California just rolled back a landmark environmental policy. Here's what it means.

The landmark California environmental legislation that lawmakers have voted to revise will allow for crucial infrastructure to take place within the state, some environmental policy experts told ABC News.

On Monday, state lawmakers passed a trailer budget bill that will now exclude certain construction projects from being subject to the California Environmental Quality Act (CEQA), such as water system upgrades, advanced manufacturing facilities -- like EV plants -- and wildfire fuel breaks.

Signed into law in 1970 by then-Governor Ronald Reagan, CEQA requires developers to consider environmental issues, traffic, air pollution and noise when proposing a new building project. Individuals and groups can challenge a project if they believe it violates the law.

However, the revisions could have positive benefits for "desperately needed infrastructure," like infill housing -- or new construction of housing on vacant lots within established neighborhoods -- water system improvements in under-resourced communities and daycare centers, Alice Kaswan, a professor who specializes in climate change and environmental justice at the University of San Francisco School of Law, told ABC News.

"The CEQA exemptions could start to chip away at the many obstacles these investments encounter, and existing local and state regulations should limit potential adverse impacts," Kaswan said.

In 2023, California Gov. Gavin Newsom vowed to reform CEQA after a Bay Area court blocked the construction of a student housing complex at the University of California, Berkeley.

The California Supreme Court issued a unanimous ruling in 2024 to allow construction for the 1,200-unit complex to begin.

Some kind of reform to CEQA has been "long overdue," David Victor, a professor of innovation and public policy at the University of California, San Diego, told ABC News.

"The State needs to figure out how to build things, and Democrats need to learn how to say 'yes' to investment," he said.

Unlike the National Environmental Policy Act, CEQA's federal counterpart, the California state law has been subject to "substantial legislative tinkering" for years, mainly to streamline the process for certain types of activities, Deborah Sivas, a professor of environmental social science at Stanford University, told ABC News.

"In the last several years, most of that tinkering has been in connection with housing development, although there is little empirical evidence showing that CEQA itself is actually a substantially contributing to the housing crisis," Sivas said, adding that she is not convinced that the changes will substantially alter the outcome of California's housing crisis.

The trailer bill will now provide additional CEQA exemptions for rezoning that complies with state-approved housing elements in local jurisdictions, Sivas said. This will help move along the planning and zoning process, where the state has tried to incentivize urban housing development and disincentivize local foot-dragging on new housing projects, she said.

More housing everywhere would make existing properties appreciate less, which could impact homeowners since homes are the principal financial asset for many families, Michael O'Hare, professor emeritus of public policy at the University of California, Berkeley, told ABC News.

Property owners who oppose the building of more housing have been using CEQA to oppose the builds, O'Hare said.

"It's not politically acceptable to seem to oppose new housing for reasons of greed, so the opposition takes morally comfortable stands, like environmental concerns and abstractions like 'neighborhood character,'" O'Hare said.

The bill goes further by also exempting or streamlining infrastructure projects, including high-speed rail; community water and sewer systems; certain types of daycare centers, health clinics and food banks, wildfire risk reduction projects; and "advanced manufacturing" located in industrial zones, Sivas said.

However, the particular approach of exempting some kinds of projects without fixing the whole of CEQA could be too blunt and haphazard, Victor said.

"But its most important impacts, perhaps, will be in forcing a more systematic and practical look at CEQA reform," he added.

Ideally, policymakers should be "smart enough" to figure out how to have both environmental quality and enough housing, O'Hare said.

Where the rollbacks could cause some harm is the provision for the exemption for advanced manufacturing facilities, Kaswan said.

"The opposition seems to be centered around the exemptions for high-speed rail and advanced manufacturing, which is quite broadly defined," Sivas said, adding that environmental groups and labor interests are "unhappy" about those two exemptions.

Opposition groups also objected to the method used by the California Legislature to pass the legislation -- including quite substantive changes in a budget trailer bill, "similar to what Congress is trying to do with the budget reconciliation package," Sivas said.

However, in Congress, the general rule is that non-fiscal policy changes cannot be included in that process, whereas California has no similar rule, Sivas said.

Because the advanced manufacturing exemption applies only in areas zoned for industrial use, it could steer new plants to these areas and intensify the disproportionate burdens people living there already experience, Kaswan said.

"State policy-makers appear to have bought into a narrow 'jobs versus environment' mentality, rather than prioritizing clean energy and technology pathways that would avoid past environmental injustices," Kaswan said.

The new exemptions do not apply to "oil and gas infrastructure" or "warehouse distribution centers" larger than 50,000 square feet, Sivas said. "Natural and protected lands" are also excluded from the exemptions.

"I am hopeful that we can make progress on housing and restart the high-speed rail process, but I am also concerned that CEQA is the primary way that disadvantaged urban communities can voice concerns about project impacts, and this legislation could reduce their ability to participate meaningfully in the process," Sivas said. "We will have to wait and see how all of this sorts out over the next couple of years."