Low Gas Prices Hurt California’s Green Energy Goals
Gas is cheap, and Californians are putting more miles on the road. That’s bad news for those hoping the state can make a difference in the world’s fight against climate change.
Thanks partly to low oil prices, Californians’ gas use is creeping up this year, despite Gov. Jerry Brown’s vow last year to cut gasoline use in half by 2030.
Recently released figures also show that even as statewide greenhouse gas emissions fell slightly between 2013 and 2014, emissions from the transportation sector rose by 1 percent. (2014 is the most recent year for which figures are available.) Transportation accounts for 36 percent of California’s greenhouse gas emissions, more than any other economic sector, so taming it will be vital from an environmental standpoint — and hard.
“One of the reasons it’s very tough to reduce emissions in the sector is that there are tremendous market barriers to clean transportation solutions,” said Simon Mui, director of the California transportation program at the Natural Resources Defense Council. Such barriers include volatile oil prices and inadequate infrastructure, he said.
Right now, low gas prices appear to be the biggest barrier. Prices across the state are down by just over 15 percent since a year ago, according to the American Automobile Association. (It may not feel that way to Californians, who pay gas prices that are considerably higher than the national average — a subject that recently caught the attention of California’s attorney general.)
People are taking advantage of cheaper gas to drive more. Sales of gasoline in California were about 2.6 percent higher in the first quarter of this year than the first quarter of last year, according to the State Board of Equalization. People are also are favoring gasoline-fueled cars over alternatives. Electric vehicles and hybrids (including plug-ins) respectively accounted for 1.4 and 6.2 percent of all new-car registrations in California in the first quarter of this year, compared with 1.7 and 7.2 percent in all of 2015, according to the California New Car Dealers Association.
Despite these headwinds, Brown has nonetheless stated his goal of cutting vehicles’ gasoline use in half by 2030. It’s a stringent target that would affect automakers, refiners and virtually every sector of the economy, and state lawmakers last year balked at writing it into law. Brown’s hopes rest partly on federal standards aimed at increasing vehicles’ fuel economy, as well as a variety of California programs to to nudge consumers toward more environmentally friendly options.
These programs include a cap-and-trade system, which impacts gasoline purchasers and refiners among others, and a low-carbon fuel standard that affects the mix of fuels available in the state.
The cap-and-trade system, for example, adds 10 cents a gallon to prices at the pump, according to Severin Borenstein, an energy expert at the University of California at Berkeley. (One oil industry group, irritated at these extra costs, is reportedly seeking to add a sticker to California gas stations that explicitly states the cap-and-trade costs.)
Mui, of the Natural Resources Defense Council, believes that California can cut gas consumption in half by 2030.
“If California sets out to meet its greenhouse gas goals as well as its air quality goals, the technologies that will be deployed are sufficient to basically halve our need for petroleum by 2030,” he said.
But Borenstein is skeptical that California can slash petroleum use over the next 14 years without drastic measures, like quickly making California’s vehicles electric. That’s tough, he said, because “the fleet turns over slowly,” he said.
Over the long term, Borenstein said, dramatic drops in gasoline use could end up reducing oil prices, in accordance with the laws of supply and demand. However, that could create a curious counter-effect: falling gas prices would make it more attractive to own gasoline-powered vehicles, and make it harder for alternative technologies, like electric vehicles, to compete. That effect could be felt far afield in the developing world, Borenstein said. There, car buyers may prefer cheap gas-powered cars.
The Western States Petroleum Association, an oil industry group based in Sacramento, successfully opposed legislative efforts last year to mandate a 50 percent petroleum reduction by 2030.
“History tells us two things; mandates designed to achieve a goal of this magnitude will require unacceptably coercive restrictions on our mobility choices and will be crushingly expensive,” the group’s president, Catherine Reheis-Boyd, wrote at the time about the legislation.
But environmental advocates say the growth of the electric car industry, led by Palo Alto’s Tesla Motors, could help the state’s economy.