California Gas Prices Increase With State’s Cap and Trade Rules
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But consumers probably aren’t noticing the impact. At least not yet.
LOS ANGELES — Gas prices have plummeted across the country in recent weeks and California is no exception. Except, in one significant way it is. Camouflaged by the steeper overall drop in prices, the cost of gasoline in the Golden State has ticked up this week in response to the state’s cap-and-trade rules.
As The Sacramento Bee reports, the rise in California fuel prices is part of the state’s 2006 climate change law, which requires larger corporate enterprises to purchase carbon offsets to compensate for the level of greenhouse emissions they produce.
Under the law, companies are given a set allowance of greenhouse emission levels. If they exceed those levels, they are required to purchase credits for additional carbon levels. The market-based approach was first produced in a rare alliance between Republicans in the U.S. House and environmentalists in the early 1990s but has since fallen out of favor with most national lawmakers.
Proponents of the approach say it allows businesses to continue to grow while paying a reasonable fee, rather than having development brought to a half by inflexible laws or regulations. In addition, the carbon taxes are micro-targeted to those directly producing the emissions, rather than imposing a broad based set of fees on everyone.
Still, opponents of the law have warned that those carbon offsets could generate a major spike in California’s gas prices. But according to the fuel price aggregator GasBuddy.com, prices have only gone up by two cents since the carbon trade requirement went into effect on Jan. 1.
“I think [gas] station margins will be affected more than consumers,” GasBuddy senior petroleum analyst Patrick DeHaan told the Bee. “Over the next week, you might be looking at 6 to 10 cents a gallon.”
That sentiment was echoed by Air Resources Board spokesman Dave Clegern, who told the paper:
“We don’t see them going up more than a dime, at the most, based on any current cap-and-trade compliance costs. We won’t speculate on fuel price projections, but the high-end numbers would require the cost of carbon allowances to increase more than six times beyond where they are now.”
California already has some of the nation’s most expensive gasoline, trailing only New York, Alaska and Hawaii. But most motorists probably did not notice the uptick in prices over the last few days when weighed against the far larger overall drop in prices compared to one year ago today.
The Air Resources Board is one of several organizations that make carbon credits available for sale to companies on the open market. It plans to make more credits available to offset increased demand, according to the Bee.
California fuel prices are likely to continue to marginally rise in the coming years even if fuel prices remain static, as the cut off in the state’s cap-and-trade law will slightly decrease annually over the next several years, meaning that companies will be required to purchase more carbon credits.
Gov. Jerry Brown, sworn in on Monday for his fourth term in office, has called on the state to increase its use of renewable energy sources to help ease the impacts of climate change. “We must demonstrate that reducing carbon is compatible with an abundant economy and human well-being,” the governor said, according to The Associated Press.
A portion of the revenue generated from the California’s cap-and-trade program is being used for the construction of the state’s ambitious high-speed rail project, which is getting started this week.
(Image by Igor Sh / Shutterstock.com)