Experts say stricter fuel emission regulation will boost prices, but estimates vary. A lot depends on the price of Low Carbon Fuel Standards credits.
Californians are likely to pay more at the gas pumps in July because of increases in the state excise tax and fuel emission fees. But how much more exactly?
Various estimates have been floating around, raising concerns and sometimes outrage. Republican state Sen. Brian Jones has demanded an audit of “Newsom’s gas price hike,” which he claims could hit 65 cents a gallon, while Gov. Gavin Newsom’s office released a “fact check” saying the increase “won’t come anywhere close” to that figure.
So what will consumers see at the pumps? The higher excise tax is a sure thing, but costs associated with fuel emission regulations remain unclear.
Excise Tax Increase
Effective July 1, the state excise tax on a gallon of gasoline will increase by 1.6 cents, to 61.2 cents from the current 59.6 cents. The California Department of Tax and Fee Administration (CDTFA) announced the increase in early June.
The state excise tax is separate from the sales tax, the federal excise tax, and other fees, including those from climate programs. The federal excise tax has been 18.4 cents since 1993 across all states.
The state excise tax is adjusted annually based on the California Consumer Price Index to account for inflation, as mandated by the Road Repair and Accountability Act passed in 2017, which also increased the excise tax by 12 cents that year.
The state excise tax on diesel fuel will also increase by 1.2 cents per gallon, to 46.6 cents from 45.4 cents, according to CDTFA.
Fuel Emissions Fees
The cost associated with fuel emission regulations is a dynamic pass-through to consumers and does not have a fixed amount.
An updated gas price breakdown on June 23 by the California Energy Commission estimated the current cost at 15 cents per gallon, or about 3 percent of the total gas price at the pump. Other experts have estimated the cost at a few cents more or less.
An increase is looming when stricter fuel emission standards set by the state’s air quality regulators go into effect.
California Air Resources Board (CARB) passed its Low Carbon Fuel Standards (LCFS) amendments on Nov. 8, 2024, setting more aggressive targets to reduce greenhouse gas emissions of the state’s transportation sector, by 30 percent by 2030 and 90 percent by 2045, against the 2010 baseline.
It is widely expected that the stricter standards will increase gas prices, but estimations vary greatly.
By Jane Yang
