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The Facts About
California’s
Climate Programs

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26 Cents Per Gallon*

The cost of the Cap and Trade program as of July, 2023
California’s Cap and Trade Program is a market-based system designed to reduce greenhouse gas emissions in the state. The program places a cap on the total amount of emissions that regulated entities, such as power plants and industrial facilities, can produce each year. These entities are required to hold allowances equal to their emissions, and they can either reduce their emissions or purchase allowances from other entities through auctions or on the secondary market. The number of allowances available decreases each year, which creates a declining cap on emissions and provides an incentive for entities to reduce their emissions over time. The program covers about 85% of California’s greenhouse gas emissions and is a key part of the state’s effort to combat climate change.
The revenue generated from the auction of allowances is used to fund various initiatives aimed at reducing greenhouse gas emissions and addressing the impacts of climate change in California. These initiatives include funding for public transportation, renewable energy projects, and programs to support disadvantaged communities. The program also includes provisions to prevent “leakage,” which occurs when regulated entities relocate their operations to avoid emissions regulations, and to ensure that the burden of emissions reductions is shared equitably across different industries and regions. The California Cap and Trade Program has been in place since 2013 and has been credited with helping to reduce emissions while also generating revenue to support the state’s transition to a more sustainable economy.

12 Cents per gallon**

The cost of the Low Carbon Fuel Standard program as of July, 2023
California’s Low Carbon Fuel Standard (LCFS) is a regulation that aims to reduce greenhouse gas emissions from transportation fuels in the state. The LCFS requires fuel producers and importers to reduce the carbon intensity of their fuels, measured in grams of CO2 equivalent per unit of energy, by a certain percentage each year. The regulation covers a wide range of transportation fuels, including gasoline, diesel, and alternative fuels such as electricity, hydrogen, and biofuels. Fuel producers can comply with the regulation by reducing the carbon intensity of their fuels, purchasing credits from other producers that have over-complied with the regulation, or a combination of both.
The goal of the LCFS is to reduce the carbon footprint of California’s transportation sector, which is responsible for about 40% of the state’s greenhouse gas emissions. The regulation is part of California’s broader effort to combat climate change and transition to a more sustainable, low-carbon economy. The LCFS has been in place since 2011 and has been credited with spurring investment in alternative fuels and reducing the carbon intensity of California’s transportation fuels.

The costs for these
programs are heading up

California’s policies are projected to significantly impact our costs for gasoline and diesel.

California’s policies are projected to significantly impact our costs for gasoline and diesel. Policy makers have authority over several government programs, fees and taxes, that are planned to increase substantially by mid-2025.

The State estimates that upcoming changes to the Low Carbon Fuel Standard program, which is meant to lower the carbon intensity of liquid fuels in an cost-effective way, will increase in cost from 11 cents to 47 cents per gallon in 2025. That’s a 327% increase from today!
The State is planning to significantly adjust the cap-and-trade program, which they acknowledge will significantly increase the cost per gallon in 2025.
The State’s gas tax will increase by an estimated 5 cents per gallon by July 1, 2025 to 62.5 cents per gallon.

 

*Based on May 2023 Auction Settlement Price for California Carbon Allowances. See California Cap-and-Trade Program – Summary of California-Quebec Joint Auction Settlement Prices and Results, May 2023 Joint Auction #35, available at: https://ww2.arb.ca.gov/sites/default/files/2020-08/results_summary.pdf. Accessed: July 10, 2023.

**Based on OPIS methodology, available at: http://www.opisnet.com/wp-content/uploads/2018/07/OPIS-California-Carbon-Allowance.pdf. Accessed: July 2023.

A) Low Carbon Fuel Standard 2023 Amendments Standard Regulatory Impact Assessment, Table 22

B) CA Air Resources Board, https://ww2.arb.ca.gov/our-work/programs/cap-and-trade-program/cap-and-trade-meetings-workshops, slide 8

C) SB 1 automatically increases the state excise tax based on the California CPI