State senate leader urges a carbon tax... with a twist

You could be forgiven if, after seeing the early reactions to a major tax proposal that would (again) put California on its own national stage in the climate change debate, you thought you were living in Bizarro World.

When it comes to a carbon tax, nothing is quite as it seems.

Thursday's announcement by Senate President pro Tem Darrell Steinberg, D-Sacramento, took most everyone by surprise: the unveiling of a multi-billion dollar new tax that would likely raise the price of a gallon of gas in California 15 cents in 2015, its first year of implementation, and more in the years after that. The tax would be assessed on everything from gasoline to ethanol, and would be based on the carbon footprint of the fuel's production.

It's a long talked about idea, one already in place in some parts of the world. But it would be the first of its kind in the United States.

"That cost, that money, is going to be felt at the pump," said Steinberg in his announcement during a speech to the Sacramento Press Club.

And that's where the Senate leader's proposal takes a novel turn. With projections of some $3.5 billion of carbon fuel tax revenues in the first year along, the top Democrat calls for spending most of it on a California version of the earned income tax credit, a way to soften or remove the blow of higher gas prices for many working class and low-income Californians who would likely feel the blow of the tax more profoundly.

"That would be an average of $600," said Steinberg of the cash refund to those who qualify. "$600 in the pocket, of additional money, of people who need it most."

The proposal seems to have begun fermenting in the mind of the legislative leader during his trip last year to British Columbia, home to one of the globe's most celebrated carbon tax programs.

But the politics of oil and gas in California are complicated. Maybe the only politics more complicated in the state. . . are those of taxes.

The plan, says Steinberg, would cancel 2015's planned inclusion of transportation fuels under California's 'cap' on greenhouse gases crafted throughthe implementation of the state's landmark 2006 climate change law. Work by state regulators on how to pull off that complicated plan is well underway.

But the Senate leader, a supporter of the 2006 law, made it clear Thursday that he agrees with the law's critics who have argued it will result in major gas price spikes once fuels are included.

"Under cap and trade, no one can tell us whether fuels will trade at ten cents or 40 cents a gallon in 2015," he said. "A carbon tax is stable. A carbon tax is significantly less vulnerable to gaming. A carbon tax is transparent."

Leading environmentalists, one of them the powerful Democrat's own Senate colleague, quickly suggested that these words sounded as though they'd been written by the oil and gas industry.

"They shopped this around last year," said state Sen. Fran Pavley, D-Agoura Hills, of the carbon tax idea's support inside the oil industry. Pavley, the author of the 2006 law, suggested that exempting oil industries from the cap would be a separate-but-unequal kind of scenario.

"Letting oil companies play by different rules than other polluters," she said, "would undermine all the progress we've made on climate change and send mixed signals to businesses investing in clean energy and reducing pollution in disadvantaged communities."

Later, perhaps not surprisingly to Pavley, the state's top oil industry group sounded a cautiously optimistic note in its comments on the Steinberg carbon tax proposal:

"We applaud his candor," said the unsigned statement from the Western States Petroleum Association. "The state's regulatory agencies should be equally candid about the coming gasoline and diesel cost shock."

But the Senate leader was adamant that the carbon tax portion of his proposal was not the whole story. Documents his staff handed out on Thursday showed some $2.5 billion of the revenues would go to the new tax credit, which would be available to taxpayers whose annual income is $75,000 or less (larger than the similar federal tax credit).

The remaining money - $1 billion in 2015, growing larger in future years - would be earmarked for expanding public transit, thus possibly cutting the number of cars on the road and adding a cheaper commute option for some of California's lowest paid workers.

Steinberg frequently invoked the current zeitgeist surrounding income inequality and poverty in his Thursday speech.

"How many more Californians could we lift from [poverty's] reach, while healing our climate at the same time?" the Senate leader asked.

Any well-calibrated crystal ball would be murky on the political fate of the carbon tax plan under the state Capitol dome during the remaining six months of the 2014 session. Taxes take a super-majority vote; and while, yes, Democrats hold the seats to do that, the not-so-warm reaction from some liberal Democrats to this plan could leave it short of votes.

And if one were to then go looking for Republican legislators to vote for billions of dollars in new fuel taxes... well, good luck.

Then there's Gov. Jerry Brown, whose opinion of the proposal is unknown... but who's made it clear that he's averse to more taxes in 2014, and in general thinks new taxes should only be imposed through a vote of the people.

But perhaps the most intriguing political question out of the Senate leader's plan is how his comments may validate what the most ardent critics of cap-and-trade have been saying all along: the program is full of things Californians don't know are coming.

"I am concerned," said Steinberg in his speech, "that bringing fuels under cap-and-trade leaves consumers vulnerable to anti-competitive behavior and Wall Street [energy] traders, which have led to unpredictable price spikes and shortages in the past."

Mind you, he's a Democrat who voted for the 2006 law and still believes in its goal of cutting greenhouse emissions. Business groups jumped on his comments as evidence state regulators are making a big mistake.

But Steinberg, just a few months away from being termed out of the Legislature, seems to welcome the messy politics that lie ahead on his carbon tax idea.

"My attempt here," he said, "is to stoke a debate."

That's one he can already check off his to-do list.


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