California Pols Have Legislated a Big Gasoline Increase

With the confidence busting effect of watching the price gauge at the gas pump, elected officials prefer avoiding gas prices as an election year issue. Adding to the anxiety is how little control any one elected official has over gas prices.

But this election year, California's state leaders are engaged in a gas price debate that is entirely their own doing.

In 2006, Governor Schwarzenegger signed AB 32 to reduce the Golden State's greenhouse gas emissions to 1990-levels by 2020 by implementing a cap-and-trade scheme for various industries that emit controlled gases. The auctions began in late 2012 covering a small group of polluting industries. In 2015, however, transportation fuels are to be included.

96 percent of California's transportation relies on petroleum and 89 percent of Californians either drive alone or carpool to work, which means transportation fuels are responsible for about 40 percent of the Golden State's total greenhouse gas emissions. Thus, consumers will soon begin feeling cost increases directly related to AB 32's implementation, and the increase in gas prices will not be small. Based on a summary of all applicable studies, California's Legislative Analyst's Office reports that the resulting increase is likely to fall between 13 cents per gallon and 20 cents per gallon by 2020 with a possibility of an increase as high as 50 cents per gallon. With California regular retail gas prices hovering around $4.00 per gallon as of the beginning of August, Californians could be paying a premium of 3.25 percent to 12.5 percent simply because of AB 32.

This has prompted 16 Democrats and many Republicans to urge the Brown Administration to delay or exempt AB 32's coverage of transportation fuels, with Assemblyman Henry Perea (D-Fresno) proposing AB 69 - legislation that would delay the coverage of fuels by three years - and Senator Andy Vidak (R-Hanford) introducing SB 1079 - a bill that would exempt fuels completely. But those calling for action are the minority and not surprisingly, if you map those who support action and those who don't, you see a theme similar to many other California policy battles: coastal vs. inland.

It is the demographic and economic differences between the two regions that are influencing the political debate. Inland California is significantly poorer and depends on private vehicle use more than the coast. While 72 percent of low-income Bay Area residents commute alone or carpool, 90 percent and 95 percent of those in Fresno and Madera counties - those at the heart of the Central Valley - drive to work. And those in rural communities, like inland California, drive about 48 percent more miles per day, on average, than urban areas. Thus, transportation likely takes up more of the typical Central Valley's household budget than in the coastal regions.

With 32 Democratic lawmakers publicly signifying their opposition to action and the price increase not occurring until well after Governor Brown's assured re-election, neither AB 69 nor SB 1079 will become law. Moreover, in AB 69's case, a delay of three years doesn't change the fact that AB 32 will, eventually, increase energy costs for Californians.

But alternatives, barring full repeal of AB 32, are limited. SB 1079 would solve the gas price increase issue, but by exempting 40 percent of emissions, to reach AB 32's 1990-level goal will likely require even more draconian price increases for the remaining 60 percent. Reducing the state's gas tax (the highest in the nation) is another option, but this would further deplete already suffering transportation infrastructure funds. Replacing the gas tax with a mileage tax could help (and this would also fix the infrastructure fund issue), but a mileage tax would give little relief to those who drive more miles, i.e. those in the Central Valley. Yet another option is replacing AB 32 with a revenue-neutral carbon tax as laid out by George Shultz and the late Gary Becker; this would work to limit carbon emissions and the revenue-neutral provisions (returning revenue to consumers instead of the government keeping it in a slush fund) would work to alleviate the regressive nature of increased energy costs.

However, with Sacramento resisting to acknowledge any of AB 32's short-comings, California's elected leaders are going to have to live with this self-imposed gas price increase and hope that when it does come, Golden State drivers are willing to trade fewer dollars in their wallets for fewer pollutants in the air.