CA Dems balk at Cap and Trade cost

03 Jul, 2014 by Wayne Lusvardi

With gas prices soaring again, consumers are rebelling. And even liberal Democrats in California are seeking to help their constituents.

Assemblyman Henry Perea, D-Fresno, spearheaded the writing of a June 16 letter signed by 16 Democratic assembly members to California Air Resources Board Chairwoman Mary Nichols. Separately, 26 Republican legislators have advanced a similar protest. The concern of the legislators is high future gasoline prices from the cap-and-trade emissions program on their constituents.

Cap and trade and its quarterly auctions of emissions allowances were instituted by CARB two years ago under the authority of AB32, the Global Warming Solutions Act of 2006. It limits air emissions by large industries and private electric utilities unless they “trade” pollution allowances above the allowed emissions “cap.”

Most of the new letter signatories represent low-income areas in Los Angeles, the Central Valley and the Inland Empire.

The letter highlighted something not well known: “AB32 does not mandate that CARB create a program that generates revenue for the state and it was not intended to be a funding mechanism for massive, new state efforts at GHG [Greenhouse Gas] reduction.”

Yet in the new state budget for fiscal year 2014-15, which began on July 1, Gov. Jerry Brown and the Legislature grabbed $250 million of cap-and-trade funds for the controversial high-speed rail program. That’s 25 percent of an expected $1 billion in cap-and-trade revenues.

The California Chamber of Commerce earlier this year filed a lawsuit contending the Legislature did not authorize CARB to raise revenue beyond the costs of administrating the cap-and-trade program. The outcome of that case is pending.

Gas price spike

Assemblyman Perea’s concern is that gasoline prices will rise by $0.15 per gallon next year from cap and trade and will increase each year thereafter. Gas prices are expected to rise dramatically as the cap-and-trade program expands to include large fuel suppliers next year. The Wall Street Journal cited a Boston Consulting Group study in 2012, predicting gasoline prices would go up between $0.49 to $1.83 per gallon by 2020 due to cap and trade.

An effort called “Fed Up at the Pump” has just been organized by the California Independent Oil Marketers Association to criticize this “hidden” tax on gas.

The largest number of long distance automobile commuters in the United States are from San Bernardino County to Los Angeles County at an average of 68 miles. The higher costs would roughly add from $799 to $2,986 per year to gasoline expenses for an average commuter (assuming 20 miles per gallon fuel efficiency). At the higher figure, that would be equivalent to a car payment each month for many lower-income workers.

Political crackup?

The Democrats are echoing the attitude of Jim Kellogg, himself a Democrat and former member of the California Fish and Game Council. He warned in 2010:

“I don’t doubt that there will be more green jobs in California, perhaps even thousands of them; however, we don’t want to put at risk the millions of well-paying, blue-collar jobs that put bread on the table right now. We need to make sure we do our homework, ask the tough questions and make adjustments as necessary to implement AB32 in a way that reduces greenhouse gases without hurting millions of families in this state.”

The Perea caucus letter signifies a continuing split in the majority Democratic Party between Hispanic politicians representing largely working-class areas — and the Bay Area Democrats who represent ultra-wealthy, Silicon Valley billionaires interested in greater environmental restrictions.

In 2013, Democrats started losing seats in the Legislature to Republicans in the Central Valley electoral districts with heavily Democratic and Hispanic constituencies over the different issue of “Fish versus Farmers.” Further unreasonable implementations of AB32 could further hurt working-class Hispanic voters, leading them to continue moving toward the Republican Party.

Jay McKeeman of the California Independent Oil Marketers Association summed up the looming higher gasoline prices:

“I think we all just kind of realized that there was no quarter given by CARB. At this late date, we don’t see out of the administration that there’s going to be an adjustment for this, so we’ve got to take it to the streets.”

Indeed, Neel Kashkari, the Republican challenger in the November gubernatorial race, has attacked what he calls Brown’s “hidden” gas tax. Kashkari’s bid remains a longshot. But if gas prices keep rising the next four months, he could turn the issue into one that makes the race too close for Brown’s comfort.

The 16 Democratic Assembly members signing the Perea letter:

Henry Perea, D-Fresno, 31^st District

Cheryl R. Brown, D-Inland Empire, 47^th District

Freddie Rodriguez, D-Pomona, 52^nd District

Rudy Salas, D-Bakersfield, 32^nd District

Susan Bonilla, D-Central Valley, 14^th District

Adam C. Gray, D-Merced-Central Valley, 21^st District

Isadore Hall III, D-Compton, 64^th District

Tom Daly, D-Anaheim, 69^th District

Jose Medina, D-Riverside, 61^st District

Christina Medina, D-Bell Gardens, 58^th District

Roger Hernandez, D-El Monte, 48^th District