California Democrat introduces bill to delay cap-and-trade expansion

Reuters News
Posted: Jul 03, 2014 6:25 PM

By Rory Carroll

SAN FRANCISCO (Reuters) - A California Democrat on Thursday introduced a bill that would keep gas prices down by delaying the state’s planned expansion of its carbon cap-and-trade program to cover transportation fuels next year, a move that has angered environmentalists.

Assemblymember Henry Perea said a three-year delay is needed to ensure that the state does not raise billions of dollars through the sale of carbon permits to fuel suppliers at the expense of residents struggling to get back on their feet after a long recession.

“In some areas of the state, like the Central Valley, constituents need to drive long distances and they will be disproportionately impacted by rising gas prices,” said Perea, who represents Fresno.

Analysts expect the program's expansion to raise gas prices by about 12 cents a gallon next year.

But the state agency that oversees the program said adding fuels to the program is essential if the state is to meet its carbon reduction target of 1990 levels by 2020.

“The cap-and-trade program is part of a group of complimentary programs to reduce greenhouse gas emissions from California sources to help manage climate change," said Dave Clegern, a spokesman for the California Air Resources Board.

“Our projections indicate that by 2020 these programs will lower the cost of driving by about $400 a year per motorist,” he said.

Environmentalists blasted the bill, calling it an eleventh-hour attempt by oil companies to get out of the program, which they have long oppposed.

“It is disappointing that some members of the legislature are succumbing to oil company scare tactics, ignoring California’s trailblazing efforts to reduce carbon pollution and the real-time economic benefits they are delivering to their constituents,” said Adrienne Alvord of environmental group the Union of Concerned Scientists.

California’s cap-and-trade program has since 2013 required large manufacturers, oil refineries and power companies to account for the carbon emissions by either ratcheting down their emissions or acquiring carbon permits.

Quarterly permit auctions have netted the state over $700 million so far, money that will be used to fund low-income housing near public transportation hubs as well as the state's planned high-speed rail project.

Keeping transportation fuels out of the carbon market would cut the amount of revenue the state could expect to raise from the program in future years.

The carbon market shrugged off news of the bill's introduction on Thursday. Carbon permits for December delivery were offered at $11.95 each on the secondary market on Thursday, up a penny from the previous day's closing price.

(Reporting by Rory Carroll; Editing by Lisa Shumaker)