Statement on California Senate Pro Tem Darrell Steinberg's Carbon Tax Proposal

Sen. Steinberg deserves credit for his transparent effort to address the the true cost of California’s climate change policies.  By acknowledging that the state’s cap-and-trade regulations for fuels are about to have a significant impact on the cost of fuel for consumers, Sen. Steinberg has proposed a transparent carbon tax as an alternative.

WSPA members have long recognized California’s desire to address climate change through AB 32 regulations and have expressed our concerns repeatedly about the impact some of those regulations will have on fuel markets.  We have not, however, taken a formal position on a specific carbon tax proposal.

Up to this point, California’s AB 32 climate change regulations have imposed major new costs on businesses and generated a significant amount of new revenue for state government.  But the impact on consumers from those costs have been difficult to quantify.

This is about to change.  Next year, a little known provision of AB 32 takes effect that will be obvious and costly to everyone who purchases gasoline or diesel fuel.  Beginning on January 1, 2015, fuel suppliers will be required to purchase allowances from the state for every gallon of gasoline and diesel sold in California.  At current carbon allowance prices, that requirement is expected to add a minimum of $2 billion per year to the cost of providing fuels to consumers – or approximately 12 cents per gallon.  Cost increases of this magnitude cannot be readily absorbed by fuel providers, and are likely to be reflected in prices paid by consumers, and be similar to a gas tax increase in their impact.

Sen.  Steinberg’s carbon tax proposal is similar in its anticipated impact on influencing behavior but, as he said, is a broader, more stable and more flexible approach.  We applaud his candor.  The state’s regulatory agencies should be equally candid about the coming gasoline and diesel cost shock.


Statement by WSPA President Catherine Reheis-Boyd