California’s climate leadership is at a critical juncture. After two decades of pioneering policies that made clean technologies viable and significantly reduced emissions, the state now faces a difficult reality: its traditional regulatory approach alone is no longer sufficient. With rising living costs, federal challenges to climate programs, and legislative hesitation over potential economic backlash, California must rethink its strategy.
The authors, who have played key roles in shaping the state’s climate framework, argue that a shift is necessary. Their collective experience spans decades in government, environmental advocacy, public funding, and coalition-building. While celebrating past successes, they acknowledge a growing gap between climate ambitions and economic realities.
A recent proposal to pause the Low Carbon Fuel Standard due to concerns over refinery closures and rising gas prices is not an isolated incident—it signals a broader issue. When climate advocates begin to scale back policies, it’s time to reassess the approach.
California’s regulatory framework has achieved significant milestones. It demonstrated that states could lead on climate when federal action stalled. It helped mainstream electric vehicles, pioneered cap-and-trade, and showed that economic growth and emissions reductions could coexist. However, the state ranks second in income inequality, and many residents find it harder to achieve economic stability compared to 2006 when AB 32 launched California’s climate leadership.
Polling shows that voters prioritize cost control over environmental concerns and rate their quality of life lower than residents of Texas, despite the latter’s weaker climate policies. This economic anxiety is not just a messaging issue—it reflects a fundamental mismatch between current climate policy and community needs.
The state has relied heavily on air pollution regulators to manage an economy-wide transition, while underinvesting in economic development tools that could ensure climate action benefits struggling regions. Meanwhile, China is building clean economy supply chains that will dominate the next century. Federal challenges to California’s vehicle standards are intensifying, and the rising costs of climate disasters strain budgets. Insurance markets are weakening, and infrastructure delivery lags behind global competitors.
To address these challenges, the authors propose a new vision: a “climate-smart economy” that delivers shared prosperity, economic resilience, and local benefits while meeting climate goals. This approach does not abandon regulation but pairs it with ambitious economic policies that create jobs, improve affordability, reduce risk, and build thriving industries across the state.
Key strategies include creating strong economic development institutions, reimagining public investment, embracing regional approaches, accelerating project delivery, and tackling affordability. The authors suggest an 18-month initiative to develop and build support for this new approach before the next governor takes office in 2027.
They emphasize that this is not about lowering climate ambitions but raising economic ones. The goal is to prove that climate action and shared prosperity are not only compatible but mutually reinforcing. California must lead again by showing that the path to a stable climate runs through thriving communities, good jobs, and opportunity for all.
— news from California Forward
— News Original —
California must shift from regulation-based climate policy to an integrated economic strategy
Photo Credit: Shutterstock.com/Alexey Savchuk
By Kate Gordon, Nuin-Tara Key, Alvaro Sanchez, Craig Segall, and Matt Armsby
California’s climate leadership is at a crossroads. After two decades of pioneering policies that made clean technologies real and slashed emissions, we face an uncomfortable truth: our traditional playbook isn’t enough on its own anymore. Not when working families are struggling with soaring costs. Not when federal attacks threaten our core climate programs. And certainly not when our own legislators are proposing to freeze signature climate policies out of fear of economic backlash.
We write as architects and implementers of California’s current climate framework who now see the urgent need for transformation. Between us, we’ve spent decades in senior government roles, leading environmental organizations, creating public funding for climate and the environment, and building cross-sector coalitions. We’ve celebrated California and the nation’s climate victories — and we’ve witnessed firsthand the growing disconnect between our climate ambitions and economic realities on the ground.
The recent proposal by state leaders to pause the Low Carbon Fuel Standard in response to potential refinery closures and gas price spikes isn’t an anomaly — it’s a warning sign. When climate champions start walking back core policies, we must ask ourselves hard questions about our approach.
The Cracks in Our Foundation
Let’s be clear: California’s regulatory framework has delivered crucial wins. We proved that states could lead on climate when federal action stalled. We made electric vehicles mainstream, pioneered cap-and-trade, and showed that economic growth and emissions reductions could go hand-in-hand. We’ve faced unprecedented climate risks that have touched every corner of the state. And we pioneered meaningful climate action in the communities where poverty and pollution have been locked in for far too long.
We are not proposing to retreat on ambition.
But we need a new way forward that delivers fair and fast economic development. California ranks as the second-most unequal state in the nation. Despite our promises of “green jobs,” it’s harder for many Californians to achieve basic economic security than it was in 2006 when AB 32 launched our climate leadership. Recent polling shows California voters prioritize “getting costs under control” far above environmental concerns — and they rate their quality of life below that of Texans who, for all their strengths, haven’t prioritized climate leadership.
This economic anxiety isn’t just a messaging problem we can solve with better talking points. It reflects a fundamental mismatch between how we’ve approached climate policy and what communities need. We’ve asked air pollution regulators to manage an economy-wide transition. We’ve focused on cutting in-state emissions while China races ahead building the clean economy supply chains that will dominate the next century. We’ve under-invested in the economic development tools that could ensure climate action delivers tangible benefits to struggling regions and workers.
Meanwhile, the ground is shifting beneath us. Federal attacks on our vehicle standards and climate authority are intensifying. The mounting costs of climate disasters — from atmospheric rivers to catastrophic wildfires — strain budgets at every level. Insurance markets are weakening. And we’re losing the infrastructure delivery race that voters care about: while China built an entire high-speed rail network, California enters its third decade trying to complete a single line.
A New Vision: The Climate-Smart Economy
This moment demands more than defending the status quo. While continuing to protect key wins, we also need a fundamentally expanded vision – one that we call a “climate-smart economy” that delivers broadly-shared prosperity, economic resilience, and local community benefits while achieving California’s climate goals.
Again, this isn’t about abandoning regulation or lowering our climate ambitions. Strong standards remain essential. But we must pair them with equally ambitious economic policies that create good jobs, address affordability, reduce risk, and build thriving industries in every region of our state. We need strategies that position California as integral to the global clean economy, not just reduce our own emissions. And we must integrate resilience and adaptation into our economic planning before climate disasters bankrupt our communities.
What would this look like in practice?
First, create the institutional capacity to deliver. California needs economic development institutions with the scale and authority to match our climate ambitions. Whether through a new cabinet-level agency or dramatically strengthened coordination of existing programs, we must build government capacity to drive an economy-wide transition — not just regulate emissions.
Second, reimagine our approach to public investment. Instead of scattered grant programs, we need coordinated strategies that blend public funding with private capital to build self-sustaining clean-economy industries. The state’s small pot of cap-and-trade revenue, constantly fought over and restricted by law, cannot drive transformation alone. We need new revenue strategies tied to economic development and resilience, not just pollution reduction.
Third, embrace regional strategies that deliver local prosperity. From sustainable forestry and bioeconomy opportunities in mountain counties to agricultural innovation in the Central Valley to clean manufacturing at coastal ports, each region needs tailored strategies that build on local assets. This means creating place-based policies that communities can see benefiting them directly.
Fourth, accelerate project delivery while maintaining fairness. We must dramatically speed up clean infrastructure development — from housing in transit-friendly neighborhoods to renewable energy to grid upgrades. This requires reforming approval processes without sacrificing community voice or environmental protection. Other states and nations are showing it’s possible and we are already taking key steps on housing -– but there’s much more to do and California must catch up.
Fifth, tackle affordability head-on. Rising electricity rates, housing costs, and transportation expenses are eroding climate policy support. We need integrated strategies that drive down costs while expanding economic opportunity — more renewable energy, more efficient buildings, more transportation options — rather than managing scarcity through prices that punish working families.
The Path Forward
We’re proposing an 18-month sprint to develop and build support for this new approach before California’s next governor takes office in 2027. This isn’t about white papers gathering dust — it’s about building a movement that brings together business and labor, environmental justice advocates and rural communities, and climate hawks and economic developers around a shared vision.
This work requires investment in systemic change, not just incremental reforms. It requires climate advocates to expand their vision of what constitutes climate action. It requires economic developers who see climate strategy as central to prosperity, not a constraint on growth. And it requires political leaders with the courage to champion integration over isolation.
The Stakes
California stands at an inflection point. We need to lead again — showing the world that climate action and shared prosperity are not just compatible but mutually reinforcing.
This isn’t about lowering our climate ambitions. It’s about raising our economic ones to match. It’s about proving that the path to a stable climate runs through thriving communities, good jobs, and opportunity for all.
We’re proud of what California stands for, and we see clearly that yesterday’s solutions won’t solve tomorrow’s challenges. The climate crisis demands we think bigger, move faster, and include everyone in the solutions.
California has always led by doing what others said was impossible. Now we must do it again. The climate-smart economy isn’t just an idea — it’s an imperative. And the time to build it is now.
For more information about what we heard through our scoping conversations and our ideas for a path forward, see our full discussion paper here.
Kate Gordon is CEO of California Forward. Nuin-Tara Key is Executive Director of Programs at California Forward. Alvaro Sanchez is the former Vice President of Policy for the Greenlining Institute. Craig Segall is a former Deputy Executive Officer and Assistant Chief Counsel of the California Air Resources Board. Matt Armsby is Interim President of Resources Legacy Fund.