gas taxes in california

May 10

TOPIC

California’s high gas taxes are the result of a combination of environmental regulations, specialized fuel requirements, and geographic isolation that collectively increase production costs and limit supply.

Overview

California has the highest gas taxes of any state in the nation. A gas tax is first defined as an excise tax, which is applied to certain products, as opposed to a general tax, which is applied to a broad category of goods. There is not a single cause of such high gas taxes; environmental policy, production policy, and supply and demand all affect how much a Californian has to pay at the pump.

Cap-and-Trade Program

In 2013, California introduced the Cap-and-Trade program, which set a cap on the amount of Carbon dioxide emissions industries could produce. Fuel suppliers would have to offset their additional emissions by purchasing allowances or investing in an external greenhouse gas reduction project. The costs incurred to cover additional emissions are partially borne by consumers.

Special Gasoline Requirements

California also uses a special mix of Gasoline that is cleaner to burn and therefore more environmentally safe. This special gas costs more to produce than the standard gas, a cost that California is willing to pay to meet emission goals.

Geographic Isolation and Supply Constraints

Referred to as an “oil island” by the Western States Petroleum Association, California is geographically isolated from other oil refineries and production. With no pipelines connecting California to nearby oil, it has to rely on the few domestic connections it has, ones that often don’t fully connect to the West Coast, and it has to rely on international. Because California’s oil type must match its environmental goals, it has to reach out to the few markets that can supply it. At the same time, California oil refineries are closing. California’s struggle for a sustainable petroleum market has left California’s gas taxes unstable.