The California Alternative Energy and Advanced Transportation Financing Authority was established by Chapter 908, Statutes of 1980, as the California Alternative Energy Source Financing Authority, to "promote the prompt and efficient development of energy sources which are renewable or which more efficiently utilize and conserve scarce energy resources." Recognizing the importance of developing a secure energy future to protect the environment and ensure economic stability, the intent of the legislation was to promote energy sources designed to reduce the degradation of the environment. The Authority later became the California Alternative Energy and Advanced Transportation Financing Authority (CAEATFA) in 1994, when the statute was amended to include development and commercialization of advanced transportation technologies.

CAEATFA consists of five members: the State Treasurer, who serves as the chairperson of CAEATFA, the State Controller, the Director of the Department of Finance, the Chairperson of the State Energy Resources Conservation and Development Commission (the California Energy Commission), and the President of the Public Utilities Commission.