‘Cap-and-invest’ hurt California — and will be bad for NY

California is seeing a staggering increase in gasoline prices, and it’s all due to idiotic state policies that may also be coming to New York.

On Tuesday, the campaign team of Republican candidate for governor Steve Hilton posted a picture of the especially high prices at a Chevron station in Los Angeles. “Downtown L.A. – almost $8 a gallon!” they wrote.

One reason could be the latest update of California’s “Low Carbon Fuel Standard,” a carbon credit trading program, which kicked in on July 1. The update had been estimated to add 65 cents per gallon to the cost of gasoline.

But that’s only part of the state’s war on petroleum products. There’s also the “cap-and-trade” program. It drives the cost of energy — and the cost of living — higher in California by requiring refineries, utilities and manufacturers to buy “allowances” to emit greenhouse gases.

The revenue from auctioning the allowances goes into the Greenhouse Gas Reduction Fund, conveniently located in the state treasury. The legislature spends the money on projects that supposedly reduce greenhouse gas emissions. Currently, 25% of the revenue is spent to build California’s high-speed rail boondoggle.

The state has raised tens of billions of dollars by selling these permits and has thrown hundreds of millions of dollars at such things as “equitable building decarbonization” and an “alternative manure management program.” More than $6 billion has gone to the high-speed rail project. Billions more have gone out in grants to various governments, agencies, authorities, commissions, districts and developers.

California’s cap-and-trade program is set to expire in 2030, which would immediately lower prices statewide, but Gov. Gavin Newsom now says he intends to extend the newly renamed “cap-and-invest” program through 2045, with $1 billion per year designated for the high-speed rail project.

All of this, minus the bullet train, could be coming to New York.

In 2019, New York enacted The Climate Leadership and Community Protection Act. It created a “Climate Action Council” to determine how the state would reduce greenhouse gas emissions 40% below 1990 levels by 2030, and then achieve “carbon neutrality” by 2050.

The Climate Action Council spent two years formulating targets for slashing the number of homes using natural gas water heaters and furnaces, replacing gasoline-powered cars with electric vehicles, and generating 70% of the state’s electricity from “renewables.” The mechanism to make this happen? A “cap-and-invest” program.

The idea of these programs is to reduce greenhouse gas emissions by charging “polluters” a lot of money for a gradually declining number of “allowances” to operate their businesses. Then the money raised can be spent on projects that further reduce greenhouse gas emissions.

But higher energy costs drive up the price of everything that’s made or transported in the state, including food. According to the Census Bureau, California has the highest poverty rate in the nation when the cost of living is considered.

In a confession that this drives up energy prices to the consumer, California’s cap-and-trade program reserves some of its funds to give state residents an annual credit on their energy bills to partially compensate for the higher costs.

Is it worth the cost? All of California accounts for only about 1% of global greenhouse gas emissions, but state officials maintain that California must show global leadership.

Who’s following, and how is it going?

On January 1, 2023, the state of Washington became the only other state to implement an economy-wide “cap-and-invest” program. Less than six months later on June 21, the Seattle Times headlined, “WA gas prices now highest in U.S.; some experts point to new climate legislation.”

One of those experts was Severin Borenstein, University of California Berkeley professor of business administration and public policy, who was invited by state lawmakers to explain the jump in fuel prices. He said there was no question that the cap-and-invest program was raising gas prices in Washington. He calculated that if carbon allowances cost $50 per metric ton of greenhouse gases, “the price of gasoline goes up about 50 cents per gallon.” The Oil Price Information Service reached the same conclusion.

In Canada, Quebec and Ontario adopted cap-and-trade programs, but Ontario bailed out in 2018. “It was costly, it was ineffective, it was killing jobs, it’s gone today,” said Environment Minister Rod Phillips.

There are signs that Gov. Hochul has cold feet about going forward with the cap-and-invest program that has been in the works for New York. In March, the Department of Environmental Conservation issued proposed regulations for the state’s “Mandatory Greenhouse Gas Reporting Program” revealing that even this preliminary step would not begin until June 1, 2027. That puts the start of higher gas prices safely past the next election.

It’s transparently evident that cap-and-invest programs are just a hidden tax on energy to fill up slush funds for politicians to spend on the kinds of things that people choose not to buy with their own hard-earned money.

Fair warning, New York.

Susan Shelley is a columnist and editorial writer with the Southern California News Group, and VP of the Howard Jarvis Taxpayers Association. On X: @Susan_Shelley.