State senator proposes carbon tax to offset cap-and-trade hike


Californians already pay some of the nation's highest gasoline prices. So the idea of tacking on a "carbon tax" doesn't sound appealing to drivers.

Starting in January 2015, pump prices could climb more than 12 cents a gallon. That's because in 2015, California's law to cap and reduce greenhouse emissions expands to cover vehicle fuels. Oil companies are expected to pass the cost along at the pump.

"That cost, that money is going to be felt at the pump," said state Senator Darrell Steinberg (D-Sacramento).

So instead, Steinberg is proposing a carbon tax, a tax based on the greenhouse emissions caused from producing and burning gasoline and other fuels.

The plan would not create an additional tax. Instead, it would alter how money is raised and spent under a provision of California's landmark 2006 greenhouse gas emissions law, known as AB32.

Steinberg's proposal would add a 15-cent-per-gallon carbon tax in 2015. He says it would create a financial incentive for cars and trucks to create less pollution.

The state's current cap-and-trade program applies only to industrial plants. It allows companies with higher emissions of greenhouse gases to buy pollution credits from companies that have found a way to lower their emissions below a certain threshold.

But next year, the cap-and-trade program is scheduled to be extended to the producers of carbon-based consumer fuels. In turn, that will raise prices at the pump by an uncertain level.

Steinberg said his proposal would raise the per-gallon carbon tax to an estimated 24 cents by 2020, which he said would still be lower than the 40-cents-a-gallon price hike that is possible under AB32. He acknowledged, however, that by 2029 his proposed carbon tax would be higher than the upper projected limit under the current law.

The tax would generate more than $3.5 billion in revenue. Some of revenue would be used to create a tax credit for low- and moderate-income families to help them offset cost of more expensive gas.

If approved, California would become the first state in the country to impose a carbon tax.

The Associated Press contributed to this report.

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