California lawmaker plans to substitute carbon market for tax on fuels

A Democratic lawmaker in California backed off an unpopular plan to tax gasoline and diesel fuels. Instead, he proposed spending up to $5 billion a year from the state’s fledgling carbon program on affordable housing and mass transit.

Specifically, Darrell Steinberg proposed building affordable housing near transit hubs, repairing state roads and highways, and helping fund mass transit projects including Democratic Governor Jerry Brown’s beleaguered high-speed rail project.

His plan also calls for returning a portion of the money collected by the state from the sale of carbon permits to California’s drivers, who are expected to see gasoline prices jump by about 12 cents a gallon next year when the state’s greenhouse gas reduction program expands to cover distributors of transport fuels.

California caps the amount of emissions allowed each year by refineries and manufacturers and requires those businesses to obtain emissions permits at state-run quarterly auctions or on the open market.

Steinberg’s tax on transportation fuels was with resistance from the environmental community and key lawmakers, who see the state’s young carbon market as a success.

One key opponent of the carbon tax, Democratic Senator Fran Pavley, was more receptive of the spending proposal. Pavley is the author of the state’s landmark law that forms the basis for the state’s carbon market. “I look forward to working with Senator Steinberg” she said.