Going Green Gets More Costly in California

February 27, 2024

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by Rebekah Alvey (Politico's Power Switch) California’s efforts to meet ambitious climate goals are increasing the daily cost of life, testing the state’s political will to quickly transition away from fossil fuels while it copes with the ravages of rising temperatures.

Some Californians’ electric bills have more than doubled in the past decade, as utilities bury power lines to reduce wildfire risk and build out transmission for renewables, writes Wes Venteicher. And, as Anne Mulkern reports, a proposal to boost low-carbon fuels in the state could increase gasoline prices by almost 50 cents a gallon next year.

The result: sticker shock that has some Democratic politicians reconsidering the state’s approach, particularly in an election year.

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California is not alone. Other Democratic states like New York and Massachusetts are grappling with how to transition from fossil fuels without adding financial burdens for ratepayers.

Two climate proposals are now up in the air in California. One would restructure utility bills so that the wealthy pay the most; at least 20 Democratic state lawmakers now want to repeal it after voting for it two years ago. (Though the bill passed, a state agency has yet to put it into a regulation.)

The other is a proposed overhaul of the state’s low-carbon fuel standard. The California Air Resources Board says a rewrite of the standard would push more Californians to switch to electric vehicles and help the state meet its goal of net-zero carbon emissions by 2045.

But a CARB analysis found that the update — which would require deeper cuts in fuels’ allowable planet-warming emissions — could increase prices at the pump by as much as 47 cents per gallon next year and by 52 cents by 2026. Opponents argue the price hikes would hurt California motorists who can’t easily buy or charge an EV, including those in low-income communities and communities of color.

California’s gasoline prices are already among the highest in the nation, averaging $4.64 per gallon of regular gas Sunday.

“This will hit the working class between the eyes,” said Jamie Court, president of Consumer Watchdog, a California-based consumer protection group. “That is unacceptable … even in exchange for what are very noble climate goals.” READ MORE

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Excerpt from E&E News Climatewire: California gasoline pump prices could jump by as much as 47 cents per gallon next year under a proposed overhaul of a state regulation on fuels.

The potential price hike would make California gasoline — already among the most expensive in the nation — even costlier, likely putting a greater burden on low-income motorists and testing residents’ appetites for more climate action.

State officials say the overhaul of the low-carbon fuel standard is necessary to help meet California’s ambitious climate goals, even as they disputed how much the rule rewrite would increase pump prices.

But in a sign the proposal could be revised, the agency in charge of the regulation postponed a possible vote on it that had been planned for March.

That was done to “build in more time” to process feedback on the rule rewrite, said Dave Clegern, spokesperson at the California Air Resources Board. No new date has been chosen.

One big concern of critics is that the move would hurt motorists who don’t have the money to easily buy an electric vehicle and avoid the potential gas price hike.

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The potential price increase — documented in a CARB analysis — stems from a proposed update to California’s low-carbon fuel standard, an initiative the state implemented in 2011 to reduce climate pollution.

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The proposed update would require deeper cuts in fuels’ allowable greenhouse gas emissions.

That likely would force fuel producers who can’t meet the standard to buy more credits. If those producers pass along the added costs, it could increase fuel prices across the board — from diesel to jet fuel to regular gasoline, the analysis said.

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Even larger gasoline price hikes could come later. Lowering the carbon intensity limit 90 percent by 2045 — as the regulation rewrite proposes — could add $1.83 per gallon to the price of gasoline by 2041, according to the agency report.

Other fuels would see similar price increases. Diesel prices could surge 59 cents more per gallon next year, and $2.40 per gallon by 2041. Jet fuel for intrastate flights would rise 44 cents next year and $1.94 per gallon by 2041.

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The CARB says a rewrite of the low-carbon fuel standard would put the state in a better position to meet its climate targets.

Those include reducing greenhouse gas emissions at least 40 percent below 1990s level by 2040, and hitting carbon neutrality by 2045.

Clegern, the spokesperson with the CARB, said the price hikes might not be as bad as the agency’s own September 2023 analysis found. He described the figures in the report as “not so much inaccurate as incomplete and outdated.”

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There isn’t a clear relationship “between fuel prices and LCFS credit prices,” he wrote in an email, “so claiming that any increase in stringency in LCFS will increase fuel prices isn’t supported by history/facts.”

To underscore that point, Clegern included a graph showing monthly low-carbon fuel standard credit price averages and California gasoline prices between 2013 and 2022. The prices do not move in tandem, it showed.

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Higher fuel costs could have another effect, too — pushing more California drivers into EVs. That aligns with other California efforts to boost EV use. State law now bans sales of new internal combustion engine vehicles after 2035.

“As Californians transition away from fossil fuels and into more energy efficient [zero-emission vehicles] and lower carbon fuel alternatives, CARB staff estimate that the fuel costs Californians pay to travel also will decrease, resulting in billions of dollars in savings on fuel costs each year,” the agency wrote in a December analysis of the proposed changes to the low-carbon fuel standard.

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Alternative fuels have flourished as part of it.

Renewable diesel earned 36 percent of program credits in 2022, the most recent year full data was available. Electricity projects won 24 percent, followed by biomethane at 16 percent and ethanol at 14 percent.

Credit prices have fallen significantly under the current regulation, in part because a surge in production of biofuels meant more projects are earning credits. That’s made those credits less valuable in the marketplace, which means less financial support for alternative fuel developers.

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Higher gasoline prices will hit economically disadvantaged communities harder, even if over the long term they see transportation cost savings, the CARB financial impact analysis said.

That’s due in part, it said, because “individuals living in these communities traditionally spend a larger share of their income on transportation fuels.”

Those same people, it said, also may have a tougher time accessing ZEVs quickly, and therefore “would rely on more expensive fossil fuels for longer.“

Amelia Keyes, legal fellow at Communities for a Better Environment, agreed, saying that those residents might live in apartments or other homes lacking ZEV charging options.

“Electric vehicles and zero-emission vehicles are not widely accessible in California’s low-income communities and communities of color … especially compared to high-income communities in the state,” she said in an interview.

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A California Energy Commission report from November said that more than 77 percent of the credits issued under the program went to biofuels in 2021. Those had a total value of $2.89 billion.

Geoff Cooper, president and CEO at the Renewable Fuels Association, a trade group for makers of ethanol, said growth is surging among electricity programs under the rule. In the first nine months of last year, he said, 39 percent of credits went to renewable diesel, 11 percent to ethanol, 7 percent to biodiesel and 24 percent to electricity. A variety of other options made up the balance.

“What this boils down to is, do you want a program that reduces carbon emissions from transportation?” he said in an interview. “Or do you want a program that mandates electric vehicles, and those are two very different things?” READ MORE

Excerpt from Politico Pro: UC Berkeley economics professor Severin Borenstein’s name has become synonymous with California's interminable excavation of why its gasoline prices are so high.

Borenstein coined the term “mystery gasoline surcharge” in 2017 to describe the remaining difference between gas prices in California and other states after accounting for the $1-per-gallon effect of state taxes and fees.

That's made him a thought leader as Gov. Gavin Newsom continues the state's investigation into its gas price spikes. The inquiry, which has been going on for a year, might culminate in a decision from state regulators to impose a cap on refiners’ profits — and is starting to attract opposition from neighboring state officials.

We asked Borenstein how it’s going and what he sees coming from the effort that is increasingly coming under fire even outside the state’s borders.

This conversation has been edited for length and clarity.

How did you become the go-to guy on this topic, anyway? READ MORE