Are California climate regulators gearing up to raise gas prices? Here’s what we know
California’s Low Carbon Fuel Standard can be extremely complex, but one impact is clear: the program raises gas prices.
The state’s air regulator faces mounting criticism over potential gas price increases linked to upcoming reforms to the LCFS. Ahead of a November 8 vote, lawmakers and critics are pressing CARB for clarity on those increases and asking whether they’re worthwhile.
The debate underscores a growing tension between the state’s need to tighten environmental policies ahead of fast-approaching climate goals, and rising energy costs for millions of Californians.
These latest concerns caught fire when opponents of Gov. Gavin Newsom’s special session refinery measure called it hypocritical to claim victory over gas price spikes while reforming a policy that might raise prices even more.
CARB’s own estimate from last year, first reported by The Sacramento Bee, suggested that the changes could increase gas prices by $0.47 per gallon next year and $0.52 by 2026. Diesel prices could rise by $0.59 this year and $0.66 within two years.
While CARB later downplayed these figures as “incomplete,” no updated estimates have been published. That has fueled frustration among Republican lawmakers, who last week demanded a delay on the vote.
Politics of the LCFS are increasingly heated. Even though much of the oil industry supports the program, Chevron has reportedly placed QR codes at its gas station pumps to alert customers to potential increases from the policy, urging them to call lawmakers.
Major environmental groups have pursued a variety of changes to the program, meanwhile, and CARB’s own environmental justice committee recently urged the Air Board to reject the update for cost reasons and dairy methane emissions.
Climate policy expert Danny Cullenward with the Kleinman Center for Energy Policy reported this month that LCFS credit prices could cause retail gasoline prices to rise by as much as $0.65 per gallon soon, and up to $1.50 by 2035.
Several studies, including from the state’s Legislative Analyst’s Office, support the same cause and effect: as credit prices rise through the program, so do costs for producing traditional fuels in California, which leads to higher prices for consumers.
The LCFS, introduced by Governor Schwarzenegger in 2011, aims to reduce the carbon intensity of fuels by creating a market where fuel producers buy credits from those who produce cleaner fuels like biofuels and renewable diesel.
Historically, price increases from the LCFS have been modest, but tightening standards could push costs higher.
California’s gas prices already average $4.00 per gallon, about a dollar higher than the national average. High gas prices hit the state’s low- and middle-income households, and rural households, the hardest.
They are driven up by taxes and environmental programs like LCFS and cap-and-trade. The LAO estimates that the LCFS, for its part, has driven retail prices up by as much as 20 cents per gallon already, with cap-and-trade driving them up 24 cents per gallon.
Even after those adjustments, though, the state still grapples with a “Mystery Gasoline Surcharge” of $0.30 to $0.60 per gallon that remains unexplained.
Newsom’s push in 2022 to address these price hikes led to the creation of the Division of Petroleum Market Oversight, which recommended that refineries increase fuel reserves to avoid price spikes and is studying a possible windfall tax on gasoline revenue.
