap-and-trade (now rebranded cap-and-invest) through 2045, but the package increases free allowance allocation to refineries and utilities, softening the price ceiling that residual emitters would have hit. In the same week, the SEC moved to eliminate Biden-era climate disclosure requirements. The carrot and the stick for US corporate CDR procurement both got smaller at once.

What is it?

California’s cap-and-invest program sets a declining cap on covered emissions from refineries, power plants, large industrial sources and fuel distributors. Covered entities surrender allowances equal to their emissions. Allowances are auctioned or distributed free. The auction floor and the price ceiling together create the carbon price that, in theory, makes paying for CDR cheaper than paying for allowances at the margin.

The May 29 overhaul does three things: extends the cap to 2045, expands free allocation to incumbent energy companies, and leaves the door open for CARB (the California Air Resources Board) to set the trajectory in implementing regulations later this year.

Who’s involved?

  • CARB: writes the implementing regulations that will set actual stringency.
  • Covered entities: refineries, utilities, large industrials, and fuel suppliers, who just got more free allowances.
  • CDR developers: hoping that compliance markets eventually accept durable removal credits as a compliance instrument. They still can’t, in California.
  • The Western Climate Initiative (WCI) and RGGI in the Northeast: the two subnational compliance markets that, without a common rulebook, cannot aggregate into a continent-scale offtake pool.

What just happened?

California loosened. New York is softening its CO2 rules in parallel. The SEC withdrew federal disclosure. Meanwhile the EU is going the other way, reducing permit auctions to defend its carbon price after the surplus topped one billion allowances. The transatlantic divergence is now sharp enough to redirect where CDR developers chase compliance-linked demand.

James Temple (@jtemple.bsky.social on Bluesky) put the durability problem plainly: “It turns out that carbon market rules, once written, are far more durable than some of these forms of removal.” The rewrite locks in looser stringency through 2045, longer than the storage duration of several removal pathways now selling credits.

What to track

  • CARB implementing regulations (expected H2 2026): will the loosened allocation actually drop the effective allowance price, or will CARB tighten elsewhere to compensate?
  • Compliance eligibility for removal credits: California still does not allow durable CDR as a compliance instrument. Any movement here would be the first US compliance on-ramp for engineered removal.
  • WCI-Quebec linkage and Washington State market alignment: harmonization could partially offset California’s loosening.
  • Corporate voluntary procurement: with no mandatory reporting and a softer compliance signal, expect US CDR demand to stay concentrated in the same dozen-or-so corporate buyers driving deals like the Tapestry-Climeworks 10-year agreement.

Further reading

Citations

  1. Ca — increases free allowance allocation to refineries and utilities — government source
  2. Sec — moved to eliminate Biden-era climate disclosure requirements — government source
  3. Carbonmeld — without a common rulebook
  4. Heatmap News — softening its CO2 rules in parallel
  5. Carbon Herald — reducing permit auctions to defend its carbon price
  6. Bluesky — @jtemple.bsky.social on Bluesky — Bluesky post