Regulator says climate program could hike gas prices 50 cents a gallon

A nearly two decades-old program to slash climate-warming emissions from transportation could cause California gasoline prices to spike as much as 50 cents a gallon in the next two years.

That's according to staff of the state's leading air quality regulator, who provided the estimate ahead of that agency's decision to strengthen the program created to discourage gasoline and diesel production in favor of cleaner alternatives.

Their drastic projection comes amid growing concerns about fuel and energy costs related to California efforts to phase out fossil fuels. Already burdened drivers can expect to see gas prices hit $5 a gallon this spring, and electricity bills also are expected to rise.

“I was shocked to see it,” said Danny Cullenward, a climate economist and advisor to the state. “A 50cent increase in the price of fuel is not a small thing.”

California Air Resources Board staff projected the price jump in a key report last fall, saying proposed reforms to the Low Carbon Fuel Standard (LCFS) would raise costs for the gasoline and diesel production companies that could get passed on to drivers.

In what they called an upper bound estimate, air board staff estimated that gasoline prices may jump by an average of $0.47 cents next year and $0.52 cents by 2026. They said diesel prices could increase by $0.59 this year and $0.66 in two years.

Over the long term, they found that gasoline prices could increase by $1.15 per gallon and diesel by $1.50 per gallon from 2031 to 2046. They also projected a $1.21 jump in jet fuel prices.

Air board staff have since downplayed their gas price hike projections, calling them “narrow and incomplete” in a December report. Instead, the agency has focused on cost savings to drivers across the economy as more people make the switch to EVs.

“CARB staff estimates the amount of money Californians spend on transportation costs across all vehicle classes could be up to 42% lower in 2045,” air board staff said this week in FAQs about the standard's impact on fuel costs.

The LCFS was created in 2007 by then Gov. Arnold Schwarzenegger to reduce the state's dependence on fossil fuels and encourage low-carbon alternatives. The first program of its kind, it has since been adopted by other governments, including the European Union.

It operates a system of monetary rewards and fees called “credits” and “deficits.” Producers of less carbon intensive fuel — such as biofuel, ethanol and biomethane — sell those credits to gasoline and diesel producers who rack up deficits.

Environmental advocates have long criticized the program as counterproductive, arguing that it neglects to invest in widely available zeroemissions transportation technology while supporting polluting industries such as industrial agriculture.

Now the California Air Resources Board is amending the program to align with its plan to reach carbon neutrality by 2045. The current proposal will increase stringency of carbon reduction targets to help replace fossil fuels with lower-carbon fuels more quickly.