SAN FRANCISCO – California’s greenhouse gas reduction law already has shaken up the state’s industrial sector, costing it more than $1.5 billion in pollution permit fees.
It’s now poised to hit the pocketbooks of everyday Californians.
Starting next year, the law will force fuel distributors into the same cap-and-trade marketplace as utilities and major manufacturers. The oil industry says it will lead to price increases of at least 12 cents a gallon immediately, while state regulators say any price spikes could vary widely, from barely noticeable to double-digits.
Anticipating angst at the pump, a leading state lawmaker is raising concerns about the uncertainty of the law’s impact on prices for consumer fuels, including gasoline, natural gas, propane and heating oil. Senate President Pro Tem Darrell Steinberg, D-Sacramento, says the state should scrap the plan to put fuel producers under the cap-and-trade provision of the law and instead institute a 15 cent-per-gallon “carbon tax.”
Cap-and-trade sets a limit, or cap, on emissions of heat-trapping gases and requires companies to pay for each ton of pollution they emit, the price of which is determined in an allowance auction. Polluters cutting emissions below the cap can sell their leftover pollution permits, called allowances, to companies needing extra.
The program is a central part of AB32, the greenhouse gas reduction law that passed the Legislature and was signed by former Gov. Arnold Schwarzenegger, a Republican, in 2006. But it is just one of several provisions of the law – such as requiring lower-carbon fuels – meant to prompt Californians to change their transportation and energy consumption habits as the state seeks to reduce emissions of heat-trapping gases to 1990 levels by 2020.
The California Air Resources Board, which designed and implemented cap-and-trade, differs with Steinberg’s assessment and projects no noticeable increase in gas costs after Jan. 1. But the board’s own economic analysis of AB32 from 2010 shows diesel prices could rise from 3 percent to 23 percent, with gasoline prices rising 5 percent to 32 percent, depending on market factors associated with the global warming law’s programs.
The industry and some economic forecasts have predicted a 10- to 12-cent increase in the price per gallon at the pump, and Steinberg says those prices could spike as high as 40.
