California May Tweak Climate Program That’s Pushing up Gas Prices
by David R. Baker (Seattle Times) … Last week, the California Air Resources Board issued proposed changes that would delay some of the program’s targets, giving fuel providers more time to reach them. Instead of needing to cut the carbon intensity of their fuels 10 percent by 2020, the companies would need to reach that level in 2022.
However, the changes — to be discussed in April at a meeting of the air board — would extend the program through 2030, setting new, tougher targets for the companies to meet in 12 years. By 2030, fuel providers would need to cut carbon intensity by 20 percent, compared with 2010 levels.
“We’re strongly signaling that we’re going to be using this policy through 2030,” said Sam Wade, chief of the air board’s transportation fuels branch. “We’re strengthening the signal in the long run. In the short run, we’re making a minor course correction, I’d call it.”
Oil companies and business groups have fought the standard since it went into effect in January 2011.
They have, at times, predicted it could send gasoline prices soaring by more than $1 per gallon. They also have called it redundant, because oil refineries are also covered by the state’s cap-and-trade system. Even before the recent increase, California has consistently had some of the highest gasoline taxes in the country.
Oil companies can comply by blending more biofuels into their products, particularly advanced biofuels such as renewable diesel and cellulosic ethanol. Or they can buy credits from companies that sell fuels with lower carbon intensity than the target. For example, utilities whose customers use electricity to charge their electric cars generate credits the oil companies can buy. So, for that matter, do Tesla and other companies that operate networks of charging stations.
The price for those credits, however, started climbing this past year.
For much of June and July, the price of a credit hovered around $75. It started rising in August, and by mid-February, it averaged $138, with individual trades as high as $150 per credit. The program caps credit prices at about $200 per credit, and the board’s own analysis predicted hitting the cap in 2020.
An online price calculator from the Air Resources Board suggests that the effect on retail prices now should be about 5 cents per gallon. A separate estimate from UC Berkeley energy economist Severin Borenstein put the impact at 7 cents in January.
In 2017, companies had to cut the carbon intensity of their fuels 3.5 percent. By 2019, that figure jumps to 7.5 percent. READ MORE