A Free-Market Energy Blog

Can CARB and U.C. Handle the Truth About Cap and Trade? A Rebuttal

By -- August 14, 2014

“[The] 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 9-10 cents, less than the drop in gas prices over the last few weeks…. Before I move to confront some of the spin, let’s consider that price increase in context. A 10-cent increase will be about 2.5%. Here are some things you could do to fully offset that additional cost:  

*Drive 70 mph instead of 72 mph on the freeway.

* Buy a car that gets 31 mpg instead of 30 mpg.

* Keep your tires properly inflated.

Instead of this simple reality, we are hearing misinformation coming from both sides.”

– Severin Borenstein, Californians Can Handle the Truth About Gas Prices, The Energy Collective, August 12, 2014. 

Severin Borenstein, Director of the University of California Energy Institute, says that “Californians Can Handle the Truth About Gas Prices” resulting from the state’s Cap and Trade program. To Borenstein, that truth is that his purported 10-cent per gallon gas tax hike would be unnoticeable at the service station pump.

But, can Borenstein handle the truth about the Cap and Trade program’s empty policies in the first place?

No matter if the looming increase in gasoline taxes is an unnoticeable sum in year one as Borenstein estimates, or could balloon to as much as a monthly car payment for long distance commuters as some consultants estimate by 2020, the larger policy issues about Cap and Trade should not be run over in a hit-and-run fashion.

If Borenstein is going to use the rhetorical device of relativizing future gasoline taxes, so can critics relativize the more important policy justifications for California’s Cap and Trade program.

First, allow me to say that Borenstein is more of a truth teller than most energy policy experts I have found in academia in California. His analysis “The California Solar Initiative is Ending, What Did It Leave Behind?”, was a candid and courageously critical look at California’s 100,000 solar roofs program. Many of us look to Borenstein as a competent analyst who we can rely on to convey accurate information and transparent opinions about California’s energy policies, even if we might not always agree with him.

Thus, I found it disappointing that Borenstein would write such a perceived self-serving article about California’s coming higher gasoline prices from its Cap and Trade program that would likely benefit programs and research grants for the U.C. system, without disclosing that upfront. I don’t think that is what he intended, but his article could certainly be construed that way.

Borenstein included his impeccable credentials at the bottom of the article and his affiliation with the U.C. system. But he failed to disclose that he has a perceived, potential conflict of interest that may have influenced his analysis and opinions.

In May, 2013 Gov. Jerry Brown diverted $500 million of the revenues collected from first year of the Cap and Trade pollution permit auctions into the state General Fund, which indirectly supports the U.C. system, as all state operating budget line items are fungible.

Moreover, how would Borenstein’s minimization of a purported 10 cent per gallon gasoline tax increase appear to some blue-collar worker who makes the 68-mile one-way commute from San Bernardino to Los Angeles each day? The largest numbers of automobile commuters in the U.S. make that commute each day.

It doesn’t matter that a 10-cent gas tax hike would be only 65 cents per day to those in the working class making that commute. Rather, they would probably perceive Borenstein’s opinion as insensitive and self dealing because the U.C. system is likely to get its cut of that tax to keep professors in their cushy jobs no matter what.

Regardless if the gas tax hike is unnoticeable, it has a perception problem because it subsidizes elite policy gurus who live off such public policies.   There is no getting around that the Cap and Trade gas tax hike has a perception problem at minimum and is a regressive tax on the working class at a maximum.

That said, allow me to use the same relativization techniques that Borenstein has employed to question the Cap and Trade program in the second place.

CARB Admits Cap and Trade Can’t Meet Goals Anyway

I will sidestep the controversial issue of whether there is a future threat of “global warming” or “climate change” that the California Air Resources Board (CARB) uses as justification for its policies and programs. But allow me to point out that there has been no global warming for the last 17 years and 10 months.

Moreover, CARB subtly had to shift its justification for Cap and Trade from “global warming” to “climate change” in 2013 after the science backing up the theory of global warming, as the public put a very low priority on solving global warming in opinion polls. This was done by subtly updating its Climate Change Scoping Plan in 2013. Even NASA now doubts global warming science models.

On page 5 of that Plan, CARB explicitly states it cannot meet its greenhouse gas reductions goals anyway by 2050 without doubling the amount of such reductions. CARB:

 “Progressing toward California’s long-term climate goals will require that GHG reduction rates be significantly accelerated. Emissions from 2020 to 2050 will have to decline at more than twice the rate of that which is needed to reach the 2020 statewide emissions limit.”

So if CARB can’t meet its carbon dioxide (C02) reduction goals anyway why is it imposing a 10-cent gasoline tax that falls on the working class the hardest?

Nickel and Diming

Once again Borenstein glosses over a perceptual problem. Local governments and school districts in California are masters at justifying tax increases as only the cost of a Starbucks coffee each day. Borenstein has now used this same bandwagon effect by saying that a 10-cent gas hike is unnoticeable given the ups and down of the market. Never is it framed as taking the cost of the donut out of the working class driver’s pocket book when they stop at Winchell’s Donuts each morning.

More importantly, this marketing ploy ignores the billions of dollars of revenue collected from Cap and Trade taxes each year by nickel and diming the public in the cost of all goods and services. The working class doesn’t look at the dimes they look at those big fat cat government and academic jobs that are robbing Martín and Marian to pay Severin.

A CARB Disinformation Program?

In an August 1 letter to CARB Chairwoman Mary Nichols, Catherine Reheis-Boyd, President of the Western State Petroleum Association, asked for clarification why CARB staff is sending out so many confusing mixed messages about looming Cap and Trade gas tax increases. Boyd quotes CARB staff as publicly stating the following contradictory messages in recent weeks:

CARB Statement CARB Contradiction
1a) “Consumers will see gasoline costs increase between 4 percent and 19 percent.”(Stanley Young, CARB, Sacramento Bee, June 30, 2014) 1b) “Consumers will not see impacts of the regulation until 2018. “(David Clegern, CARB, Inland Valley Daily Bulletin, July 2, 2014)
2a) “Consumers already are paying the higher costs for fuels.” (Stanley Young, CARB, Sacramento Bee, June 30, 2014) 2b) Consumer will not see any impact on fuel costs as a result of the regulation. (Stanley Young, CARB, Sacramento Bee, June 30, 2014)

And as Boyd’s letter points out, if Stanley Young of CARB is quoted in the June 30, 2014 issue of The Sacramento Bee that gas prices could increase 4 to 19 percent, how can Borenstein contend it will only be a 2 percent increase? A 19 percent increase would equate to a 95-cents per gallon increase using Borenstein’s math.

All this raises the question of whether CARB has deliberately launched a disinformation campaign to confuse the public? Unfortunately, Borenstein’s article could be perceived as adding to the confusion.

Gas Taxes Will Rise More than 10 Cents

Borenstein well knows that starting in 2015, the number of pollution permits that CARB issues to industries, utilities, and to fuel providers (gas and diesel fuel) will be intentionally reduced to compel them to either reduce air emissions or have to buy a scarce supply of permits from CARB at ever higher prices. This will mean that the 10-cent per gallon gas tax increase that Borenstein is advertising won’t stay 10-cents very long. But Borenstein never estimates what he believes the future Cap and Trade gas tax would likely be.

Borenstein says pollution permit auction prices will stay $12 per ton of emitted pollutants. But Borenstein’s own prior research has raised the alarm that ‘Cap and Trade pollution’ permit prices could climb to $50 per ton or higher and has called for a price ceiling. At $50 per ton the Cap and Trade gas tax hike would be $0.41 per gallon. A 41-cents per gallon gas tax increase would equate to a $700.98 increase per year to those long distance commuters from San Bernardino to Los Angeles mentioned above (136 miles per day / 21 mpg = 6.48 x $0.41 x 22 days month x 12 months).

Unfortunately, Borenstein may have created the impression he has crossed the line between being a neutral civil servant and becoming an advocate for higher taxes without disclosing he is exercising his free speech rights to do so independent of the University of California, the State of California, or CARB for whom he does consulting work.

TAGS: Severin Borenstein University of California Energy Institute ‘Californians Can Handle the Truth about Gas Prices’, California Air Resources Board Cap and Trade gasoline tax increase 2014, Wayne Lusvardi



  1. Sean  

    How many decades have energy rationers wanted a $0.50/gal gas tax. Cap and trade looks to be the vehicle to deliver this regressive tax.


  2. Tom Tanton  

    The issue of ‘relativization’ cuts the other way as well, and not at all in Borenstein’s favor. EVEN if California’s AB32 implementation is successful at reducing GHG emissions, the deminimus change in global emissions (what, less than 1/2 of 1% ?) will do less than nothing to the climate.


  3. kuhnkat  

    “Here are some things you could do to fully offset that additional cost:

    *Drive 70 mph instead of 72 mph on the freeway.

    * Buy a car that gets 31 mpg instead of 30 mpg.

    * Keep your tires properly inflated.”

    Except I have a car that gets 31 mpg. I drive 55 and put up with the other drivers glares. I run my tires at maximum inflation.

    IN other words Seth is full of it cause I cannot repeat these steps I have been taking for over 10 YEARS to save money!!!

    I also insure the car is in good repair and drive carefully, again, for the savings and the safety. Guess I will have to move my 84 year old mother onto the back of my motorcycle… Can’t afford a $30K car that gets over 40mpg.


  4. Bill Chaffee  

    Instead of a regressive tax there should be a requirement the cars be equipped with fuel flow meters that would display the fuel flow per hour of the car. Some cars already have instantaneous mileage meters. Fuel flow meters have the added benefit of displaying the fuel consumed while idling .


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