California low-carbon rule survives big legal challenge, writes the Sacramento Bee:
California’s Low Carbon Fuel Standard, one of the centerpieces of the state’s fight against global warming, survived a significant legal challenge Monday when the U.S. Supreme Court declined to hear a lawsuit brought by oil-industry and out-of-state farm groups.
The court let stand a 2013 decision by the 9th U.S. Circuit Court of Appeals upholding the low-carbon fuel standard, which became a law in 2007 by then Governor Schwarzenegger’s executive order. The standard requires fuel producers to reduce the “carbon intensity” of their products by 10 percent by 2020.
The fuel standard is one of the two key components of California’s effort to curtail greenhouse gases. The other is AB 32, signed into law by Schwarzenegger in 2006, which established a cap-and-trade program requiring hundreds of big industrial firms to purchase credits in order to release carbon into the air. Refineries have been exempt from the requirement so far, but their emissions will come under the program’s regulations beginning next January. Analysts have said it could mean gas prices at the pump could rise 10 to 20 cents.
What does this mean to Nevada County? The target is transportation, according to Mary Nichole CARB Chairwoman.
“It sends a clear message that the time for delay is over and the time to clean up and diversify transportation fuels is now,” Nichols said.
Tourism is one of the legs of Nevada County’s economic strategy. Tourism is sensitive to fuel prices, as it is an elective activity, families can choose how to spend their discretionary budget. Families can elect to stay home, or spend a day, or week end in Western Nevada County. If a family commutes to work, there will be less money in the vacation budget. As the cost of commuting increases families will have less money in the vacation budget.
While some estimate the increase cost a 10 to 20 cents per gallon, others say it could be as high as 40 cents a gallon. While this might only raise the cost of a visit no more than $10 to $20 in transportation costs, it is the perception that it cost too much. The CBO writes in a study:
By raising the cost of using fossil fuels, a carbon tax would tend to increase the cost of producing goods and services—especially things, such as electricity or transportation, that involve relatively large amounts of CO2 emissions. Those cost increases would provide an incentive for companies to manufacture their products in ways that resulted in fewer CO2 emissions. Higher production costs would also lead to higher prices for emission-intensive goods and services, which would encourage households to use less of them and more of other goods and services.
One of the choices people will most likely make is to reduce the miles traveled, which is exactly want CARB wants to happen. Many will choose to reduce their vacation miles and allocate more miles for commuting to work, or shopping for family needs. As the CBO points out, the biggest impact is on lower income segments of the population.
The costs of a carbon tax would not be evenly distributed among U.S. households. For example, the additional costs from higher prices would consume a greater share of income for low-income households than for higher-income households, because low-income households generally spend a larger percentage of their income on emission-intensive goods.
Emission-intensive good also includes transportation costs. The California Trucking Association projects that LCFS, when combined with AB-32 Cap and Trade, will raise the price of diesel to $6.69 per gallon.
Under the Compliance Outcome the combined effect of the LCFS and Cap and Trade programs would add an additional $2.22/gallon to California diesel prices, increasing retail diesel prices by 50 percent to $6.69/gallon by 2020.
The average price difference between California and neighboring states would be $2.33/gallon, taking into consideration California‘s $0.11/gallon higher average diesel tax rate.
These higher California-only diesel costs will create a substantial cost bubble around California where inside the bubble diesel prices will be significantly higher than in the rest of the country.
This increases the challenge for the Nevada County Economic Resource Council that has developed an economic strategy based on manufacturing companies relocating or expanding in Nevada County. Manufacturing relies on the importing of raw material and exporting finished products. With diesel prices higher than surrounding states, transportation cost will be higher, a disincentive for moving a business to Nevada County.
Increased diesel prices will also impact the cost of goods on the store shelves, including the groceries that sustain all of us in Nevada County. As diesel prices go up, the cost of living in rural counties goes up, making a company of family move to the foothills less attractive. The closer a community is to distribution centers the smaller the transportation cost impact. Nevada County is not close to critical distribution centers/facilities.
The increased fuel cost from LCFS and AB-32 will have the highest impact on the poor in rural counties. While our local lefties are celebrate the Supreme Court’s decision not address the LCFS issues, they have not considered the impacts on the poorest in rural counties like Nevada County.