California's plan to overhaul a key climate program — raising the cost of gas — ignites debate


LOW CARBON FUEL STANDARD


On Nov. 8, just three days after an election marked by concerns over rising costs, the California Air Resources Board will hold a public hearing and vote on its plan to amend the Low Carbon Fuel Standard. The program, which has existed since 2011, is a $2-billion credit trading system that requires fuels sold in California to become progressively cleaner while giving companies financial incentives to produce less-polluting fuels, such as biofuels made from soybeans or cow manure. The standard has helped the state phase out fossil fuels to clean up air pollution and cut climate-warming gases.

Concern over gas prices has been part of the debate since last December, when the plan was released. Much of the agency's overhaul has focused on technical disputes between oil companies, dairy farms, biofuel and other lower-carbon fuel companies, and environmental justice advocates who say the program maintains polluting industries.

POLITICAL PRESSURE


With the election approaching and costs top of mind for voters, Republicans in California's state Legislature have urged a delay in the fuel standard changes, arguing they could further drive up gasoline prices. They also have criticized Gov. Gavin Newsom, who recently declared victory over Big Oil during a special legislative session, for not doing enough to cut gas prices. On Thursday, California Republicans in the U.S. House of Representatives also urged a delay in the air board plan.

The proposal to strengthen the fuel standard has fueled a recent outcry from the public: More than 100 commenters wrote to the air board earlier this month, protesting the amendments due to the potential impact on gas and diesel prices. "Are you kidding?" wrote Rich Marotti of Ventura County, adding a profane adjective. "Gas is already more expensive in CA than HI. That's absurd. … Any action taken to increase gas prices is an attack on California citizens."

CLIMATE GOALS AND ECONOMIC IMPACT


The gas price revolt over the fuel standard underscores how the state's ambitious climate agenda can come under fire if it threatens to make fossil fuels more expensive as the state tries to phase them out by 2045. Californians paid an average of $4.61 a gallon on Thursday.

Energy experts and air board staff say the fuel standard raises the cost of producing high-polluting gasoline and diesel for the California market. Those costs can drive up prices at the pump when companies pass them on to customers, although predicting the exact increase is challenging.

The air board said earlier this month that fuel producers typically pass on 8 to 10 cents per gallon of costs to consumers because of the program. Estimates for how the air board's proposed changes would affect gasoline prices vary.

PROJECTED PRICE IMPACTS


In an initial assessment released last year, the air board projected that the proposed new standard could potentially raise per-gallon diesel prices by 59 cents and gasoline by 47 cents in 2025. Air board officials have since disavowed that estimate, writing earlier this month that the analysis "should not be misconstrued as a prediction of the future credit price nor as a direct impact on prices at the pump."

A separate report, released earlier this month by the University of Pennsylvania's Kleinman Center for Energy Policy, predicted the program's changes could increase the cost of gas by 85 cents a gallon through 2030.

SHIFT TO CLEANER FUELS


Air Resources Board Chair Liane Randolph told CalMatters in an exclusive interview that the heated debate prompted her to speak out ahead of the board's vote. Randolph emphasized that the fuel standard is critical for meeting the state's targets to slash greenhouse gases and fossil fuel use. She said the proposed changes are designed to prevent California from falling behind on its ambitious climate goals, which are already at risk, according to experts.

At the heart of the debate, Randolph said, is a fundamental question about California's climate future: How quickly can the state shift from fossil fuels to a zero-emission future?

The air board's changes could reduce carbon dioxide-equivalent gases by 558 million metric tons through 2046, according to its initial economic assessment. This figure is equivalent to what more than 120 million cars emit on average in a year.

ROLE OF BIOFUELS


Most notably, the fuel standard has spurred a boom in biofuels, which are produced from plants or animal waste. Two Bay Area companies are converting their refineries to focus on biofuels: a Marathon joint venture with the company Neste at the Marathon Martinez refinery and a conversion by Phillips 66 of one of its refineries in Rodeo to a biofuels project.

But experts have increasingly questioned that approach, particularly if the state is trying to shift transportation from burnable fuels to zero-emission vehicles. The University of Pennsylvania report, authored by Danny Cullenward, a climate economist, estimates that about 80% of the credits issued to date — worth more than $17.7 billion — have gone to biofuels.

While biofuels reduce emissions relative to traditional fossil fuels, their production, particularly renewable diesel fuels like soybean, has unintended environmental consequences, including deforestation and food system disruptions.

COW MANURE CREDITS


Throughout the debate, tensions have arisen over how the new fuels have impacted California's polluted, low-income communities of color. One of the most heated disputes has been over the proposed phaseout of climate credits for cow poop — biofuel made from dairy farm manure.

California's strategy for cutting its methane footprint has so far hinged on providing incentives, mostly to the dairy industry, through grants for construction of digesters — recovery systems that trap the methane from manure — and valuable climate credits from the fuel standard program for the natural gas that methane produces.