California’s leading clean-air authority may reconsider a proposed policy that threatens to impact the state’s already fragile oil sector.

Lauren Sanchez, who chairs the California Air Resources Board, revealed that the board is carefully reviewing public input on suggested modifications to the state’s influential cap-and-invest carbon trading system. The board is expected to make a crucial decision in May.

This program operates by setting a strict limit, or “cap,” on greenhouse gas emissions. It obligates significant polluters to purchase allowances for these emissions.

The proposed changes aim to tighten the restrictions on emissions credits available for purchase. This could potentially escalate costs for industries like oil refining and electricity generation, while pushing them to reduce pollution more rapidly.

However, Sanchez admitted that the proposal has ignited intense debate from all political corners.

In an interview with KCRA on Sunday, she stated, “We’re receiving a lot of feedback indicating that we’ve either been too ambitious or haven’t sufficiently considered affordability.”

“We’re looking forward to continuing to engage with stakeholders on their feedback and any changes they’re requesting.”

Under the cap-and-invest system, major polluters must either cut greenhouse gas emission or purchase credits that fund state climate initiatives, including clean public transit and environmental projects.

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The program has long been a cornerstone of California’s aggressive climate agenda — but proposed changes are now drawing fire from industry groups, lawmakers and environmental activists alike in the wake of spiraling gas prices following Gavin Newsom’s policies and the Iran war.

Oil companies warn stricter limits could further squeeze the state’s shrinking refinery sector and send fuel prices soaring even higher in a state that already has some of the most expensive gas in the nation.

Environmental groups meanwhile argue the proposal doesn’t go far enough to meet California’s ambitious climate goals of reaching carbon neutrality by 2045, and push the state away from fossil fuels.

Under proposed amendments, regulators want to speed up greenhouse-gas reduction targets and require major companies to disclose their emissions and climate-related financial risks, adding another layer of oversight for big businesses.

Sanchez said regulators are still meeting with stakeholders from across the spectrum and suggested the rule could still evolve before regulators take a vote.

She said: “We’ve built in enough time for changes should those be deemed necessary.” The debate comes at a precarious moment for California’s energy supply.

The state has already seen refinery operations shrink in recent years as companies grapple with strict regulations and shifting markets.

Industry leaders have repeatedly warned that further tightening the rules could accelerate closures–potentially driving up already sky high fuel costs for millions of drivers.

“Our refiners are asking for more support from this program, and that’s a conversation we look forward to continuing,” Sanchez said.

For those in the Golden State who are refueling, as of Saturday, they are looking at an average of $5.483 per gallon of regular gas — nearly 40 cents higher than a week ago and over 90 cents more than the average a month before, according to the American Automobile Association.

According to the California Energy Commission, the cap-and-invest program tacks on about 24 cents per gallon to the cost of gasoline.

At the same time, lawmakers recently extended California’s cap-and-invest program through 2045, ensuring the policy will remain a central piece of the state’s climate strategy for nearly two more decades.

The California Air Resources Board is expected to vote on the updated rules in late May after reviewing public comments and proposed revisions.