California gas stations to slap cap-and-trade ‘cost’ labels on pumps

Source: Anne C. Mulkern, E&E reporter • Posted: Tuesday, July 5, 2016

Gas pumps in California could soon feature signs telling drivers they’re paying more per gallon because of the state’s cap-and-trade program for carbon emissions.

The California Independent Oil Marketers Association (CIOMA), a trade group for oil distributors, is handing out to members a label that adds wording on cap-and-trade costs to the standard one that advises motorists on gas taxes. The state requires that a label with gas taxes appear on all gas pumps. Those change on July 1 to reflect updated amounts.

With the yearly change in mind, CIOMA created the new label. Beneath the amounts for federal, state and local sales taxes on petroleum products, and for the underground storage tank fee, it added the heading “Other Assessments.” It then listed “state cap & trade obligation (apprx).” It cited the costs as 10 cents per gallon for gasoline and 13 cents per gallon for diesel.

“We have been trying for a number of years to get the state to include the cost” of cap and trade on gas tank labels, said Jay McKeeman, a vice president at CIOMA. “We just decided if we can’t get it included … we are going to provide that as a service to our members.”

“Consumers are paying about 10 cents a gallon on gasoline and 13 cents a gallon on diesel, and they know nothing about it,” he added.

The label from the oil group comes as Democratic leaders in the state are working to extend the law, A.B. 32, that authorized cap and trade. The climate measure’s authority lasts through 2020.

Backers of S.B. 32, the bill that would reauthorize California’s carbon programs, have not resolved whether the extension of cap and trade would run afoul of Proposition 26. That state constitutional amendment requires a two-thirds vote to raise taxes or fees (ClimateWire, June 16). There are negotiations ongoing with Gov. Jerry Brown (D) and interested groups in an effort to get the needed supermajority, which would have to include moderate Democrats and two Republicans, according to a source familiar with the talks. Supporters of S.B. 32 might have to decide how much they’ll have to give up in order to attain the needed two-thirds vote.

McKeemam said CIOMA isn’t seeking to kill cap and trade.

“We don’t have any agenda to try to undo this,” he said. “We just think that consumers ought to know they’re paying 10 cents a gallon.”

At issue: Is cap-and-trade a tax?

The cap-and-trade system auctions environmental permits to businesses with the highest greenhouse gas pollution. In 2015, the program expanded to include distributors of motor fuels. They must submit allowances for emissions tied to all in-state gasoline and diesel sales. Those are estimated at 17 billion gallons annually. Fuels represent about 40 percent of California’s greenhouse gas emissions, the largest single sector.

Oil companies for at least a year fought adding fuels to cap and trade, dubbing it the “gas tax.” Oil groups and their supporters said at the time that it would push up pump prices at least 10 cents per gallon, with spikes of 75 cents per gallon possible.

A state analysis in 2014 predicted pump prices would climb 10 to 12 cents per gallon as a result of coming under cap and trade. That was based on an auction allowance price of $12 per carbon ton.

Dave Clegern, a spokesman for the California Air Resources Board (ARB) said that the wording on the label is inaccurate because “the compliance obligation under the cap-and-trade program is not a tax.”

Oil groups are among those that have sued the state, arguing that the cap-and-trade program is a tax, which requires a two-thirds vote of approval under California’s Proposition 13. That constitutional amendment, which pre-dated Proposition 26, required a two-thirds vote for new taxes. The state contends that cap and trade is a fee. The suit is pending in the courts.

“It seems likely customers would really be more interested in the profit margins of the oil industry and public health impacts,” Clegern added in an email. “Now, why aren’t they posting those figures?

Time to revisit labels?

Oil companies are trying to “have it both ways,” said Susan Frank, director of the California Business Alliance for a Clean Economy, a coalition of 1,300 small and midsized companies supporting clean energy. Oil companies have opposed labels that said burning gasoline contributes to global warming, she said.

In 2014, Berkeley and San Francisco were debating a label stating that burning gasoline worsens climate change, Frank said. The San Francisco Chronicle said that Catherine Reheis-Boyd, president of oil trade group Western States Petroleum Association, in a letter to the city of Berkeley had called the labels “forced reproductions of the State’s and City’s policy opinions.”

“It’s incredibly hypocritical because the oil industry opposes gas pump labeling except when it reflects their claims of how gas prices may or may not reflect the cost of clean air standards,” Frank said. She added that “no one can definitively” say how much gas prices have gone up because of the state’s clean air policy.

“It’s unfair to consumers and to businesses because if we’re going to start labeling gasoline, let’s include everything,” she said, “including the costs to health and the environment.”

It might be time for the state Legislature to revisit the labels, she said.

CIOMA had tried to get lawmakers to mandate that labels include the cap-and-trade cost, without success. Assembly bills that would have required a version of the information died in committee in 2014 and this year.

A lawmaker who sponsored one of the failed measures this year praised CIOMA’s action.

“When government is collecting a tax worth billions of dollars, it has a fundamental duty to disclose it to consumers,” Assemblyman Tom Lackey (R) said in a statement. “While the Legislature may not value transparency, I am thankful gas station owners are willing to provide it absent a state mandate to do so.”

It wasn’t immediately clear how many gas stations would post the labels. CIOMA has about 2,500 members, but also supplies gasoline to about 80 percent of the stations in the state. In addition to posting the label at member-owned stations, trade group’s members can provide the new label to stations where it delivers gas, McKeeman said.

Click here to see the label.