The Hidden Gas Tax That Doesn’t Exist

GasTaxMobileBillboardYou may have seen the ads on Facebook, or on one of the roving billboards being pulled by a gasoline-powered truck. They warned darkly of a coming “hidden tax” on fuel that was so hidden nobody in the media was talking about it. You may have wondered what it meant, even as the ads urged you to sign a petition today.

Last week, the oil-industry-backed effort to get people riled up about the “coming hidden gas tax” delivered its petition [PDF] to the California Air Resources Board’s monthly meeting in Diamond Bar.

The California Drivers Alliance gathered a whopping 115,000 signatures, and “dozens” of people showed up to deliver them. It urges the Air Resources Board to delay its “plan to increase fuel prices next year” and charges that the agency has been “unresponsive” and “has not even put this far-reaching policy on its agenda for public discussion.”

Not a word of which is true.

There is no “hidden gas tax” that will suddenly come into being in January. The Air Resources Board has no “plan to increase fuel prices,” nor could it do so. The only change coming is that transportation fuels will become subject to California’s cap-and-trade system.

That means that distributors and transporters of fuels must either 1) comply with requirements to produce no more than a certain amount of greenhouse gas emissions (the “cap” on emissions), or 2) buy enough “pollution credits” from the state to “meet” the cap. This is the “trade” part of the system.

The EPA estimates that transportation contributes a quarter of the greenhouse gas emissions in the country.

To adopt the industry’s tactic of endless repetition: “There is no ‘hidden tax,’ or any other tax associated with [California climate change law A.B. 32] programs,” according to a written statement from Dave Clegern of the Air Resources Board. “There is simply a market mechanism, which industry preferred, to allow businesses to spread their emission reductions between now and 2020 . . . instead of having to make those greenhouse gas reductions all at once.”

The Air Resources Board knows that the industry prefers this method because it has said so. “The oil industry and dealers were at the table through this whole process, and have been aware this coverage was coming for at least five years,” wrote Clegern.

In official comments submitted to the Board in 2011, the industry’s trade group, the Western States Petroleum Association, wrote: “WSPA reiterates its support for the Cap and Trade program and a market-based approach to implementing AB 32.” [PDF]

Of course WSPA has fought hard against A.B. 32 and against many details of its programs, including the schedule for gradually decreasing the emissions cap and the timing of bringing transportation fuels into the system. At one point, WSPA recommended not doing that “until there are widespread cap-and-trade programs that include fuels throughout the U.S. and the world.” [PDF]

That could put it off as long as infinity, which would probably be just fine with the oil companies.

Meanwhile, despite what the billboards want people to believe, there is no reason for a sudden jump in fuel prices in January.

The Air Resources Board “has no control over fuel prices, so if there is an increase January 1, it is because the oil industry has decided that should happen,” wrote Clegern.

More to the point, oil companies have already been buying pollution credits under the cap and trade. This is partly because stationary sources of emissions–including oil refiners–have been subject to the cap since 2013.

While the Air Resources Board can’t say who has purchased allowances, there is a public record on which companies have been bidding in the auctions, and many fuel companies are on the list [PDF]. “It would certainly be prudent for a business with five years’ notice of this program to do so while the cost of allowances is quite low,” wrote Clegern.

“We know that there have been millions and millions of credits that have been purchased that can’t be used for another three years,” said Tim O’Connor of the Environmental Defense Fund. “So we know many of these market participants have been buying them. Oil companies have had this expectation of compliance for years.”

Since they’ve been buying credits, it’s logical to assume they are already passing the cost on to consumers.

Have they? Who can say?

There are two things that one can say with certainty about fuel prices: they have risen over time and will continue to do so, and they do so in anything but a straight line. The reasons for fuel price fluctuations are not clear, and they make predicting future gas prices a very imprecise science.

Since 2005, the price of gas in California has fluctuated by an average of $1.16 per gallon–not just gone up, but up and down and up and down.

Here is a chart showing changes in gas prices in California over just the last twelve months.

source: GasBuddy.com
source: GasBuddy.com

O’Connor has a name for the way prices fluctuate: rockets and feathers. “Year after year, prices at the pump shoot up – yielding significant additional profits for fuel suppliers – then casually drift down back to a point higher than where they started.”

“[The California Drivers Alliance’s] story is that cap and trade raises prices,” said O’Connor. “But they avoid any discussion of a whole litany of information that shows that it isn’t necessarily true.”

“For example, with fuel diversification—moving away from a transportation system based solely on gas and diesel—you can decrease prices at the pump just by shifting demand. With more choices for fuels, demand for gas and diesel will lessen, and prices can go down. Also, providing more choices for mobility [so not everyone depends on driving] will also lower prices. And increasing diversification can decrease price volatility, making fuel prices much more stable and reliable.”

You can sign a petition in support of “the timely implementation of California’s pioneering clean air and clean energy standards (A.B. 32), along with setting clear, comprehensive, and ambitious greenhouse gas reduction goals to extend the benefits of the law beyond 2020” here.

[NOTE: This story was updated to clarify the way cap and trade works]

Email tips, alerts, press releases, ideas, etc. to melanie@streetsblog.org.
For social media coverage focused on statewide issues, follow Melanie @currymel on Twitter or like our Facebook page here.

  • LAifer

    Link at the end of the article needs fixing. I think it’s http://www.cadelivers.org

  • Melanie Curry

    Thanks!

  • Reilly

    You’re doing your readers a disservice by arguing that cap-and-trade might not raise gas prices. It will, and it should. If it doesn’t change prices, then why would people and corporations burn any less of it?

    Fossil fuels have huge negative externalities, and they’re currently underpriced.

  • Melanie Curry

    That’s not my argument, although I admit I could have made that more clear. My points are 1) that there is no “tax” 2) that there is no real reason for a sudden jump in prices and 3) any price increase in January is likely to be invisible to consumers in the context of the price fluctuations they are subject to already. Cap-and-trade, at least in the first year, will not raise prices enough to make much of a difference. Over time–that’s a different story, and that depends how sensitive people are to a difficult-to-predict price increase. There’s a whole ‘nother discussion here about price sensitivity and behavioral changes.

  • 42apples

    I mean, the whole point of cap-and-trade is to raise the price of GHG emissions, just like a gas tax or carbon tax would. If prices don’t go up, it’s not working. Gas prices might go down due to other factors, but in isolation, cap-and-trade causes them to go up. It’s a bit disingenuous to say “we need a price on carbon” and then say that there won’t be any price increases.

  • theqin

    That’s not exactly true, the point of cap and trade is to decrease GHG emissions. This can be accomplished by reduction or it can be accomplished offsetting by carbon negative means. Cap and trade is designed to price in the cost of emissions. If someone suddenly invents some very cheap way to do sequestration and the price of emitting becomes very cheap, I wouldn’t consider that to be a bad outcome because we would still be reducing the total amount of emitted GHG.

  • Melanie Curry

    It’s true that a price signal to consumers about the cost of emissions is important. But if the price signal is invisible because “normal” prices fluctuate so widely, it won’t do much to change people’s behaviors around energy consumption.

  • my2centz

    A government fee to produce carbon emissions over a certain amount is a de facto tax.
    Producers simply pass the cost on to their customers. Which goes on until the customers are priced out of the market. Unfortunately it affects those who can afford it the least. Not many people can afford to buy a Tesla or even a new more fuel efficient car. So they suffer. Further it has already been shown that a gas price approaching $4.50 a gallon puts a significant damper on most families spending which affects businesses everywhere. Others have mentioned that the unforeseen effects of free market carbon credit trading could backfire and cause massive price swings such as the California electricity market experienced several years ago. I don’t think risking everyone’s economic livelihood with experimental social engineering is the most prudent way to reduce emissions.

  • Joh

    Typical left wing parsing of the English. If you like your gas, you can keep your gas. You’re just going to have to pay more for it. The CARB won’t even step up and say how much. When the “stupid” voters figure it out after Jan. 1 they can always blame Arnold for this farewell kiss off

  • doomedby2020

    There was, most definitely, going to be a flat tax on gas. This has been talked about, and seriously considered as recently as September. There was a very real discussion in Sacramento regarding imposing a .15 tax instead of putting the refineries under the cap and trade scam, which would result it an unknown increase in gas.
    It would seem this flat tax is not going to happen because gas prices are dropping so much.
    Environmentalists do not like cheap gas. They will do whatever they can to keep it high.
    Expect a $1 increase in January, it will be a lot like the energy deregulation 14 years ago. And don’t blame the oil companies, blame the enviro activists you all voted into office because you hate republicans so much. Morons.

  • doomedby2020

    Here is what democrats do for the poor and middle class:

    http://vidak.cssrc.us/content/democrat-leaders-kill-vidaks-effort-stop-hidden-gas-tax

  • Mumbai4000

    Curry is painfully, obviously full of shit.

  • Bill Diller

    Total BS piece by the author. “That means that distributors and transporters of fuels must either 1)
    comply with requirements to produce no more than a certain amount of
    greenhouse gas emissions (the “cap” on emissions), or 2) buy enough
    “pollution credits” from the state to “meet” the cap. This is the
    “trade” part of the system”Who do you think will ultimately pay for said regulations? Typical lies from the left.

  • jerry mander

    And just who do you think will pay for the rise in prices? My God, liberals are nitwits! No such thing as Green House Gases, just Green House Asses.

  • doomedby2020

    ‘Green House Asses’ …classic.

  • SohnMan

    My prices are already up $0.12 in one day. What will happen in a week? How about a month? Are you too stupid to realize that increased regulation creates higher prices and therefore is in essence a tax to the consumer whether it is labeled a tax or not? Seriously, how dishonest can one be?

  • The Truth

    Do you really think all “liberals” are nitwits? If so, you are part of the problem and not the solution.

  • jerry mander

    YES, I do!

  • The Truth

    Well then, you’re part of the problem. Enjoy your divided states of America.

  • dave darrow

    Nice bent this article tries to put on the reality of Ca’s asinine legislature but the reality is that AB32 will eff consumers. Wake up, Melanie! Ca has not been business-friendly for many years and is now extending the middle finger to the residents. Cap and trade measures on motor-fuel? An essential component of 99.9% of the work forces’ means to GET TO THEIR JOB SITES? This will raise the cost of everything. Plain and simple.

  • Ass Trough Terff

    look at all the astroturfers hitting this article!

  • Jake Thomas

    This is a huge lie. Fox news reports http://www.foxnews.com/politics/2014/08/27/california-hidden-gas-tax/

    This web site is crap.

  • Joe Linton

    Congrats, Melanie! Great article – seems like you’re pissing the right people off.

  • desperado49

    liberalism is a mental disorder, so yes they are all nitwits and have maggots up their arses

  • The Truth

    What’s funny about your comment is that you probably are an American that loves America, yet you and your votes make it a worse place to live. I’m no Democrat or GOP supporter, but blanket comments like “liberalism is a mental disorder” is eerily similar to Hitler’s “all Jews must die.” So, just know, you are the problem and not the solution.

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