FOR IMMEDIATE RELEASE
July 1, 2025
Contact: Tryn Brown, tbrown@buildingdecarb.org
California preserves neighborhood decarbonization program funding
The 2025-26 California budget maintains funding for neighborhood-scale clean energy pilot projects, but further funding is needed to expand clean, affordable cooling and protect Californians from worsening extreme heat and pollution.
SACRAMENTO, CA – The California Legislature and Governor Gavin Newsom reached a budget agreement that preserves the $1.65 million allocation to launch a groundbreaking pilot program through the California Public Utilities Commission (CPUC) to advance neighborhood-scale building decarbonization. This program will help protect Californians from extreme heat, advance long-term energy affordability, and support the state’s 6 million heat pump and emissions goals by 2030. But, sustained funding for large-scale building decarbonization is needed to ensure a healthier, safer, and more climate-resilient future for California.
“Large-scale building decarbonization solutions are crucial for working-class Californians who need healthy, climate-resilient homes,” said Beckie Menten, California Director for the Building Decarbonization Coalition. “We thank the Administration and state leaders for this commitment to neighborhood decarbonization to help our communities access clean cooling and protection from climate pollution. Forty percent of California households cannot afford to electrify their homes, and stronger funding for buildings is essential to ensure our low- and moderate-income households aren’t left behind.”
Senate Bill (SB) 1221, which was signed into law in 2024, authorizes neighborhood decarbonization pilots from gas utilities in California, enabling responsible utility investments to electrify entire neighborhoods and provide heat pumps and home upgrades instead of replacing expensive gas pipelines. Neighborhood decarbonization can help reduce household energy bills in the long term by saving millions of ratepayer dollars on avoided gas infrastructure projects, support the state’s workforce with high-road jobs, and ensure that the benefits of clean energy reach the communities that need it most. Highly efficient heat pumps are an affordable climate solution that can provide cooling and heating in one system, helping to save California households an average of $260 per year on energy bills.
Currently, about a quarter of Californians lack access to cooling, and extreme heat events—which caused nearly 4,000 deaths between 2010 and 2019—are growing in severity and frequency. Extreme heat affects over 30 million Californians, primarily in low-income and frontline communities, and is projected to become the state’s seventh leading cause of death by 2050, with more than 11,300 deaths annually. Neighborhood decarbonization is critical to help mitigate the impact of rising temperatures and create climate resilience.
Long-term investments in building decarbonization will also put California back on track to reach its climate and heat pump targets. To achieve Governor Newsom’s goal of carbon neutrality by 2045, the state must upgrade nearly 14 million homes with over 27 million heat pumps, requiring approximately $10 billion in residential funding through 2040. The state’s current rate of heat pump installations is fewer than 200,000 per year, and it would need to quadruple that rate annually to reach 6 million by 2030. Adequate funding for heat pump installations could upgrade hundreds of thousands of homes and cut millions of tons of carbon emissions each year.
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The Building Decarbonization Coalition (BDC) aligns critical stakeholders on a path to transform the nation’s buildings through clean energy, using policy, research, market development, and public engagement. The BDC and its members are charting the course to eliminate fossil fuels in buildings to improve people’s health, cut climate and air pollution, prioritize high-road jobs, and ensure that our communities are more resilient to the impacts of climate change.