Californians gassing up their cars would pay a carbon tax — starting at 15 cents per gallon next year and rising to 43 cents per gallon in 2030 — under a proposal Senate leader Darrell Steinberg introduced Thursday.
He touted the plan as a better alternative to the rising gas prices drivers would otherwise see under California's existing law to reduce greenhouse gas emissions. Under that 2006 law, known as Assembly Bill 32, oil companies will have to buy carbon credits for all the fuel they sell starting next year. Experts expect that will lead to a rise in gas prices that could fluctuate unpredictably.
Steinberg said his plan would provide more stability.
"We must reduce the amount of carbon we put into the air, and that will come with a price.
Nothing is free. A carbon tax is not free and cap and trade is not free," Steinberg said while unveiling the proposal to the Sacramento Press Club.
"Under either, applied to fuel, consumers will undoubtedly pay more at the pump. It may not be popular to say, but that's necessary. Higher prices discourage demand. if carbon pricing doesn't sting, at least a little bit, we won't change our habits."
Steinberg's plan calls for spending the taxes generated — estimated at more than $3 billion in the first year — to improve public transportation and give income tax credits to California families making up to $75,000 a year. That would give about $600 back to the average qualifying household, Steinberg said.
"How many more Californians could we lift from the reach of poverty while healing our climate at the same time?" Steinberg said.
He compared his proposed tax break to the federal Earned Income Tax Credit, which he said has helped millions of poor people.
Environmental groups that support AB 32 were critical of Steinberg's proposal, while the oil industry did not initially object.
"What the Senate leader's plan does is put a different option out there that is broader in nature, more transparent and flexible. And it achieves the same goals that AB 32 is trying to achieve, but it does it in a way that's less impactful to the consumer," said Catherine Reheis-Boyd, president of the Western States Petroleum Association.
Her association, which represents oil companies, has not taken a formal position yet, but Reheis-Boyd said the proposal is igniting an important debate.
"Many people did not know that on Jan. 1st, 100 percent of emissions associated with transportation fuels would have to be purchased... I don't think people understood what that meant or that it would be happening."
It would cost oil companies about 12 cents a gallon buy carbon credits for the 17 billion gallons of fuel sold in California each year, she said. It's likely much of that cost would be passed on to consumers.
But pricing gas so people feel the impact of pollution is exactly what's needed to change transportation habits and improve the environment, said Timothy O'Connor, an attorney with the Environmental Defense Fund. He said nearly 40 percent of greenhouse gasses in California come from cars and trucks.
"Dismantling or disrupting a world-class program that's working to cut pollution and replacing it with something where you can't guarantee those reductions in the communities that he's trying to protect doesn't seem like a very reasonable approach," O'Connor said following Steinberg's speech.
"We need to be guaranteeing these pollution cuts. And what we heard today cannot guarantee that."