(The Center Square) – According to the California Air Resources Board, the updated Low Carbon Fuel Standard is expected to add five to eight cents per gallon to the cost of gasoline when the rule comes into effect July 1. That’s on top of the existing eight to 10 cents per gallon CARB estimates consumers are already paying in pass-through gasoline costs for the LCFS.
However, that estimate is still much lower than that from the University of Pennsylvania Kleiman Center for Energy Policy, which says that if LCFS credit prices reach their maximum allowable level, gasoline could become up to 65 cents per gallon more expensive in the near future.
“Even CARB is now quietly admitting what we’ve been warning about all along: Their updated LCFS regulation will at least double the cost burden on California drivers,” said state Sen. Minority Leader Brian Jones, R-San Diego, to The Center Square. “Whether it’s 13 cents or 65 cents, LCFS is a hidden gas hike being forced on working families without transparency or accountability.”
While LCFS does not apply to Nevada and Arizona, the parts of those two states reliant on California refineries for gasoline could see prices increase as refineries grapple with higher credit costs for their California fuel.
Under the existing LCFS program, a steadily decreasing carbon dioxide allowance is set for transportation energy, which requires producers of energy that is more carbon intensive than the standard to buy credits from producers of energy that is less carbon intensive than the standard.
Thus, while the state does not generate revenue from this program, as it does with its cap-and-trade emissions program, this program is a mandatory transfer of resources from producers of fuels like gasoline to hydrogen producers and electric vehicle charging network owners.
CARB estimates the updated LCFS standard, which will require a 30% reduction in carbon intensity by 2030, and a 90% reduction by 2045, will increase fuel costs by $162 billion through 2046, while providing $105 billion in credits for electric vehicle charging network owners and $8 billion in credits for hydrogen producers.
Under the current LCFS program, credit prices have recently been approximately $60 per ton of carbon dioxide. The tightening of the LCFS set to take place July 1 could significantly increase the cost of the credits, which have a maximum allowable price of $268.90 per ton.
Should the credits rise modestly to $100 per ton, the University of Pennsylvania estimates the retail price of gasoline would rise “$0.26 per gallon in the near term, $0.34 per gallon by 2030, and almost $0.60 per gallon by 2035.”
In addition to the LCFS, California gas prices will be impacted by a statutory increase in the state’s gasoline tax that will also take place July 1, which will rise 1.6 cents per gallon from 59.6 cents, to 61.2 cents per gallon.
The updated LCFS was passed by CARB, all but two of whose voting members are appointed by the governor, last November. The LCFS update was supposed to take effect Oct. 1, and when prices are generally lower. But CARB instead affirmatively filed to have the regulation take effect on July 1, during the peak summer driving season.
“Any additional delay of the effective date of the amendments contrary to market expectations could introduce volatility to not only the LCFS credit market, but also the statewide transportation fuel market, potentially disrupting investment and deployment of low-carbon fuels in California,” argued CARB. “There could also be substantial implications for programs dependent upon revenues from the LCFS market and for compliance plans for all affected entities.”
California’s Office of Administrative Law, a California executive agency under the governor’s purview, initially delayed the updated LCFS standard, but quickly provided final approval.
