California drivers brace for costly new gas tax

Californians already pay the nation's second highest gas tax at 68 cents a gallon -- and now it will go up again in January to pay for a first-in-the-nation climate change law.

"I didn't know that," said Los Angeles motorist Tyler Rich. "It's ridiculous."

"I think it’s terrible," added Lupe Sanchez, pumping $4.09-a-gallon gas at a Chevron near Santa Monica. "The economy, the way it is right now with jobs and everything, it's just crazy."

When gas prices go up, motorists typically blame oil companies, Arab sheiks and Wall Street speculators. This time they can blame Sacramento and former Gov. Arnold Schwarzenegger for passing a bill requiring California to reduce carbon emissions to 1990 levels by 2020.

The tax on carbon already raised about $1 billion in revenue by requiring manufacturers and utilities to buy credits for each ton of carbon emitted into the atmosphere. At the beginning of next year, the law will also apply to oil and gas. Refiners and distributors say they will pass another $2 billion in costs on - largely to consumers.

"Ultimately it hurts the consumer," said California Independent Oil and Marketing Association spokesman Mike Rohrer. "It is going to affect anyone who has a vehicle. Be it a motorist that is commuting back and forth to work or a trucker just moving goods throughout the state of California, the cost is immediately going to increase because whatever we have to pay for in carbon credits ultimately we have to pass through to the consumer."

Estimates of the cost of the tax vary. The California Air Resources Board, the Golden State's premier anti-pollution agency, predicts the new tax will raise gasoline prices from 20 cents to $1.30 per gallon. A prominent state senator who helped author the bill estimated the cost at 40 cents a gallon. Environmental activists downplay the cost, but hail the impact.

"We're going to now tackle probably 40 percent of greenhouse gas emissions in the state that are emitted mostly through transportation - oil and gas use," said Climate Resolve Executive Director Jonathan Parfrey.

The cost of the climate change law never was spelled out in the original bill in 2010, which did not even include transportation fuels.But any meaningful climate change law would have to address driving, the state's largest single source of pollution. By raising the price, officials hope to reduce the number of miles driven as consumers are forced to consider options.

"We have to effect a transition away from the polluting of fuels that we currently have," said Parfrey. "We have to pay a little extra so that we're making sure that our energy in the future is not going to be spoiled."

Not everyone is sold on the idea. Europe tried a cap and trade program in the last decade and pollution levels still increased dramatically.

California is the only state to extend the idea to gasoline. By the end of the decade, the state is expected to collect $5 billion in revenue by charging businesses and consumers for the right to pollute. So far the state collected $833 billion by selling 'carbon credits' to polluters.

"They have generated close to a billion dollars in revenue just from the carbon tax credit auctions that have been going on for over a year. Where has that money gone?" asked Rohrer.

"And why do we have to tax the consumer to make this happen for clean air? Everyone is for clean air but let’s not hurt the consumer in the process and not giving them a full explanation of how this exactly works and why."

Last week California sold all of the nearly 22.5 million carbon credits it offered this year. Revenue from the auction is deposited into California's greenhouse gas reduction account. There it is used not just to reduce emissions or the cost of pollution controls for business, but also to build low-income housing near mass-transit hubs and support construction of the state's high-speed rail project.

Critics claim the money could be better spent to directly reduce emissions from industrial sources. Instead, some say the fund acts more like a pot of money for state politicians to build projects in their district for residents who may or my not use the transportation alternatives.