How Much Will Gas Prices Rise in California After Cap and Trade?

As noted last month, legislators opposed to the inclusion of transportation fuels have launched a campaign, complete with legislation, to delay it for three years. Borenstein bemoans that campaign, viewing it as "spin over how much gas prices will go up." His comprehensive article in Green Tech Media is his "attempt at de-spinning."

But first, why is this such an important issue? Is this just a debate about how much one can realistically expect "the cap" will add to gas prices, or is there something bigger at stake?

"There is a real policy debate here about how and when California should reduce its greenhouse gas emissions, 38 percent of which come from transportation," writes Borenstein. "I share (UC-Davis economics professor James Bushnell's) view that this is a moment of truth in which California needs to show it will really step up to reduce GHGs," he adds.

Interesting, the spinning is not just being done by industry, which suggests "a price impact of 16 cents to 76 cents." Even the California Air Resources Board (ARB) knows how to play the game, writes Borenstein.

The ARB and some other supporters of fuels under the cap have responded with their own inaccuracies, saying that including fuels in the program needn’t raise gas prices at all and suggesting that any increase is the fault of oil companies.

Borenstein states that based on his review of economic literature, it's "almost certain outcome is that within a few days after January 1, 2015, the cap-and-trade program will cause the price of gasoline in California to increase by 9 cents to 10 cents, a margin that is lower than the drop in gas prices that has occurred over the last few weeks."

The leader of the movement to delay the program for gas and diesel fuel is Assemblyman Henry T. Perea (D-Fresno) who has an opinion published in the San Francisco Chronicle on August 12 explaining his position.