Changes to California’s Low Carbon Fuel Standard will cost families dearly | Opinion
The California Air Resources Board should go back to the drawing board rather than expand a policy that would raise gas prices without meaningfully lowering emissions.
At issue is an upcoming vote where this group of unelected bureaucrats will update California’s Low Carbon Fuel Standard, effectively driving prices at the pump even higher. Worse yet, the California Air Resources Board is refusing to be transparent about the effect its decision will have on consumers.
The Low Carbon Fuel Standard requires reductions in the carbon intensity of core transportation fuels sold in California. It will become progressively more stringent over time. These mandates require producers to invest substantial sums of money into refining costlier special blends of fossil fuels — ergo, the Low Carbon Fuel Standard increases gas prices.
As the Kleinman Center for Energy Policy at the University of Pennsylvania explains, “if (Low Carbon Fuel Standard) credit prices reach their maximum allowed levels, as has occurred in the past, then retail gasoline price impacts could be $0.65 per gallon in the near term, $0.85 per gallon by 2030 and nearly $1.50 per gallon by 2035.”
Even the state estimates that the Low Carbon Fuel Standard imposes costs on California drivers. In its weekly report breaking down the costs of a gallon of gasoline, the California Energy Commission estimated that “environmental programs” added $0.54 in costs for the week of October 14, 2024 (the latest data as of this writing).
Put differently, the average retail price of gasoline in California could have been $3.89 a gallon rather than $4.43 for the week of October 14. Assuming weekly consumption of 15 gallons of gas, the annualized costs of these environmental programs are over $420 annually for each California family.
Amazingly, in response to concerns about the update’s impact on gas prices, a California Air Resources Board spokesperson claimed “there is no historical relationship between (Low Carbon Fuel Standard) credit prices and what consumers pay at the pump,” giving the false impression that the standard does not raise gas prices.
Making matters worse, the costs captured by these estimates are an incomplete accounting of the Low Carbon Fuel Standard’s impact. Following his 2024 special session to increase gas reserves, Gov. Gavin Newsom crowed that: “(P)rice spikes have cost Californians billions of dollars over the years, and we’re not waiting around for the industry to do the right thing — we’re taking action to prevent these price spikes and save consumers money at the pump.”
As the Pacific Research Institute argued previously, these price spikes are unique to California and are caused by the overly burdensome taxes and regulations that the state imposes, including the Low Carbon Fuel Standard. Thanks to these costs, California has been losing refining capacity.
Citing U.S. Energy Information Administration data, S&P Global noted “California’s refining capacity has been tightening for decades.” Immediately following the governor’s signing of the new mandate, Phillips 66 announced its Los Angeles refinery would be shut down, further reducing capacity.
The lost refining capacity and California’s unique blend are responsible for the state’s vulnerability to price spikes. A complete accounting of the Low Carbon Fuel Standard’s adverse impacts must include these burdens as well.
Policies such as the Low Carbon Fuel Standard fail to achieve their environmental goals while imposing large economic costs on Californians due to the fundamental limitations of current alternative technologies. Rather than implementing ineffective policies that impose large costs on consumers, policies should incentivize the private sector to invest in broad-based innovation that does not pick winners or losers.
As an example, the state could temporarily exempt from corporate taxes the income earned from developing economically viable lower- or zero-emission technologies. Since the relative rate of return from investing in low-emission technologies would be higher, more investment would be devoted toward overcoming the limitations that are thwarting current efforts to address the problem.
Ultimately, creating positive market-neutral incentives to develop lower- or zero-emission technologies will improve the state’s affordability while more effectively addressing the problem of global climate change.
In the meantime, demanding greater transparency of the California Air Resources Board will help voters understand the decisions being made on their behalf in Sacramento.