Communities for a Better Environment (CBE) has filed a lawsuit against the California Air Resources Board (CARB), challenging the agency’s recent amendments to California’s Cap-and-Invest program. The suit alleges that CARB violated the California Environmental Quality Act (CEQA) by approving significant program changes without adequately analyzing their environmental, public health, and community impacts. As a remedy, the plaintiffs are asking the court to set aside CARB’s approval of the amendments, vacate the associated environmental review, and halt implementation of the changes until CARB completes a CEQA-compliant review process.

At the center of the dispute are revisions adopted by CARB in May 2026, including expanded industrial assistance provisions and the creation of a new Manufacturing Decarbonization Incentive (MDI). CBE contends that these changes were introduced late in the rulemaking process and were not fully evaluated in CARB’s environmental impact analysis. According to the complaint, the amendments could weaken emissions reduction incentives, increase pollution burdens in environmental justice communities, and reduce revenue for programs funded through the Greenhouse Gas Reduction Fund (GGRF).

The lawsuit further argues that CARB failed to adequately respond to public comments, evaluate reasonable alternatives, and recirculate environmental review documents after substantial modifications were made to the proposal. CBE maintains that these procedural deficiencies deprived decision-makers and the public of critical information needed to assess the amendments’ impacts. The case could have significant implications for the future administration of California’s flagship climate program.

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