Isra-Mart srl:California Carbon Auctions in 2015 May Boost Gasoline Prices

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California’s planned cap-and-trade program for greenhouse gases may raise gasoline prices in 2015 when oil refiners are required to start buying carbon dioxide permits for pollution from cars and trucks, a state agency said.

The program would regulate carbon dioxide emissions from the vehicles when they burn oil-based fuels. Refiners would likely have to buy the permits needed to cover this pollution in state-run auctions and “these fuel providers will be able to fully pass the cost of acquiring these allowances to the consumers of these fuels,” the California Air Resources Board said in a report today.

The proposed cap-and-trade system starts in 2012 by regulating pollution from the state’s electricity and industrial sectors, which will get free carbon dioxide permits, also called allowances, to provide a “soft start to the program,” the agency’s report said. The plan would expand to include pollution from cars and trucks in 2015.

The agency expects pollution permits, each representing one metric ton of carbon dioxide, to be priced between $15 and $30 each by 2020, according to an economic analysis released with the report. That would mean a 4 percent to 8 percent increase in gasoline prices, according to the analysis. If the carbon allowance prices climbed to $75 each, gasoline prices would be 19 percent higher in 2020, the agency said in the analysis.

The carbon trading proposal released today is authorized under California’s Global Warming Solutions Act, which requires the state to cut its greenhouse gases to 1990 levels by 2020. The agency’s 11-member board will meet Dec. 16 to decide whether to approve the plan.

Proposition 23

Details of the state’s cap-and-trade program are being released four days before California voters decide whether the global-warming law should be delayed until the economy improves. Proposition 23 on the Nov. 2 ballot would suspend the carbon- cutting law until the state’s unemployment rate falls from its current 12.4 percent to 5.5 percent for at least a year.

The design of the cap-and-trade program allows the state “to reach our emissions reduction goals while taking into consideration the current economic climate and the need to fully protect California’s economy,” Mary Nichols, the chairman of the air resources board, said in an e-mailed statement.

Some of the money the state government raises through pollution permit auctions should be used for a rebate program to “help consumers avoid negative impacts of higher fuel prices,” the agency said in the report on its cap-and-trade proposal.

Still, the higher fuel prices “may induce some consumers to switch to smaller vehicles that are both more fuel-efficient but less expensive than the larger vehicles chosen without cap- and-trade,” according to the agency’s economic analysis. Others may respond by “driving less,” according to the analysis.