Starting in January 2015, California's cap and trade program is expanding to include transportation fuels. Gasoline refiners will be required to purchase allowances for the greenhouse gas emissions associated with their product, and at $12 a ton for carbon dioxide, this will raise the price of California gas for consumers by 10 cents a gallon, according to UC Berkeley Professor Severin Borenstein. Consumers will likely not notice the change, given the decrease in the price of oil over the past year and the overall volatility in gas prices. But the funds raised will be substantial.
The Governor and State Legislature have appropriated the funds to a variety of state agencies, and the California Air Resources Board will likely have over $200 million to disperse through its Air Quality Improvement Program (AQIP). After the controversial High Speed Rail project, AQIP is the second largest expenditure category for the cap and trade funds.
Over half of the AQIP funds are used to provide rebates to purchasers of plug-in and battery electric vehicles. The rebates have drawn criticism from environmental justice advocates who believe the main beneficiaries are wealthy people who would purchase Teslas with or without the incentive. In fact, according to one survey, almost half of those submitting rebates for Tesla's premium electric sedan, which costs at least $70,000, earned at least $300,000. Historically, the rebates have also been clustered geographically, favoring the affluent, coastal, urban centers of the San Francisco Bay Area, Los Angeles, and San Diego.
To address this, the Governor signed the Charge Ahead California Initiative (SB 1275), authored by Senate President pro Tem Kevin de León (D-Los Angeles), into law. It directs the Air Board to increase access for disadvantaged, low-income, and moderate-income communities and consumers to zero-emission and near-zero-emission vehicles.
In early 2015, the Air Resources Board will be hosting workshops and developing a plan to comply with the new law. Among the options they will be considering are limiting consumer eligibility for the electric vehicle rebates based on income, and expanding the trade-in program for older higher-polluting vehicles by offering vouchers for car sharing and bus and transit passes (referred to as the "mobility option" in the law).
In considering how to reach lower-income communities, the Air Board may want to look at combining the marketing of the vehicle incentives with the ongoing marketing for the other energy rebates funded with cap and trade dollars such as the California Climate Credit. A new combined campaign could build greater popular awareness of how the cap and trade system can benefit consumers. Conveniently, the vehicle rebate is administered by the same organization that does the marketing for the climate credit. It would be a small leap to turn the electric vehicle rebates into a "Climate Credit for Cars."
Over several years, the combined marketing for the electric vehicle rebate and the energy climate credit could be developed into a consumer-oriented multi-sector "climate dividend" that recognizes the shared ownership of the atmospheric commons and returns the value generated to all Californians. Although the Governor has currently chosen to divide the funds into silos within the State's governmental structure, a future climate dividend could combine cap and trade funds from the transportation and energy sectors and return them to individuals as a per-capita distribution, perhaps on a debit card.
Such a system would ensure funds go directly to the people living in disadvantaged and low- and medium-income communities. It would provide positive publicity for carbon pricing with dividends that could resonate up to the national climate debate, and in terms of choosing how to spend the funds, it would put consumers of all incomes in the driver's seat.