Pain At The Pump: How Much More Californians May Soon Be Shelling Out To Fuel Up

As California continues to lead the nation in its environmental efforts, landmark legislation that aims "...to prevent catastrophic climate change..." by reducing greenhouse gas emissions in the Golden State was signed this week by Gov. Jerry Brown. The state's cap-and-trade program, originally slated for expiration in 2020, was extended to 2030 when Brown signed AB 398 into law on Tuesday. A companion measure, AB 617, was signed the next day, establishing a program for reporting emissions and measuring air quality, while also increasing criminal and civil penalties against those who violate air pollution laws.

Another recent overhaul in the state came just a few months ago when Brown signed legislation aimed at funding transportation projects. SB 1, or the "Road Repair and Accountability Act of 2017," established a 10-year gas tax and new annual vehicle fee increase to fix the state's roads and make other transit improvements.

But at what cost will these major changes come? That's where the plot starts to thicken, as there are a lot of estimates out there for how much more Californians will really be paying at the pump, between the new gas tax and cap-and-trade costs.

With the new gas tax, which will take effect in November, we know this for certain: Gasoline will go up by 12 cents a gallon, while diesel will go up by 20 cents a gallon.

Now, things start to get more complicated.

No More 'Fuel Tax Swap' Means 19.5 Cents Per Gallon More Than When SB 1 Was Signed

Since 2010, the California State Board of Equalization has adjusted the motor vehicle fuel excise tax annually through the "fuel tax swap," which requires something called "revenue neutrality." At that time, the state sales tax was eliminated for gasoline, and a complicated process for adjusting the excise tax rate per gallon began. Each March, the BOE now sets a "prepayment" amount tax that will then be in effect from July 1 through June 30 the following year.

"The fuel tax swap provisions require the BOE to maintain revenue neutrality so that the revenues derived from the increased gasoline excise tax and the increased diesel sales and use tax equal the revenues that would have been derived had the gasoline sales and use tax partial exemption and the diesel fuel excise tax reduction, respectively, not occurred," a document from the BOE analyzing the effects of SB 1 on fuel tax rates stated in December.

However, under SB 1, that will all change — again — in 2019.

Come July 1, 2019, the fuel tax swap will be eliminated, and "...the higher gasoline excise tax rate that was in effect on July 1, 2010..." will be reimposed, "...in addition to the increase in the [new gas tax] rate... that becomes effective on November 1, 2017," according to the bill's language.

The current excise tax — which just went up by 1.9 cents a gallon on July 20 — is 29.7 cents per gallon. In July 2010, that rate was 35.3 centers per gallon, according to BOE data. So that means in 2019, when the fuel tax swap is done away with, we'll be paying 5.6 more cents per gallon of gasoline than now.

The December analysis of SB 1 from the BOE confirmed this, when the agency stated, "Overall, gasoline excise taxes increase from the FY 2016-17 rate of $0.278 to $0.473 per gallon over a three year period, and diesel fuel excise taxes increase from the FY 2016-17 rate of $0.16 to $0.33 per gallon."

This means that come November, we'll be paying the 12 cents per gallon new tax, plus the 1.9 cents that was just added. In 2019, you can add 5.6 cents to that, for a grand total of 19.5 cents more per gallon than when SB 1 was signed.

Cap-And-Trade Extension May Mean Up To 73 Cents More Per Gallon By 2031

Here's where the cap-and-trade extension comes in and we get into the estimation game.

As stated above, cap-and-trade — which seeks to reduce greenhouse gas levels in California to 1990 levels by 2020 and requires companies to buy permits to release greenhouse gas emissions — was extended via AB 398 into 2030. With the renewal of the "Global Warming Solutions Act of 2006," legislators are hoping that statewide greenhouse gas emissions "...are reduced to at least 40% below the 1990 level by 2030," according to the bill's text.

A report by the Legislative Analyst's Office, which is a nonpartisan organization that provides analyses of the state budget, estimated last year that some of the cost of participating in the program since its inception has been passed onto consumers by transportation fuel suppliers — to the tune of 11 cents per gallon.

At the behest of a Republican assemblymember, the same agency recently looked into how much an extension of cap-and-trade would cost people at the pumps. They examined two scenarios.

"We consider post-2020 cap-and-trade allowance prices under two hypothetical scenarios — a relatively low price (known as the auction reserve price, or price floor), and a relatively high one (known as the Allowance Price Containment Reserve [APCR] price, or price ceiling)," the LAO said.

Under the two scenarios, the LAO came back with these numbers:

• Under the auction reserve price scenario, cap-and-trade would raise gas prices by an estimated 15 cents per gallon in 2021, increasing to 24 cents per gallon in 2031.
• Under the APCR price scenario, cap-and-trade would raise gas prices by an estimated 63 cents per gallon in 2021, increasing to 73 cents per gallon in 2031

Using those numbers for our overall estimations, by 2021 Californians could potentially be paying 32.6 cents more than they are today in gas taxes on the low end (that's the 12 cent gas tax coming in November, plus the 5.6 cents a gallon more when the fuel swap ends and the 15 cents estimated by the LAO) — and as much as 80.6 cents per gallon on the high end of the estimations by the LAO.

What do YOU think about these potential increases? Tell us in the comments below!

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