It was passed along with a trio of other clean energy bills intended to help kick-start the nascent renewable energy industry. These bills created an incentive for utilities to invest in renewable energy systems, regulations allowing rooftop solar and state coordination on renewable projects, and, as mentioned, a five-year 10% ITC for solar energy projects. While these measures were useful for getting the ball rolling, they had limited impacts on actually installing clean energy technologies as there was a lot of maturing needed before the industry was ready for primetime.

So let’s jump ahead a couple of decades to 1996 when Governor Wilson signed the Electric Utility Industry Restructuring Act into law, which authorized Net Energy Metering (NEM) programs across the state (it also led to the California energy crisis and the Enron scandal, but we’ll skip over those for today). NEM, which allowed businesses and individuals to receive compensation for excess solar energy generation through their electric utility, let solar owners capture more of the true value of their renewable resources without the energy storage technologies that would become more widely available and affordable over the coming decades.

While NEM initially saw limited participation in its early years, it would go on to become one of California’s most widely-used solar incentives and is currently in its third iteration.

California’s next big step toward a green economy came in the form of SB 1078 in 2002, which established the state’s first Renewable Portfolio Standards (RPS) requiring that at least 20% of retail electricity must be from renewable sources by 2017. This legislative backing provided a clear market signal that the Golden State was going green, and was popular enough to receive several expansions that ultimately put the state on the path to 100% carbon-free electricity by 2045. RPS programs like California’s have been shown to result in greater investments in renewable energy and corresponding reductions in GHG emissions, air pollution, and water use, as well as accelerated workforce development in clean energy industries. RPS has been criticized, typically by anti-regulation advocacy organizations, for taking a few years to have significant effects and for being initially more expensive than (heavily subsidized) fossil fuel power; however, when put into context as a developing market that provides significant climate and health benefits, these arguments fall flat.

2006 was a big year for California renewables, with SB 1 establishing the Go Solar California Program, AB 32 expanding the state’s RPS, and AB 920 allowing for the trading of Renewable Energy Certificates (RECs). Go Solar California allocated a total of $3.3 billion through several related incentive offerings, meeting the program target of 3,000 MW of new solar resources in 2016; nearly 15 times the state’s total installed solar capacity in 2006. RECs further drove solar growth by creating tradable credits attached to each megawatt of qualified renewable power that can be “unbundled” from the electricity and sold separately, providing additional revenue generation (and greenwashing) opportunities. California’s REC market has expanded over the years and now serves 12,612 active generating participants across 14 U.S. states, 2 Canadian provinces, and northern Baja California under the Western Electricity Coordinating Council.

In 2008, the California legislature created the framework for a type of renewable financing option called Property Assessed Clean Energy (PACE) financing, which allowed property owners to pay for clean energy upgrades through property tax payments with no upfront costs. Unfortunately, a lack of oversight led to some contractor fraud and financial harm to low-income participants. Several pieces of legislation passed in subsequent years enacted consumer protections intended to address these shortcomings, including safeguards against PACE-financed projects from being too expensive for the applicant and authorizing the state to pursue enforcement actions against unscrupulous contractors. PACE has gone on to successfully finance tens of thousands of projects across California, with just one provider funding nearly a billion dollars in efficiency and renewable upgrades between 2013 and 2018.

California’s most impactful climate program to date, the Cap & Trade Program, was launched in 2013 by the Air Resources Board to create an emissions trading market that served the dual purpose of incentivizing industrial GHG emissions reductions as well as provide an ongoing source of funding for a myriad of other climate programs. Under this program, entities that emit 25,000 or more metric tons of carbon dioxide equivalent (CO2e) per year are required to meet an annually-decreasing emissions cap through emissions reductions measures, purchasing offset credits (for up to 8% of the entity’s total emissions), and/or trading credits with other participating entities that are below their emissions cap. The revenue the state collects from credit trading goes into the Greenhouse Gas Reduction Fund, which serves as a funding pool for the suite of programs (listed in the table below) that collectively fall under the California Climate Investments (CCI) initiative.

Cap & Trade and CCI are worth exploring a bit more in-depth due to their sheer size and scope, and the outsized impact they have had on California’s progress toward a spectrum of sustainability goals. Cap & Trade has generated a total of nearly $28 billion in funding that has been appropriated toward CCI programs, which has thus far invested more than $11 billion across 578,500 (and counting) individual projects across the state. The list above gives an idea of the wide range of project types made possible by CCI, from clean energy to EVs to coastal resilience to soil carbon sequestration, providing a multitude of benefits beyond the 109,000,000 metric tons of CO2e estimated reduction over project lifetimes. And, after some early findings that Cap & Trade and CCI programs were actually causing increased environmental harm to disadvantaged communities, lawmakers and regulatory agencies changed the programs to increasingly prioritize this critical segment of the population. As of 2024, more than $8 billion of the total $11 billion invested by CCI has gone to disadvantaged areas.

However, some fundamental flaws in the original Cap & Trade regulations have undermined its ability to help California meet its emission reduction targets. In the early days of the program when credits were cheap and plentiful, big polluters bought up large amounts of them and banked them away for later years when the cap would be lower. This has resulted in a scenario where these large polluters are using their banked credits to meet the increasingly stringent Cap & Trade requirements while continuing to generate emissions unabated, thereby creating a disconnect between Cap & Trade compliance and actual emissions reductions. Fortunately, the Air Resources Board recently proposed and analyzed several amendments to the program that would help alleviate this issue, including reducing the total amount of available credits and reworking allowance budgets to prevent increased out-of-state emissions and enhance benefits to low-income residents.

Between 2015 and 2018, three landmark climate bills (SB 350, SB 32, and SB 100) were passed that together set targets for the state’s retail electricity sales to be 100% renewable and zero-carbon by 2045 along with a 40% reduction in statewide GHG emissions by 2030 from a 1990 baseline. Along with Governor Newsom’s 2020 executive order requiring all light-duty and drayage vehicles sold in California to be zero-emission by 2035 and all medium-and heavy-duty vehicle sales to be of zero-emission models by 2045, the regulatory stage was set for serious reductions in transportation and electricity emissions; the state’s two largest sources of GHGs. So, where have all these incentives gotten us?

Well, between 2001 and 2023, California utility-scale solar generation grew by nearly 50-fold; from 837 GWh to over 40,000. Combined with small-scale solar (which is tracked separately), nearly 70,000 GWh of solar energy were produced last year — the highest in the country and more than twice that of the next leading state, Texas. And while California’s wind generation has mostly plateaued due to the limited number of available sites on land, plans are underway to tap into the huge amount of offshore wind resources with the advent of new floating wind turbines that can operate in the deep waters off the state’s extensive coastline.

In the same time period, sales of zero-emission vehicles skyrocketed from essentially none to nearly 2,000,000 per year. The strong market signals and incentive support created by the state have not only driven California to have the most clean vehicles in the country but also stimulated the development of a new nationwide industry.

All this has brought down state GHG emissions by a quarter compared to 2000 levels all while population and gross domestic product (GDP) have been steadily increasing. By 2021, for every million dollars in GDP, California emitted 133 metric tons of CO2e — less than half of the US’s national average of 300 metric tons CO2e per million dollars. This represents a significant decoupling of economic growth from GHG emissions for the first time since the industrial revolution, a momentous feat for the world’s second largest economy per capita.

California’s green economy trajectory is one of the great successes and some notable failures, as well as an example to the rest of the country and the world that sustainability solutions backed by well-made policies and incentives can achieve a triple bottom line for economic growth, environmental protection, and societal benefits. Understanding what has and hasn’t worked for the Golden State in its trailblazing efforts has been and will continue to be key in helping humanity break free from the destructive, antisocial practices that are the cause of the myriad of environmental and societal woes of today, and help us to build a world in which future generations not only survive, but thrive.