By Alejandro Lazo, CalMatters

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California is considering handing oil refineries and other major polluters billions of dollars in free emission allowances just as the state says carbon reductions need to come faster than ever.

In the last six months, two refineries have closed and gas prices have topped an average of $6 a gallon as the Iran-Israel war sent oil markets into turmoil. The oil and gas sector spent $10.3 million lobbying Sacramento in the first three months of the year, according to lobbying filings, with the Western States Petroleum Association and Chevron accounting for the bulk of it.

The result is a new proposal before the California Air Resources Board that would provide as much as $4 billion in new free emission permits to companies with half slated for the fossil fuel industry in exchange for commitments to invest in clean energy. 

Environmentalists warn the proposal is a giveaway to Big Oil that would weaken California’s “cap-and-invest” program just as the state is relying on it to cut emissions and fund climate, housing and other programs. Anthony Martinez, a spokesman for Gov. Gavin Newsom, said the changes are necessary to keep the state’s carbon market “durable” and “affordable” amid mounting refinery closures.

The fight over California’s carbon market has exposed the political tensions at the heart of Newsom’s energy transition agenda. California is trying to preserve its climate ambitions while keeping gasoline affordable for drivers already facing the highest prices in the country. Critics say the air board’s proposal accomplishes neither goal.

“We are really concerned that this would significantly kneecap the program,” said Chloe Ames, a policy adviser with NextGen Policy.

Weakening the backstop

Through California’s 13-year-old carbon market, major polluting companies must buy permits for every ton of greenhouse gases they emit, with the state capping total emissions year by year. Each permit is worth real money and companies can sell the ones they don’t use. The program is considered California’s climate backstop — the only state policy that sets a firm limit on greenhouse gas emissions.

At the heart of the dispute with environmentalists is a proposed subsidy program carved out of that carbon market. The air board, if it approves the proposal on May 28, would create a new pool of free pollution permits for refineries, cement plants and other big companies that pledge to invest in clean energy and efficiency projects.

The pool would be capped at 118.3 million permits — the same number the air board has said must come off the market for California to hit its 2030 climate target. Environmentalists say the proposal risks wiping out those reductions.

Berkeley energy economist Meredith Fowlie, who chairs an independent committee that oversees the carbon market, wrote in a recent analysis that the design would give qualifying refineries more free permits than they need to cover their emissions.

“One could use the word generous,” Fowlie said.

Rajinder Sahota, the air board official overseeing the program, said the proposal would ensure emissions reductions. The new permits, she said, would only go to companies undertaking clean energy and efficiency projects and would be limited, temporary and rescinded if companies misuse them. The plan is meant to help keep refineries operating in California at a time of uncertainty, she added.

“We want to make sure that there’s reliable, affordable fuel for California consumers while the demand persists,” Sahota said.

But environmentalists say the air board has built in almost no accountability for how companies invest in those projects. Katelyn Roedner Sutter, state director for the Environmental Defense Fund, said the proposal  “is based on proposed investment, not any guaranteed reduction.” 

“That’s a red flag,” she said.

A climate money crunch

Quarterly auction revenue for state programs could drop from roughly $4 billion a year to about $2 billion under the proposal, according to the Legislative Analyst’s Office.

Sen. John Laird, the state Senate budget chair and a co-author of California’s original 2006 climate law, warned at a May 6 hearing that the proposal “flies against many things we negotiated just last fall” with the governor and could put the carbon market deal “back on the table.”

Not all lawmakers are critical. Assemblymembers Jacqui Irwin and Cottie Petrie-Norris, who respectively chair climate and energy committees, said the proposal “reflects the Legislature’s focus on affordability,” and urged the board to proceed “without delay.” 

They pointed to an increase in the Climate Credit, the twice-yearly rebate that the carbon market funds on Californians’ utility bills; a UC Santa Barbara analysis, however, found the new subsidy could shrink the credit by as much as $1.7 billion under the proposal.

A separate, bipartisan group including Assemblymember David Alvarez, a Democrat, and Senator Suzette Valladares, a Republican, argues the purpose of the carbon market is to cut emissions, not raise money for programs.

Newsom struck an eleventh-hour deal with lawmakers last year that extended the state’s carbon market through 2045 and set the order of which state programs get auction money first.

Under that plan, California’s high-speed rail project receives $1 billion a year before many other programs. Lawmakers also carved out a $1 billion annual pool for priorities they control themselves, but Newsom in January proposed committing that money to wildfire spending and other programs. 

Last in line are programs lawmakers have spent years building into California’s climate agenda: affordable housing and transit-oriented development meant to reduce driving and climate pollution, rail and bus service, wildfire resilience, clean drinking water in poor communities and neighborhood pollution monitoring. 

Newsom unveiled a revised state budget on May 14 that did not reflect the potential drop in carbon market revenue. Laird, in an interview, said the administration told him the revenue drop wouldn’t show up in the coming fiscal year.

Laird said he planned to “ground truth” that assessment in the weeks ahead. The hit “would still be a big hit the year after this budget year,” he added.

Big Oil’s biggest target

California’s carbon market became a central focus of the oil industry’s lobbying efforts after the air board released a January proposal sharply reducing free pollution permits for industry.

Seven of the 10 highest-spending oil and gas lobbying groups in California pushed state officials on the proposal, state filings show. The petroleum association and Chevron mounted some of the industry’s most aggressive lobbying, pressing lawmakers, the governor’s office, the air board and the California Energy Commission on the plan.

The April plan raised free permits for most industries through 2030 above the January version, but deferred decisions on permits after 2030 to a future rulemaking.

Jim Stanley, a spokesman for the petroleum association, said the group has been pressing lawmakers, regulators and the governor’s office about “the potential consequences of a poorly structured cap-and-invest program.”

Chevron spokesman Ross Allen declined to comment beyond letters Chevron filed with the air board. Chevron initially warned the proposal threatened refinery survival in California. After last month’s revisions, the company is continuing to push for additional protections.

Zach Leary, a lobbyist for the petroleum association, said California needs to go further than even its latest proposal. He wants California to lock in a higher level of free permits permanently. 

“The state is acknowledging that affordability and ambition are not getting along very well right now,” Leary said.

Eddie Ahn, executive director of Brightline Defense, oversees community air sensors in San Francisco’s Tenderloin, Mission and South of Market neighborhoods funded through the state’s community air protection program. That program is among those that could lose state money if carbon market auctions decline under the proposal. 

“If the funding is cut off, then convening groups of people on a monthly basis — that goes away,” Ahn said. “It means frontline communities get disconnected from environmental policy.”

This article was originally published on CalMatters and was republished under the Creative Commons Attribution-NonCommercial-NoDerivatives license.

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On a recent Wednesday morning at the hula mound at Kuhio Beach, Susan Willick moved through clusters of sunbathers and tourists to a man sitting alone on a grassy rise in the middle of Waikiki’s busiest stretch of sand.

Amid the churn of visitors — families spreading towels, surfers heading out — he remained withdrawn and apart.

Willick, an outreach worker with the Waikiki Business Improvement District, knelt beside him and spoke softly. Minutes later, Dr. Louie Gangcuangco of Waikiki Health joined her, crouching to assess the man as Honolulu Police Department community policing officers provided data support.

As Gangcuangco checked on him, Willick began calling for a shelter bed. The man hesitated, then nodded. Within minutes, he agreed to go — first to Waikiki Health, then to a shelter.

It’s seldom this straightforward, but encounters like this underpin a broader strategy reshaping homelessness in Waikiki’s core. Homelessness there has dropped sharply over the past three years, driven by coordinated outreach, medical care and enforcement — even as encampments grow along nearby beaches, where jurisdictional gaps limit the city’s authority.

A point-in-time count on April 16 found 201 people experiencing homelessness across Waikiki and nearby areas, down from 251 in September 2022, according to WBID and the University of Hawaii. The steepest decline came along Kalakaua and Kuhio avenues and Kuhio Beach, where unsheltered homelessness fell about 91%.

The figures, from a biannual count with UH’s School of Urban Planning, are measured against a multi-agency crime reduction and social services strategy launched in September 2022 through the Safe & Sound Waikiki partnership that includes the mayor’s office, police, prosecutors and community groups.

WBID President Trevor Abarzua said the results reflect layered work combining outreach, healthcare and enforcement.

“When we compare the work we are doing with our mainland counterparts … the progress we are seeing is unprecedented,” he said. “A 91% reduction … is a national feat.”

Many of Waikiki’s homeless are transplants who like any other visitors to Hawaii are drawn there first, Abarzua said. WBID will pay for travel home if a vetted support system is in place.

A key piece is WBID’s street medicine partnership with Waikiki Health, which started a year ago and expanded to twice weekly in February. The program augments WBID’s own outreach programs —Willick is a dedicated outreach worker and some of the programs Aloha Ambassadors also provide similar services.

Gangcuangco said the medical program’s success relies on building trust.

“Some are skittish and walk away. But after they see us week after week … eventually it becomes something like ‘Hey, can you call my mom for me?’”

He connects patients to insurance, medication and care — sometimes treating them on the street. “Housing is healthcare — it’s really very important,” he said.

Willick, who lives in Waikiki and has worked there for more than a decade, said coordination has changed outcomes.

“I often refer to myself as a ‘walking referral booth,’” Willick said, adding that she walks weekly with Gang­cuango and the HPD community policing team, and also works with client navigators from The Queen’s Medical Center

“Ninety percent, yes,” she said when asked how often the homeless individuals that they encounter in Waikiki agree to take injectible psychotic medications. “It’s absolutely amazing seeing the personalities change.”

Waikiki resident John Deutzman, who tracks crime data and partners with the Safe & Sound Waikiki initiative, said the improvements in the Waikiki core are visible and measurable.

“I used to call it ‘area 666’ for a reason, and now it’s like heaven,” Deutzman said. “It’s been a dramatic improvement. The numbers don’t lie, and the University of Hawaii is tracking it in a very scientific way.”

Jurisdictional issues

While Zone 2 — Waikiki’s core corridor — dropped to just 10 people, the April count showed increases elsewhere. Zone 1, including Fort DeRussy Beach, rose to 57 from 49 in October 2025. Zone 6, which includes Ala Moana Beach Park outside the WBID boundary, climbed to 49.

“We’ve seen a 25% reduction in the entire radius, but the biggest reductions are in Waikiki’s urban core,” Abarzua said. “The data shows us where people are going, and we adjust strategy based on that.”

HPD Major Paul Okamoto said the increases reflect displacement pressures and limits on enforcement. Fort DeRussy falls under the state Department of Land and Natural Resources (DLNR), leaving Honolulu police without full authority to enforce park closures or camping bans.

A prior city-state right-of-entry agreement expired in 2015. Since then, the beach has become a refuge as enforcement tightened elsewhere.

DLNR said in an email that “Complaints about unhoused individuals sleeping and camping on the beach” prompted the original agreement.

DLNR “receives complaints … on a weekly basis from the public and the hotels, ” and has responded with joint operations.

“Since 2024, DLNR has been part of monthly cleanup operations” with state, city and military partners.

Still, DLNR acknowledges limits,”We consider cleanups successful when people move on … however, (we) cannot force people into shelters or programs. Sometimes they choose to return.”

DLNR communications director Andrew Laurence added that, “Governor Green’s administration remains committed to finding effective long-term solutions to aid individuals dealing with houselessness.”

DLNR is now working with the city on a new right-of-­entry agreement. The push for coordination is reflected not just in policy talks, but in how agencies operate together on the ground.

Officials from the Honolulu Department of Community Services (DCS) said in an email that the department “in coordination with other city departments and state agencies along with the Waikiki Business Improvement District and Safe & Sound Waikiki, continues to focus on compassionate triage navigation efforts that connect individuals experiencing homelessness to shelter, healthcare, behavioral health services, outreach, and housing resources … DCS and its community partners remain engaged in ongoing outreach … in Waikiki and surrounding areas.”

Carrot and stick

Okamoto said enforcement is necessary but not enough.

“We’re just one part of the solution,” he said. “In many parts of the country, enforcement is the only solution, and that doesn’t work — all we see is a revolving door.”

HPD officers work with outreach teams and ambassadors, using enforcement to steer people toward services rather than arrest. Six plainclothes community policing officers are assigned to outreach, with two to three on duty each shift.

“The people we come in contact with in Waikiki … are mostly mentally ill or suffer from substance abuse,” Okamoto said. “We need to get to the root of it… now they have hope.”

“Enforcement is important because it creates a stimulus to help people understand that we cannot live on the street … or live in the parks,” he added.

Okamoto said enforcement is done compassionately but meant to push people toward services.

Deutzman said conditions have improved but repeat offenders remain a challenge. “The weak link now is still the judicial system,” he said. “We do have repeat offenders.”

He said about 77% of those arrested in Waikiki show indicators of living on the street and his research of more than 1,000 misdemeanor/petty misdemeanor convictions in Waikiki shows the median sentence is two days.

Joint operations have reduced visible encampments, with tents at Fort DeRussy dropping to about two from 27 on April 16, Okamoto said.

Waikiki’s approach has drawn national attention, with Abarzua set to speak at a policy conference in Washington, D.C.

Still, he said the Fort DeRussy gap highlights the need for aligned authority. “We have service pipelines … But if you are going to say no … you cannot just sit on the sidewalk or live in the park.”

Deutzman said long-term success will depend on consistent enforcement, community cooperation, and deterrent design measures, such as installing dividers on park benches to prevent sleeping, removing picnic tables to discourage loitering, and using trash cans designed to prevent dumpster diving.

He added that relocating the entrance to St. Augustine by the Sea’s food ministry — from across the Waikiki Beach Marriott to a less-trafficked roadway — has created a less-disruptive environment. However, the change has drawn complaints from some residents of the nearby luxury Foster Tower.

“If you eliminate the hangouts piece by piece, the problem goes down … The problem starts to go away,” Duetzman said.