Here They Go Again: Oil Companies Trying to Stop Progress on Climate Policy

October 24, 2012
Adrienne Alvord
Former contributor

California policies to fight global warming, reduce oil consumption, and clean our air are under sweeping attack from critics who are warning that they portend an economic doomsday for the Golden State while ignoring their benefits to our health and environment.

Oil refinery in Richmond, CA. Photo: Flickred!/flickrThe fossil fuel industry is on a media blitz to convince California consumers that the price they will have to pay to pioneer the nation’s first comprehensive effort to tackle climate change is too high. The Wall Street Journal joined the fray with a misleading editorial blaming California’s recent surge in gas prices on laws designed to reduce the negative effects of our oil consumption, ignoring the economic reality that only a handful of largely unregulated oil companies control the state’s gas market. With no major jump in demand and no significant reduction in gasoline supplies in California to explain the spike in gas prices, Sen. Dianne Feinstein called on antitrust regulators to investigate possible illegal manipulation of the market.

Paying for pollution is part of the solution

Meanwhile, large oil refiners and manufacturers launched a series of expensive ads and a petition to force the governor to stop next month’s inaugural cap-and-trade auction. The Nov. 14 auction, which will kick off the nation’s first economy-wide carbon market, is the result of years of careful study and deliberations. After failing to convince the California Air Resources Board last month to provide them with more free carbon credits, some of the state’s heaviest polluters are now trying to stop the auction. They claim that the auction is unnecessary to achieve the goals of AB 32, California’s Global Warming Solutions Act, to reduce statewide greenhouse gas emissions to 1990 levels by 2020.

That is simply not true. By requiring polluters to pay for each ton of carbon they emit, the auction creates financial incentives for polluters to reduce their emissions through greater use of energy efficiency, renewable energy, and alternative technologies. The auction is a critical component of our climate legislation because it will generate revenues that will help us to transition to a clean energy economy.

As a prominent group of economists, including UCS’s Jasmin Ansar, wrote in a recent letter to the governor, cancelling or scaling back the auction would disrupt the current design of the cap-and-trade program.

The economists noted that distributing more free carbon credits poses the potential for windfall profits because carbon-intensive businesses can pass the market value of the allowances through to consumers even though they received them at no cost. Already, concerns that some businesses might move production outside of California to avoid paying for carbon emissions within the state were addressed when regulators decided to allocate 90 percent of the allowances for free to most industries for the first few years of the program.

Cap-and-trade opponents, and the oil industry in particular, have been aware for several years that they will be expected to pay for a portion of their carbon pollution by participating in the allowance auction. They should join the rest of California in being part of the solution by complying with policies that will encourage clean energy investments and create broad spillover benefits throughout our economy.

Another oily strategy: Litigate, don’t innovate

Another critical piece of the state’s efforts to reduce global warming emissions — the low-carbon fuel standard — is under fire in a federal appeals court, where air quality officials are defending the first-in-the-nation mandate requiring cleaner fuels for millions of cars and trucks in the California. Because the transportation sector is the largest emitter of greenhouse gases in California, the law requires that all vehicle fuels be an average of 10 percent less carbon-intensive by 2020. The standard is designed to cut California’s dependence on petroleum by 20 percent.

One of California’s top lawyers rightfully argued in a hearing last week that petroleum refiners and out-of-state ethanol producers who are challenging the law’s constitutionality are trying to “prevent California from following sound science” and defended the state’s method of using a “life cycle analysis” that takes into account the pollution caused by manufacturing and the distance it has to travel when calculating the carbon intensity of fuel.

Let’s move forward!

All of these 11th-hour attempts to derail key components of California’s climate change legislation are part of a shortsighted strategy to cling to the businesses practices of the past, protecting corporate profits over California’s economic growth and public health.

Despite their claims of wanting to shield consumers from higher prices, large industrial polluters are using scare tactics to continue our reliance on dirty fuels and bolster their bottom lines. It’s time for the state’s heaviest polluters to join other businesses who recognize that clean energy investments also present economic opportunities.

We can all learn from California’s leadership on these issues that dramatically reducing our oil use is the only long-term and permanent solution to air pollution, climate change and, yes, lower gas prices.