Commission considers a carbon tax

By CMTA Staff

Capitol Update, Feb. 27, 2009 Share this on FacebookTweet thisEmail this to a friend

Late last fall the Governor issued an executive order ( establishing the Commission on the 21st Century Economy to re-examine and modernize California's out-of-date revenue laws that contribute to feast-or-famine state budget cycles.  Some Commission Members have discussed the idea of imposing a carbon tax in California as a revenue generator for the General Fund.

The AB 32 Implementation Group has pointed out to the Commission how critical it is to consider this and other tax policies in the broader context of the state’s entire regulatory and fee program.  (CMTA is co-chair of the AB 32 IG. See

In December 2008, the California Air Resources Board (CARB) approved a plan to achieve the greenhouse gas emission reductions required under AB 32 (the Global Warming Solutions Act) primarily through direct regulations and to a lesser extent a regional cap-and-trade program.

These regulations will include direct administrative fees, regulations that will result in billions of dollars a year in higher costs for electricity, natural gas and transportation fuels. In addition, CARB is considering a cap-and-trade system that allocates emission credits from an auction system that could impose new burdens in the tens of billions of dollars for California companies, municipal utilities and others. Furthermore, local governments in California are imposing their own global warming regulatory programs and the federal government is likely to impose a national global warming strategy.

Imposing a new California carbon tax would be an additional burden on top of the costs outlined above, and could undermine the success of those programs. First, a key element of AB 32 is the requirement that regulations should be cost-effective and technologically feasible to protect the economy and minimize leakage (the movement of production and jobs out of California) that would both hurt the economy and fail to reduce emissions globally. A carbon tax not subject to AB 32 requirements would encourage leakage and divert money away from the very organizations (both public and private) that have the heaviest economic burden for reducing greenhouse gas emissions. Also, using the revenues from a new carbon tax for general fund purposes would conflict with using any such revenues for greenhouse gas emission reduction purposes or other appropriate mitigation required as part of AB 32 implementation.

CMTA has urged the Commission to abandon the discussion of a carbon tax as a solution to the state budget problems.

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