By Dan Walters, CalMatters
This commentary was originally published by CalMatters. Sign up for their newsletters.
This week — as the conflict between the U.S. and Iran raged and gasoline prices soared due to disruption in the global oil trade — a political war erupted in California over proposed air pollution rules that could increase fuel prices even more.
The California Air Resources Board’s new crackdown on greenhouse gas emissions, “risks driving production, and the associated emissions, out of state, ultimately undermining both California’s economic base and global climate objectives,” the California Manufacturers & Technology Association says.
Association President Lance Hastings added in a statement, “If these proposed regulations move forward, Californians should brace for higher costs across the board with no end in sight. There is still time to fix this. CARB and the Legislature must act before it’s too late."
The proposed regulation "will cripple the survivability of the state’s remaining refineries, which will result in California losing the entire industry to this misguided program,” Andy Walz, a high-level Chevron executive, said in a statement. Two California refineries have announced plans to shut down and Chevron, which operates two of the remaining plants, has repeatedly implied that California’s regulatory climate might force it to flee the state as well.
However as business pressured the Air Resources Board to ease the limits, a coalition of environmental groups, including the Environmental Defense Fund, complained that the proposed rules don’t go far enough.
“Last year, in the face of federal backtracking, California reinforced its leadership on fighting climate change by extending its cap-and-invest program while prioritizing reducing high electricity bills and saving households money,” their letter read. “However, CARB’s 2026 proposed C&I program amendments fall short of the near-term ambition needed for California to be on a consistent and affordable path to achieve its 2045 carbon neutrality goals.”
Meanwhile, 15 Democratic legislators released a letter expressing concern that the new rules would raise fuel and energy costs that are already among the nation’s highest.
“This crisis is not a fallacy nor a thinly veiled threat. It is a reality borne by consumers today, who are historically and empirically least able to afford it,” the legislators said, adding, “California's climate leadership cannot come at the cost of destabilizing our energy markets and burdening those least able to bear it.”
Interestingly — or ironically — all 15 signatories voted less than a year ago for the legislation that empowered the air board to draft the revisions, which were released in January and are due to be finalized in May.
The legislation behind this flurry of warnings and laments is Assembly Bill 1207, which emerged from backroom negotiations last September. It quickly passed and Gov. Gavin Newsom signed it.
The measure renames the cap-and-trade program cap-and-invest and extends it 15 years from 2030, the current expiration date, coinciding with the state’s declared intention to make California carbon neutral by 2045. It authorizes the Air Resources Board to adjust the emission limits accordingly.
Until now, the state’s business community had fundamentally supported the auctioning of emission allowances as a market approach preferable to the direct regulation of emissions, which many environmental groups favored.
Capitol politicians also liked auctions because they generate large amounts of money — an estimated $31 billion since 2013 — that are supposed to finance carbon emission reductions. One major recipient has been the state’s much-troubled bullet train project. However, when the state incurs one of its periodic budget crises, the Greenhouse Gas Reduction Fund has also been tapped for expenses that have little, if any, connection to greenhouse gases.
The cost of living is now a top-drawer political concern, and with gasoline prices topping $5 a gallon in many regions, anything that pushes consumer prices even higher is bound to become a political football.
This article was originally published on CalMatters and was republished under the Creative Commons Attribution-NonCommercial-NoDerivatives license.