Cap-and-Trade, And The Cost Of Living

October 30, 2014- A cap-and-trade provision of California's Assembly Bill 32, also known as AB 32 or the Global Warming Solutions Act of 2006, has become a hot button issue for the state.

Beginning on New Year's Day, 2015 emissions from gasoline-fueled vehicles will become subject to California's cap-and-trade program rules, meaning fuel producers will have to account for greenhouse gases generated by gas-burning auto engines as part of the state's plan to reduce greenhouse gas emissions.

In an September 22, 2014 online post, " ENVIRONMENT: Gas prices fueling debate," The Press Enterprise (PE.com) writes that oil companies are warning that motorists could bear the cost of complying with the change, and notes that some have estimated that gas prices could rise anywhere from nine to 76 cents a gallon.

Here are the highlights of the PE.com post:

• California's higher emission standards force gasoline producers to use a special formulation. That, and higher gas taxes make the state's price at the pump among the highest in the nation.

• Supervisors in Riverside County, concerned that a spike in fuel costs could derail the local economy and hurt commuters, unanimously passed a resolution asking the state to delay adding gasoline to the cap-and-trade regulatory framework.

• Members of both political parties signed a letter in June to the head of the California Air Resources Board urging a delay. "The author of that letter, Assemblyman Henry Perea, D-Fresno, introduced a bill that would have delayed the changes for three years," PE.com writes. Lacking a hearing, the bill faltered in the state Senate.

• A spokesperson for the air resources board, which oversees the cap-and-trade program, said gas prices won’t skyrocket. Environmental groups, concerned over poor air quality especially in low-income communities, wrote to California Attorney General Kamala Harris asking her to make sure oil companies don’t collude to raise gas prices.

• Under cap-and-trade, companies responsible for greenhouse gases must buy allowances — essentially licenses to pollute — that are becoming scarcer and more costly. Those allowances, or credits, are sold at auctions and businesses can trade them on the open market.

• Hence, the fewer greenhouse gases a business emits, the less it has to pay for credits. The scheme forces polluters to pay for the cost of their emissions and provides incentives for clean energy alternatives.

• Beginning January 1, 2015, fuel producers will have to buy credits to cover auto emissions. Fed Up at The Pump, a coalition of fuel producers and business groups call the upcoming cap-and-trade change a hidden tax.

If the debate seems strange, pitting those concerned with the Cost of Living against those concerned with Cost of Living, remember, it's California, America's Proving Ground.

Read the full PE.com post here.

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