California Outlines Clean Cars Roadmap After Federal Repeals

But the road ahead for clean vehicles remains uncertain

California is projecting commitment and urgency in its response to recent federal repeals of the states’ right to set air pollution standards more stringent than federal standards. On June 12, 2025, Governor Newsom issued an executive order directing state agencies to prepare recommendations for countering the repeal of federal vehicle and climate policies. In line with that directive, on August 19 the California Air Resources Board (CARB) released an eight-page action plan, Report to the Governor in Response to Executive Order N-27-25 on Zero-Emission Vehicle Deployment.

The plan renews California’s pledge to lead the zero-emission vehicle (ZEV) transition through smart policy, while also positioning the state as a model and source of inspiration for others. The first header leaves little doubt: “California Reaffirms Commitment to Clean Transportation.”

In May, California joined with ten other states to launch the Affordable Clean Cars Coalition under the banner of the U.S. Climate Alliance. The state’s role in shaping this coalition statement underscores its continued external leadership. Yet the statement makes no mention of trucks or heavy-duty vehicles—an omission that reflects ongoing political and economic headwinds.

The scope of CARB’s report is limited, focusing on actions achievable within existing legal authority. Partly for this reason, the plan is light on specifics and avoids some of the larger questions that hinge on unresolved judicial questions. The executive order itself acknowledges one of these, directing CARB to prepare an Advanced Clean Cars (ACC) 3 policy if legal efforts to reinstate the repealed ACC 2 and Advanced Clean Trucks (ACT) fail.

The report’s “priority recommended actions” are drawn from several agencies and organized under six themes: infrastructure, incentives, private investment, fuel pricing, procurement, and regulations. Viewed as a whole, CARB’s agenda will have to be fleshed out by California agencies and lawmakers in the coming months and years. But it’s an important signal committing California to continue its leadership role in reducing pollution by embracing an electrified transportation future.

Navigating funding uncertainty

With the federal One Big Beautiful Bill Act cutting funding to states for Medicaid and other services, states will face hard choices about where to allocate their limited resources.

For example, “incentives” – meaning rebates for clean vehicle purchasers – is the second category of recommended actions. Seeing the document clearly state California’s intent to “backfill the federal tax credits” and “support ZEV market deployment incentive and rebate programs” sends a reassuring signal that incentives will remain central to the state’s policy arsenal. Earlier this year, concern mounted when the Governor’s 2025–2026 budget proposal explicitly identified firefighting and high-speed rail as priority uses for carbon auction revenues, without mentioning vehicle incentives.

But concerns still loom over that source of funding. California has long relied on revenue earned from auctioning carbon allowances to fund clean transportation incentives, but the state’s cap-and-trade program is currently authorized only through 2030. Carbon market demand is also showing signs of fragility, highlighting the risk to public funding in the next year or two. In the May 2025 auction, carbon allowance prices fell to the floor for the first time since August 2020.

If lawmakers fail to approve a post-2030 cap-and-trade extension before California’s legislative session ends on September 12, that would put at risk future carbon allowance auction revenue.

First, if the proposed legislative extension does not pass, then California carbon allowance prices will very likely remain low, dampening public revenue earned from allowance sales. Second, eventually, demand shortfalls would be expected to cause some carbon allowances to be unsold at the auction floor price. If no extension passes this session, such shortfalls could emerge as soon as the next few quarterly auctions. Both low prices and auctions resulting in unsold allowances would suppress the amount of public revenue available from carbon allowance sales.

Amid ongoing fiscal pressure on state budgets, the report highlights positive trends in private investment, highlighting that the Low Carbon Fuel Standard is catalyzing $4 billion annually in advanced clean fuels production in California.

The infrastructure theme is one requiring less budgetary support but could play a big role keeping California and other states on track. Similar to Energy Innovation’s recommendations in our state energy policy blueprint, CARB highlights the need to support in-state and interstate charging infrastructure, both through allocations of state and federal funding and policies like planning, permitting, and grid interconnection.

California can still lead

What comes next after this latest milestone in California’s recommitment to leading the ZEV transition?

Incentives appear positioned as a linchpin in the light-duty vehicle space, once funding is secured. Yet many consequential questions remain unresolved, particularly for heavy-duty vehicles.

Some are tied to judicial outcomes. ACC 3 only becomes relevant if states’ efforts to preserve ACC 2 and ACT fail. Another open issue likely to play out in the courts is Clean Freight Partnership enforcement. Whether or not CARB succeeds in holding industry partners accountable for that voluntary agreement will shape the freight sector’s approach.

The road ahead for heavy-duty vehicle policy could depend on legislation to authorize new, promising tools, such as indirect source policies and clean freight miles standards. Indirect source policies are included among CARB’s priority recommended actions. Regional air quality managers already hold this authority and the South Coast Air Quality Management District has used it to require greater ZEV use at new warehouses. Assembly Bill 914 would have given CARB statewide authority to set indirect source standards but it failed this year and will have to wait for reconsideration.

A “clean freight miles” policy would set a required share of cargo miles transported with ZEVs, building on the existing Clean Miles Standard applied to Uber and Lyft, which requires 100 percent ZEV passenger miles by 2030. A parallel standard for freight delivery miles could be crafted, though it would require new legislation.

In sum, California’s action plan delivers the right tone and reaffirms the state’s intent to lead. But much remains unsettled. The next phase of policymaking will test the state’s ability to translate unmistakable intentions into durable strategy and effective implementation amid unprecedented legal and political turbulence.