Over the last several years California agencies have adopted a variety of regulations which are aimed at reducing carbon emissions from state stationary and mobile sources. These regulations are commonly reference as “AB 32” or “GHG” regulations.
This web page examines the scope of regulations that influence motor fuels consumption and price in this state. There are three basic elements of regulations, all under the jurisdiction of the California Air Resources Board (CARB), that directly affect motor fuels (click each link for more information):
The short story for fuel consumers is that fuel costs will increase due to each of these programs. The costs will be additive for each program. A study recently prepared indicates the following estimates of additional cost for each program element:
Stationary source Cap & Trade – 2-8¢/gallon
Fuels Under the Cap – 14-75¢/gallon
Low Carbon Fuel Standard – 33¢-$1.00/gallon
These costs will roll into the price over time, as each regulatory program matures, and CARB increases carbon credit price by reducing available carbon credits.
Special Note on Fuel Taxation: The costs from these various programs are highly likely to be included in the overall fuel price. However, these costs are not “officially” taxes, so rules that apply to special tax circumstances (such as tax excise exemption for off-road fuel use) do not apply to costs attributed to GHG regulations. There is no exemption for the GHG imposed fuel obligations, from the obligated parties down to the final customer. That being said, the state sales tax, applied to the full cost of goods, will be applied to any increased costs of fuel to the customer.
Significant attempts have been made to try and delay various aspects of these programs, without success. Therefore, customers should prepare themselves for increasing, California-only, fuel prices due to the costs of these programs on the fuel manufacturing and distribution industries. Below are links for further information on groups that are remaining active in the GHG fuels issues, debates, and communications.