Environmentalists Vs. Big Oil In Fight Over Transportation Fuels And California’s Cap-And-Trade Program

California’s cap-and-trade program is an important part of the overall effort to reduce greenhouse gas emissions to 1990 levels by 2020.  The cap went into operation in 2012 with compliance required in 2013. So far, the program has generated close to a billion dollars in annual auction revenue from regulated sources that need to buy allowances to emit greenhouse gases.  The cap is phasing in over time, and so far only large, industrial-type emitters and utilities are included.

fuelThat will change on January 1, 2015, when transportation fuel providers come under the cap.  Or I should say “if” they come under the cap.  The oil and gas industry is launching a big campaign to keep that from happening.  They already won this two-year reprieve from the launch.  At stake is a huge amount of auction revenue and a relatively small increase in gas prices that would spur innovation for more fuel-efficient vehicles.

Perhaps seeing the writing on the wall, State Senator Darrell Steinberg earlier this year proposed a preemptive retreat by removing fuels from the cap and creating a carbon tax as compensation.  Environmentalists shot that proposal down, but they may now have a tough time keeping fuels under the cap.  If they fail, they will be left with nothing, making Steinberg’s proposal seem like a missed opportunity.

Billionaire climate-fighter Tom Steyer is pledging to spend what it takes to keep fuels under the cap, according to the Los Angeles Times. Let’s hope he and the environmental community have success.  Otherwise it will be a lot harder for California to meet its climate goals and encourage the technological innovation we need to wean ourselves off polluting fossil fuels in favor of cheaper, clean energy.


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