California Democrats are planning to send the state’s astronomical gasoline prices soaring even higher by strengthening a pair of decade-old climate policies.
The California Air Resources Board (CARB), whose most senior members are appointed by Governor Gavin Newsom, is considering amending two regulations — the Low Carbon Fuel Standard (LCFS) and the cap-and-trade program — to help the state meet its carbon-reduction goals. But in the process, gas taxes will increase significantly over the next two years and beyond.
Gas prices could increase by as much as 47 cents per gallon by 2025 and by 52 cents by 2026, according to CARB’s September 2023 report on the potential impact of the proposed LCFS amendments. Gas taxes could surge by as much as $1.15 per gallon on average from 2031 to 2046, hitting a peak of $1.83 in 2041. California drivers currently pay about 12 cents per gallon in additional gas taxes because of the LCFS program, per the report’s projections.
Created in 2007 by Governor Arnold Schwarzenegger, LCFS presently seeks to reduce greenhouse-gas emissions and overall air pollution from transportation fuels by 20 percent by 2030. If the regulation is amended in accordance with Democrats’ plans, that goal would be revised upward to a 30 percent reduction by 2030 and a 90 percent reduction by 2045. The amendment would also eliminate an exemption for fossil jet fuel used for aircraft flying within the state.
While it would likely hasten the transition toward electric vehicles as regulators intend, the amendment is also expected to have a net negative impact on the state economy.
California is facing a $45 billion budget deficit for fiscal year 2024 and a $30 billion shortfall the following fiscal year, according to the latest legislative budget proposal.
The state already has some of the highest gas prices in the U.S., with a regular gas price average of $5.04 per gallon as of June 3, according to the American Automobile Association. California’s diesel-price average of $5.21 per gallon is also at a record high and second only to Hawaii’s, which takes the top spot with $5.49 per gallon.
Like regular gas, diesel prices are expected to increase significantly because of an updated LCFS rule. CARB projects that customers will pay roughly 59 cents per gallon in taxes by next year and 66 cents per gallon the following year. In the long term, the climate program estimates that diesel could reach as high as $2.40 per gallon in 2041.
An employee working for the City of Los Angeles told National Review that he spends about $480 per month making the daily 80-minute commute to his office.
“A lot of people in my area commute into downtown, and it kind of is what it is,” the man said resignedly.
California’s cap-and-trade program could also exacerbate the price hikes. Introduced in 2012, the state’s cap-and-trade policy sets an emissions limit, or cap, that decreases each year, incentivizing companies emitting greenhouse gases to invest in clean, alternative energy. Companies that surpass the cap are taxed, while others that reduce their emissions can trade allowances with those that have a higher pollution rate.
Unlike its LCFS assessment, CARB’s April report on the cap-and-trade program’s proposed amendments failed to include any potential costs. All 26 Republican members of the California assembly and senate sent a joint letter to CARB, asking the board’s chairwoman Liane Randolph why this was the case.
“Instead of acknowledging the potential costs as had been done in previous assessments, CARB’s [Standardized Regulatory Impact Assessment] purposely avoids showing consumers what to expect,” the letter states. “Why is an honest projection of the impact of your policies on consumers now outside of your scope of work?”
Though CARB didn’t disclose projected costs, the state government calculated that for every $10 increase in the cap-and-trade allowance prices results in an additional 9 cents per gallon of gasoline. “So, following this practice, if the allowance price is $50, consumers would pay about 45 cents per gallon of gas,” the lawmakers wrote. As currently constituted, the cap-and-trade program adds about 30 cents per gallon to Californians’ gas bills, they noted.
Republican state senator Janet Nguyen, one of the letter’s signatories, described the future gas increases as a “tax on a tax” that will simultaneously raise prices for food and delivery of goods. In the process, businesses would be forced to shut down, and homeowners would be forced to leave California.
Business has been on the rise in California since the Covid-19 pandemic, which caused a 7 percent drop in new business openings. Between 2021 and 2022, new businesses increased by 21 percent.
Residents have been leaving the state in droves, however. Net migration has been in the negative since 2020, though the population has been on the mend recently. California’s population grew by more than 67,000 in 2023 after 700,000 people had moved out of the state over the previous three years.
Nguyen said the desired outcome of both climate policies — widespread use of electric vehicles — will only further harm California’s consumers because the state doesn’t have the infrastructure in place to support the transition and most people can’t afford to buy electric cars anyway.
Moreover, California residents are facing unwarranted price increases in electricity consumption.
On May 9, the California Public Utilities Commission (CPUC) voted to raise consumers’ monthly utility bills by tacking on a mandatory fee of $24.15 in exchange for lowering the rate per kilowatt hour. With 30–32 cents per kilowatt hour, California currently has the second-highest average electricity rates in the U.S. after Hawaii.
The fixed charge will affect about 11 million customers of investor-owned utilities, including Pacific Gas & Electric, Southern California Edison, and San Diego Gas & Electric, once it goes into effect in late 2025 and early 2026. It would not affect customers of the Los Angeles Department of Water and Power or other municipal utilities.
The change, which the California senate Republican caucus urged the commission to reject earlier this month, is part of the state’s overarching climate effort in encouraging customers to buy electric vehicles and replace gas appliances in their homes.
Democratic leaders in California are working toward their goal of banning the sale of gas- and diesel-powered vehicles by 2035, as well as outlawing the construction of new gas furnaces and water furnaces by 2030.
“Our electricity rate design has to evolve to meet this moment in time,” said CPUC president Alice Reynolds. “It’s an important step to meet our decarbonized future. It helps us get to this future, the future we know we need because it makes it more attractive for customers to electrify.”
CPUC’s commissioners are appointed by Newsom, who in 2022 signed sweeping energy legislation requiring the commission to come up with a new fixed charge for utility bills. The legislation was enacted with limited public discussion.