California motorists to be stung by new cap-and-trade tax

As if the myriad of taxes Californians pay isn’t enough, a new one will go into effect January 1st to further soak the populace. According to The Sacramento Bee, the new levy is the result of the state’s cap-and-trade program in which now gas and diesel fuel will be subject to cap-and-trade prices on carbon emissions pumped into the atmosphere. The Golden State has had the program in place for two years and motorists can now expect to pay higher gasoline and diesel prices.

The California Air Resource Board (aka CARB) and some academics downplay the effect of the new rules stating that falling gas prices will mean increases of around ten cents a gallon. Petroleum producers dispute the claims of minor impact, stating the effect of imposing cap-and-trade rules on gas and diesel emissions will mean prices of up to 16 to 76 a gallon. The Western States Petroleum Association’s research on the issue, for example, used carbon price data from California Air Resource Board’s studies though they admit their price predictions maybe higher than what may result.

California’s cap-and-trade law essentially forces companies that emit more than 25,000 tons of yearly carbon dioxide emissions to pay for the right to do so by buying carbon credits (or allowances) at state-run auctions or on the open market. If emissions exceed state imposed caps, companies can buy more credits or implement ways to reduce carbon emissions. In the case of this new tax, Golden State motorists will pay for the cost of compliance on the part of gas retailers who buy carbon credits based on the volume of fuel they sell.

The cap-and-trade scheme is the result of the Global Warming Solutions Act signed into law by Governor Arnold Schwarzenegger in 2006. The law requires the state to cut greenhouse gases 25 percent by the year 2025 in which the cap-and-trade program was supported by the Governor. The program has had some legal setbacks and state energy prices have gone up as a result of implementing it. Consequently, the state pays ratepayers with utility rebates to offset the program’s costs in which The San Francisco Chronicle predicts energy prices will go up even higher:

And while prices have stayed low since trading began in late 2012, with allowances now selling for about $11.50 per ton of carbon dioxide, they will eventually push up the cost of electricity, gasoline and other goods.

Even The New York Times has reported that Europe has had severe problems with it’s enormous cap-and-trade system resulting in fluctuations in prices companies have to pay for the right to emit carbon emissions. With these things in mind, it doesn’t just spell disaster for The Golden State’s cap-and-trade program but is an indication of things to come. California commuters will end up paying even more at the pump out of an expectation of increased sacrifice for the needs of nature.