What price are Californians paying to fight climate change?

Where greenhouse gases come from

Despite problems with its ‘cap and trade’ carbon market, California has made progress in reducing greenhouse gas emissions. Here are the six main sources of greenhouse gas emissions in the state.
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Despite problems with its ‘cap and trade’ carbon market, California has made progress in reducing greenhouse gas emissions. Here are the six main sources of greenhouse gas emissions in the state.

Californians pay about 15 cents a gallon extra at the pump to fight climate change.

Here’s what they’re getting for their money: continued progress in the effort to curb carbon.

Greenhouse gas emissions fell by 1.5 million tons in California in 2015, state officials announced Wednesday. The reduction was the equivalent of pulling 300,000 cars off the road for a year, according to the California Air Resources Board.

The agency said emissions dropped 0.3 percent compared with 2014, and have fallen a total of 10 percent since 2004. The state is on target to meet 2020 benchmarks established in a landmark climate change law passed in 2006.

The results come as the political debate intensifies about climate change and the cost of taking carbon out of the air. Last week President Donald Trump withdrew from the Paris climate accord, saying the pact was harming the U.S. economy. On Tuesday, in a clear rebuke to the president, California Gov. Jerry Brown signed an agreement with Chinese leaders to work together to reduce carbon.

The China accord emphasizes working together on developing “green technologies” that could boost job creation. Air Resources Board officials, in releasing the latest carbon statistics, were eager to push the notion that economic growth can coexist with carbon reductions.

“These numbers clearly indicate that the state is on track to achieve its 2020 emission reduction goals and that California can grow its economy while continuing to fight climate change,” said Air Board Chairwoman Mary Nichols in a prepared statement. She said California has added 2.3 million jobs since 2010 while reducing unemployment.

Critics said, however, that California’s climate change initiatives have put a dent into economic growth, and the impact will magnify as new, more stringent carbon targets imposed by the Legislature take effect in the coming years.

“There’s been no free lunch,” said Jeremy Carl, an energy specialist at the conservative Hoover Institution at Stanford University.

It starts at the corner gas station. California’s cap-and-trade program requires fuel wholesalers, along with other big industrial firms, to purchase emissions allowances in order to generate carbon. In addition, fuel producers – from giant oil refiners to ethanol manufacturers – must purchase a separate type of credits to comply with the state’s “low carbon fuel standard,” which penalizes companies that spew lots of carbon during the production process.

Those costs get passed along to motorists. The total impact is about 15 cents a gallon, according to figures compiles by UC Berkeley energy economist Severin Borenstein.

The expenses go beyond gas and diesel. Food processors, cement manufacturers and others that are required to participate in the cap-and-trade market have spent more than $5 billion on carbon allowances since the program began in 2012, according to Air Resources Board data. Carl of the Hoover Institution said the requirements placed on businesses have created “substantial dead weight” on the California economy.

Californians also will likely pay some premium on their power bills to fight carbon. Electric utilities must adhere to the state’s “renewable portfolio standard,” which requires them to generate one-third of their power with solar and other renewable sources by 2020. Half of their power must come from renewables by 2030.

Solar and wind power costs have declined significantly in recent years, but the price of traditional gas-fired electricity has dropped even further because of plunging natural gas prices, Borenstein said. So Californians are also paying more for electricity, although he couldn’t put a figure on it.

“It’s definitely more expensive than if we had just stuck with coal and gas,” Borenstein said. Californians pay an average of 15.42 cents per kilowatt hour of electricity, nearly 50 percent above the national average, according to the U.S. Department of Energy.

Californians seem comfortable with the higher costs, at least for now. A January poll by the Public Policy Institute of California found 56 percent of Californians are willing to pay more for electricity to reduce carbon emissions, for instance.

Yet Loren Kaye, who tracks energy issues for the California Chamber of Commerce, said the economic impact of climate initiatives has only begun to hit home. The chamber has been part of a group that – so far unsuccessfully – has been trying to overturn the cap and trade program’s state-run emissions auctions in the courts.

Kaye said California is making good progress toward its original carbon-reduction goals largely because the economic recession depressed industrial activity dramatically. As the economy continues to recover, and carbon targets become more ambitious, Kaye said the costs will hit consumers and businesses more forcefully.

The first climate law, in 2006, required Californians to reduce carbon emissions to 1990 levels by 2020. SB 32, which Brown signed into law last fall, will require carbon emissions to fall another 40 percent by 2030.

Kaye said meeting SB 32’s mandates will cause significant impact to the economy.

“It’s going to be a combination of painful and unknown exactly how it’s going to get done,” Kaye said.

Dale Kasler: 916-321-1066, @dakasler