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(Bloomberg) — California regulators tightened requirements for the carbon intensity of fuels sold in the state, despite fears the move could add nearly 50 cents to the price of a gallon of gasoline.
The move came even as Governor Gavin Newsom has been grappling with an affordability crisis in the state, with rising costs of housing and energy squeezing the world’s fifth-largest economy.
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The California Air Resources Board on Friday voted to amend one of the state’s key climate programs, known as the Low Carbon Fuel Standard, which sets a declining annual target for the carbon intensity of fuels. Producers of fuels such as gasoline and diesel that are higher than the target must buy credits from suppliers of low- or zero-carbon fuels, such as electricity or hydrogen. The amendments will accelerate how quickly the target declines.
The changes alarmed consumer advocates after a report last year from the board’s staff estimated gasoline prices could rise 47 cents a gallon in 2025 as a result. California pays some of the nation’s highest gas prices, due in part to high taxes and the use of pollution-fighting fuel blends not required in other states.
The average cost of a gallon of regular in California is currently $4.29, $1.22 more than the national average, according to the US Energy Information Administration.
The air board’s staff walked back that initial cost estimate but didn’t provide another, prompting politicians to call for a delay in the board’s vote. But board Chair Liane Randolph said the urgency of fighting climate change required action.
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“We cannot afford to continue with the status quo,” Randolph said at a public hearing before the vote. Global warming, she said, already is contributing to stronger wildfires, hurricanes and droughts. “The health and economic impacts of these events are vastly underestimated.”
Newsom is locked in a battle with the oil industry over high gas prices, a growing concern for Democrats as the state’s effort to phase out fossil fuels helps drive costs higher. Newsom has accused oil companies of price-gouging and recently signed legislation requiring refiners to maintain minimum fuel inventories, aiming to curb price spikes that have frustrated Californians. Last year, he approved the state’s first watchdog agency to investigate the oil industry.
—With assistance from Eliyahu Kamisher.
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