Delay of "fuels under the cap" introduced

By CMTA Staff

Capitol Update, July 18, 2014 Share this on FacebookTweet thisEmail this to a friend

While the official bill introduction deadline has long past, AB 69 has been substantially amended by Assemblyman Henry Perea (D-Fresno) to address the state’s plan to reduce greenhouse gas emissions. The bill would delay for three years the inclusion of transportation fuels in the cap and trade program.

“Cap and Trade” is a key regulation imposed by the California Air Resources Board (CARB) to implement AB 32, the Global Warming Solutions Act. Emissions from large manufacturers and electric generators have been under the cap since 2013. Beginning in 2015 transportation fuels and natural gas emissions will also be controlled under the cap.

While many in the regulated community agree that a market-mechanism such as cap and trade can be a cost-effective way to reduce emissions, there are concerns about CARB’s market design and operation. Legislators are also becoming increasingly aware of the potential costs of AB 32 implementation. Prior to amending AB 69, Assemblyman Perea along with 15 of his fellow democrat party colleagues wrote a letter to CARB’s Chairman Mary Nichols urging a delay in putting transportation fuels under the cap.

It is estimated that gas prices could increase 12 to 15 cents a gallon as a result of fuels coming under the cap. This is because fuel suppliers must purchase allowances to account for all the emissions from burning gasoline. A similar allowance purchasing requirement applies to electricity generators, but in that case nearly all the money raised by the state must be credited back to the utility’s residential customers, small businesses and some vulnerable large industries. The credit offsets the higher wholesale cost of power passed along from generators. 

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