California plans to overhaul one of its cornerstone climate programs 鈥� a decision that could push gasoline prices higher in a state where residents already pay the most at the pump.
On Nov. 8, just three days after marked by concerns over rising costs, the California Air Resources Board will hold a public hearing and vote on
The , which has existed since 2011, is a $2-billion credit trading system that requires fuels sold in California to become progressively cleaner, while giving companies financial incentives to produce less-polluting fuels, such as biofuels made from soybeans or cow manure. The standard has helped the state phase out fossil fuels to clean up air pollution and cut climate-warming gases.
The concern over gas prices has been since last December, when the plan was released. Much of the agency鈥檚 overhaul, however, has focused on highly technical disputes between oil companies, dairy farms, biofuel and other lower-carbon fuel companies, and environmental justice advocates who say the program maintains polluting industries.
But as the election has approached 鈥� with costs and affordability of top concern for voters 鈥� Republicans in California鈥檚 state Legislature have , saying they could further drive up gasoline prices. They also have criticized Gov. Gavin Newsom, who recently , for not doing enough to cut gas prices. On Thursday, California鈥檚 House Republicans also urged a delay in the air board plan.
The proposal to strengthen the fuel standard has fueled a recent outcry from the public: More than earlier this month wrote to the air board, protesting the amendments due to the potential impact on gas and diesel prices.
鈥淎re you kidding?鈥� Rich Marotti of Ventura County wrote, adding a profane adjective. 鈥淕as is already more expensive in CA than HI. That鈥檚 absurd鈥ny action taken to increase gas prices is an attack on California citizens.鈥�
The gas price revolt over the fuel standard underscores how the for addressing can come under fire if it threatens to make fossil fuels more expensive as the state tries to phase them out by 2045. Californians paid an average of on Thursday.
Energy experts and air board staff say the fuel standard raises the cost of producing high-polluting gasoline and diesel for the California market. Those costs can drive up prices at the pump when companies pass them on to their customers, although it鈥檚 difficult to predict exactly by how much.
鈥淕as is already more expensive in CA than HI. That鈥檚 absurd鈥ny action taken to increase gas prices is an attack on California citizens.鈥�Rich Marotti, a Ventura County resident
The air board that fuel producers typically pass on 8 to 10 cents per gallon of costs to consumers because of the program. Estimates for how the air board鈥檚 proposed changes in the program would affect gasoline prices vary.
In an released last year, the air board projected that the proposed new standard could potentially raise the per-gallon price of diesel by 59 cents and for gasoline, 47 cents, in 2025 鈥� numbers that have turned the policy debate into a political flashpoint.
Air board officials have since disavowed that estimate, that the analysis 鈥渟hould not be misconstrued as a prediction of the future credit price nor as a direct impact on prices at the pump.鈥�
, released earlier this month by the University of Pennsylvania鈥檚 Kleinman Center for Energy Policy, predicted that the program鈥檚 changes could increase the cost of gas by 85 cents a gallon through 2030.
told CalMatters in an exclusive interview that the heated debate prompted her to speak out ahead of the board鈥檚 vote, something she typically doesn鈥檛 do.
In the interview, Randolph emphasized that the fuel standard is critical for meeting the state鈥檚 targets to slash greenhouse gases and use of fossil fuels. She said the proposed changes are designed to prevent California from falling behind on its ambitious climate goals, which are , according to experts.
At the heart of the debate, Randolph said, is a fundamental question about California鈥檚 climate future: How quickly can we shift from fossil fuels to a zero-emission future?
The air board鈥檚 changes by 558 million metric tons through 2046, according to its initial economic assessment. That鈥檚 equal to what more than 120 million cars . (Experts say that may be an overstatement because the carbon footprint from some renewable diesel such as soybeans might be more than reported.)
鈥淭he Low Carbon Fuel Standard is one of California鈥檚 most significant and most effective climate programs,鈥� Randolph told CalMatters. 鈥淚t鈥檚 a market program that comes with a mandate to fuel producers to reduce their carbon intensity over time. So the reason we undertook the update of this program is because we wanted to make sure that the ambition of the program was aligned with our goals.鈥�
Randolph said the fuel standard has been a crucial driver in reducing pollution from cars and trucks, and can help drive a wider array of transportation choices for Californians. The program, she added, 鈥渉elps clean the air in the most impacted areas.鈥�
鈥淔or the everyday Californian鈥his helps fund your opportunity to buy a plug-in hybrid car, a battery electric car, a hydrogen fuel cell car,鈥� Randolph said. And for diesel trucks and delivery vans, it 鈥渋s helping make those vehicles cleaner and quieter.鈥�
The program has been particularly successful in shifting the fuel market for medium and heavy-duty trucks, and over the course of 13 years, the 25 billion gallons of petroleum fuels, according to the board鈥檚 economic assessment.
Regarding the cost at the gas pump, Randolph said it鈥檚 challenging to put a specific number on gas prices because fuel producers have different strategies for complying. Some might produce cleaner fuels themselves, potentially profiting from the incentives, while others may buy credits on the market, which could lead to varying costs.
It鈥檚 hard to predict whether oil companies will pass those costs onto customers or absorb them, making it difficult to determine the exact impact on prices, Randolph said. She pointed to the data indicating that fuel producers typically pass on 8 to 10 cents per gallon costs to consumers because of the program.
The fuel standard 鈥渋s one of California鈥檚 most significant and most effective climate programs. It鈥檚 a market program that comes with a mandate to fuel producers to reduce their carbon intensity over time.鈥�Air Board Chair Liane Randolph
The current standard鈥檚 target is reducing the climate impact of transportation fuels by 20% between 2010 and 2030. The air board proposal would impose tougher 鈥渃arbon intensity鈥� targets, in the greenhouse gases those fuels produce by about 30% by 2030 and 90% by 2045. (Carbon intensity is the measure of carbon dioxide emissions produced per unit of energy or activity.) The board is also considering accelerating those reductions when certain conditions are met.
This tightening of the standard will affect the entire fuel market, from companies such as Chevron and Shell that dominate fuel production in California to smaller operators who import fuel.
The Western States Petroleum Association, an oil industry group, has supported the low-carbon fuels program, with many of its members producing some of the new fuels the program has spurred. However, they have because they might increase costs or disadvantage some companies.
Chevron has warned against what the changes might do to costs in the state.
鈥淎t a time when fuel prices are under significant scrutiny and demand in California frequently outstrips supply, regulators should be careful about adding new measures that restrict supply,鈥� Don Gilstrap, the company鈥檚 manager of fuels regulations .
Laura Renger, executive director of the California Electric Transportation Coalition, said the fuel standard is essential for getting more electric cars on the road and building the charging infrastructure they need.
The program has funneled billions into electric vehicles and chargers, pushing the state away from petroleum and toward cleaner electricity. With the new rules under consideration, she says, the state鈥檚 utilities will have funds to invest even more.
Through the fuel standard, California has become a proving ground for cleaner fuels.
The tighter the fuel standard, the more intense the scramble to produce lower-carbon alternatives and obtain credits. The program considers not just tailpipe emissions but also carbon emitted during fuel production and distribution.
So many companies have produced cleaner fuels that the price of credits has nosedived, dropping to an average of $62.17 in mid-October compared to $180.86 the same week three years ago. The credits have built up to the point where some companies can simply buy their way out of producing cleaner fuels.
To avoid that, regulators have proposed the changes to be voted on next month 鈥� essentially tightening the standard so that companies are incentivized to burn through the excess credits.
Biofuels: Are they better?
Most notably, the fuel standard has spurred a boom in biofuels, which are produced from plants or animal waste. Two Bay Area companies are converting their refineries to focus on biofuels: a Marathon joint venture with the company Neste at the Marathon Martinez refinery and a conversion by Phillips 66 of one of its refineries in Rodeo to a biofuels project.
But experts have increasingly questioned that approach, particularly if the state is trying to shift transportation from fuels that are burned to zero-emission vehicles. The University of Pennsylvania , authored by Danny Cullenward, a climate economist, estimates that about 80% of the credits issued to date 鈥� worth more than $17.7 billion, have gone to biofuels.
While biofuels reduce emissions relative to traditional fossil fuels, he says that their production, particularly renewable diesel fuels, like soybean, has unintended environmental consequences, including deforestation and food system disruptions. The board has on diesel produced from soybean oil, canola oil and sunflower oil, but some groups say that the proposed measures don鈥檛 go far enough.
A debate over fuel from cow manure
Throughout the debate, tensions have arisen over how the new fuels have impacted California鈥檚 polluted, low-income communities of color. One of the most heated disputes has been over the proposed phaseout of 鈥� biofuel made from dairy farm manure.
California鈥檚 strategy for cutting its methane footprint has so far hinged on providing incentives, mostly to the dairy industry, through grants for construction of digesters 鈥� recovery systems that trap the methane from manure 鈥� and valuable climate credits from the fuel standard program for the natural gas that methane produces.
About half of the state鈥檚 methane emissions come from dairy and livestock, so collecting the gases wafting off of manure keeps them out of the atmosphere and offers a renewable source of fuel.
But the board has proposed a of those credits, beginning in 30 years for projects that already exist and 20 years for those built before 2030. The proposal has angered environmental groups who want a more aggressive discontinuation because they say the credits support industrial dairy farms that rural, low-income communities in the Central Valley.
The state鈥檚 dairy industry, meanwhile, says the credits are one of the program鈥檚 success stories.
鈥淎s a result of this important program, dairy farmers are able to reduce emissions and enhance the environment and economic stability of their farms,鈥� Michael Boccadoro, head of Dairy Cares, which promotes digesters for methane reduction.
And finally, a major debate has been waged about what the program isn鈥檛 regulating. The air board considered ending an exemption for jet fuel under the program, but under pressure from the aviation industry, declined to pursue it in its final proposal.
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