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Get ready for gas price sticker shock

POSTED June 24, 2014 10:07 p.m.

Think gas prices are too high now?

Wait until Jan. 1. That's when AB 32 (the Global Warming Solutions Act) kicks into effect in an effort to get California to return to 1990 levels of greenhouse gas emissions by 2020. That is the equivalent of removing 15 million cars off the road.

The cap and trade program is a key element in the climate plan. It sets a statewide limit on sources responsible for 85 percent of California's greenhouse gas emissions, and establishes a price signal needed to drive long-term investment in cleaner fuels and more efficient use of energy. According to the California Environmental Protection Agency, the program is designed to provide covered entities the flexibility to seek out and implement the lowest-cost options to reduce emissions.

But gas and oil experts say the new cap and trade rules could result in your gas prices rising from 12 cents to as high as 70 cents per gallon. That's because AB 32 - which is based on the questionable premise that mankind is affecting the slight variation in the earth's temperature despite evidence that this occurs naturally - affects fuel producers. For example, Chevron's Richmond refinery is the largest emitter of greenhouse gases in California, emitting 4.5 million tons of carbon dioxide each year. So Chevron's Richmond refinery will need to turn in 4.5 million allowances to cover their annual greenhouse gas emissions. Make no mistake - that cost gets passed onto you and I.

A study issued by the Western States Petroleum Association in 2012 said that:

• Gas prices could increase by $2.70 per gallon in California, depending on the cost of carbon.

• Due to refinery closures, California could lose 28,000-51,000 jobs, including many high-paying skilled manufacturing jobs, as well as indirect job losses due to multiplier effects.

• California could lose up to $ 4.4 billion of tax revenue per year by 2020.

• There will be a wealth transfer of at least $3.7 billion per year by 2020 from refineries and fuel suppliers to the California Air Resources Board as a result of purchasing allowances.

• California's climate-change regulations will discourage energy intensive industries from locating in the state, and existing industry will have an incentive to leave the state.

"The findings of this research are sobering," wrote WSPA President Catherine Reheis-Boyd in a June 18, 2012 letter to Gov. Jerry Brown. "Californians know all too well that, no matter how well intended, innovative energy policies may result in unintended consequences. CARB's climate change regulations for fuel providers and fuels are exactly these innovative, first-of-their-kind policies that may result in serious and unintended consequences.

"From possible fuel shortages to an increase in global emissions to market disruptions reminiscent of the California energy crisis, the BCG study has highlighted some warning signs that require immediate attention by California policymakers. In order to safeguard Californians and fuel providers from the unintended but almost certain disruption of our state's fuel supplies, it is essential that we begin a serious and constructive discussion on California's fuels policies."

Imagine how that will affect your transportation budget. This will be a tough pill for the Valley in particular, which has the longest commute and far fewer alternatives than more populated areas like the Bay Area or Los Angeles. Keep in mind that being one of the poorest parts of the state, Valley residents disproportionately spend a greater percentage of what they earn on fuel - typically spend 20 to 40 percent of their income on transportation costs.

With the increased costs of fuel prices, the cost of food and product delivery will also increase.

Currently California drivers like you and I pay 71 cents in gas tax per gallon of gasoline at the pumps. That's 18 percent when the nationwide average of 13 percent. Meanwhile California continues to have the worst road conditions and the worst air quality despite some of the strictest environmental laws. Once cap and trade laws go into effect, over 20 percent to 40 percent of the cost of gas will be due in taxes.

How cap and trade works is complicated but works like this: It essentially creates a new market by capping the amount of emissions that industry can put forth and allows them to trade or purpose "offsets" for emissions they do create. That will cause industry to burn less fossil fuel or buy allowances from other companies. That causes business expenses to rise. It also allows the state to collect millions of dollars in new revenue and divert it to any pet project, such as high-speed rail. It's even been suggested in the state Senate to use the funds for affordable housing, as if that makes any sense.

State Assemblywoman Kristin Olsen suggests creative alternatives, including the creation of carbon sequestration plants in the Valley which would improve air quality and put thousands of people to work. She also suggests that the carbon tax be returned to the taxpayers in lower tax rates as is done in British Columbia, Canada.

That's not likely to happen in California, a state notorious for stealing from funds (such as cities and counties and redevelopment agencies) to balance its deficit budget spending plans. In fact, in 2011, California's total debt was at least $265 billion but the state balanced its budget for the first time in decades in June 2013, conveniently after Gov. Brown "borrowed" $500 million from AB32 revenue to put into the general fund.

Residents should contact their representatives and suggest that we cannot afford to pay any extra in taxes. Start with Gov. Brown at (916) 445-2841.

 

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