Back to top

California Air Resources Board (CARB)

CARB fundamentally altered the state’s ability to address climate change in a holistic manner by designing and overseeing California’s Cap-and-Trade program. The Affordable Housing and Sustainable Communities program, funded through Cap-and-Trade proceeds, is the state’s largest and only permanently-funded source of funding for affordable housing production.

Keys to Success

  1. Carve Out Funds for LMI Programs

  2. Create Deep Partnerships between Energy and Housing Agencies to Lead Programs

  3. Streamline Energy Funds with Affordable Housing Funds

  4. Ensure Funding Awards are Flexible, Easy to Use, and Large Enough to Change Behavior for Affordable Multifamily Properties

  5. Authorize Programs for the Long-term

Agency Overview

The California Air Resources Board (CARB) is responsible for implementing policy, regulations, funding, and research mandated by landmark state climate legislation, including AB 32 (2006), SB 32 (2016) and AB 1279 (2022) which set statewide emission reduction standards through the year 2045. CARB also designed and oversees California’s Cap-and-Trade program, a financial mechanism launched in 2013 which incentivizes GHG-generating entities to comply with mandated reduction standards through the purchase of credits. Cap-and-Trade covers GHG-emitting sources amounting to 85 percent of the state’s total emissions. The program is required to invest a minimum of 35% of its proceeds in Disadvantaged Communities (DACs) and projects benefiting low-income communities.

The Cap and Trade program funds a wide range of multi-sectoral projects, including those related to affordable housing production and proximate transit-related infrastructure. The Affordable Housing and Sustainable Communities (AHSC) program is one of the largest state-financed public subsidy programs, providing direct capital for the construction of affordable housing units, paired with grants for transit-related infrastructure projects benefiting the residents of the housing and community at large. Through six rounds of funding to date, AHSC program investments total $2.5 billion which has resulted in the production of 15,324 affordable housing units and reduced GHG emissions by 4.4 million metric tons. The AHSC program requires 50% of its program funds be invested in affordable housing and transit projects located in DAC’s.

The GGRF also funds the Transformative Climate Communities (TCC) program, collaborative projects driven by communities and implemented at the neighborhood level. To date, $241 million has been allocated to the program resulting in 91 projects benefitting low-income households. The TCC program has funded development and infrastructure projects including climate education, environ- mental resilience and solar and energy efficiency initiatives.

Other GHG-reduction programs funded through Cap-and-Trade under the CARB’s purview range from low-carbon economy workforce development, to wildfire response and readiness, to agricultural initiatives. A complete program list can be viewed here. Total cumulative appropriations through fiscal year 2022-23 are $22.5 billion, including $2.97 billion in FY 2022-23.

Agency Snapshot

  • Funding Size: The Cap-and-Trade program has appropriated $2.97B in total program funds in FY 2022-23.

  • Agency Objectives: Lead agency responsible for implementing climate change programs designed to reduce greenhouse gas emissions

  • Funding Source: Cap-and-Trade auction proceeds

  • Key Players: Strategic Growth Council (SGC), California Department of Housing and Community Development (HDC)

  • Financing Type: AHSC provides funding structured as grants and public subsidies; TCC project funding is structured as grants.

Demonstrating Keys to Success

  1. Carve Out Funds for LMI Programs: CARB manages the state’s Cap-and-Trade program which, by legislative mandate, must allocate a minimum of 25% of its funds to DAC’s and low-income communities. The AHSC program, which also falls under the CARB’s purview, allocates 50% of its program funds to affordable housing and transit projects in DACs. TCC grants require the project area to be a DAC or low-income community.

  2. Create Deep Partnerships Between Energy and Housing Agencies to Lead Programs: CARB engages public agencies focused on both climate and housing to help design and implement programs funded with Cap-and-Trade proceeds. The Strategic Growth Council (SGC) is the lead agency responsible for administering the TCC and AHSC programs, the latter in partnership with the California Department of Housing and Community Development (HCD) which implements the majority of the state’s affordable housing production funding.

  3. Streamline Energy Funds with LMI Funds: CARB directs Cap-and-Trade proceeds into the AHSC program which then deploys the capital directly into affordable housing projects and transit related infrastructure in the form of “soft” loans and grants. The financing structures are designed to be compatible with other sources of funding typically found in affordable housing developments, including other public subsidies, conventional debt, and investment equity including low-income-housing tax credits (LIHTC).

  4. Ensure Funding Awards are Flexible, Easy to Use, and Large Enough to Change Behavior for Affordable Multifamily Properties: The current maximum AHSC award per project is $50 million, with a single affordable housing developer eligible to receive up to a total of $100 million across multiple projects. The size and scope of eligible uses allowed by AHSC makes the program highly attractive to both developers and their public agency partners which receive transit-related infrastructure grants as part of funding award.

  5. Authorize Programs for the Long-term: CARB has existed since 1967 and created the Cap-and-Trade program as the primary financial vehicle to reducing GHG emissions in California for the long-term. The AHSC program is the only state-funded affordable housing program with a statutory, ongoing yearly allocation; SB 862 (2014) permanently appropriated 20 percent of available GGRF proceeds to the AHSC program.

Agency Strengths and Market Transformation

With the advent of the Cap-and-Trade program in 2012, CARB fundamentally altered the state’s ability to address climate change in a holistic manner. Revenue generated by the Cap-and-Trade program provides permanent sources of funding to programs with the sole purpose of reducing GHG emissions. The range of programs under the CARB’s purview touches virtually every sector of industry in California, not least of all affordable housing via the AHSC program, which is the state’s largest and only permanently-funded source of funding for affordable housing production. Projects funded by AHSC have resulted in transformative positive outcomes, providing housing stability for thousands of low-income households, and co-benefits for surrounding communities and local public agencies in the form of GHG-reducing public infrastructure.


Back to top