Fuel Smarts

The Impact of the Low Carbon Fuel Standard and Cap and Trade Programs on California Retail Diesel Prices

California has embarked upon a Greenhouse Gas Reduction policy path that may have large negative impacts on the state’s diesel market and the diesel prices California consumers and businesses may face. The impacts are associated with possible outcomes of the California Air Resources Board’s (ARB) Low Carbon Fuel Standard (LCFS) in combination with the impacts of ARB’s Cap and Trade program.

One possible LCFS outcome, the Compliance Outcome, would occur if the alternative fuels required for compliance are available. If that is the case, there will be significant diesel price increases from incorporating those alternative fuels. These diesel price increases will be added to price increases that will be imposed by ARB’s Cap and Trade Program.

CTA estimates that the combined effect of the two programs could increase California-only retail diesel prices by $2.22/gallon by 2020, raising diesel prices by 50 percent to $6.69/gallon. These California-only diesel price increases would have a very damaging effect on California’s recovering economy.

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