(July 17, 2007) Two “job killer” bills that are likely to result in higher fuel and energy costs in California passed the Assembly Transportation Committee this week. Both bills failed passage last week in the same committee but were granted reconsideration and heard again July 9.
SB 140 (Kehoe; D-San Diego) disadvantages California businesses and increases fuel prices by creating a fuel mandate that picks a winner in the alternative fuels market, preventing the research and development of additional viable options that may be cheaper and more efficient.
SB 210 (Kehoe; D-San Diego) interferes with the development of a competitive alternative fuels market and threatens job creation in California by creating a costly low carbon fuel standard that conflicts with the existing standard created by Governor’s Executive Order S-7-04.
SB 140 Prejudges Options
SB 140 would require at least 2 percent of all diesel fuel sold in the state to contain renewable diesel fuel by a date specified by the Air Resources Board (ARB) and 5 percent two years after the implementation of the 2 percent standard.
AB 1007 (Pavley; D-Agoura Hills), signed in 2005, required the California Energy Commission and the ARB to evaluate and recommend options for diversifying the state’s energy portfolio to increase consumer access to and use of alternative, non-petroleum fuels. This process is underway.
Unfortunately, SB 140 prejudges this analysis by choosing a winner in the fuels market when all options have not been thoroughly researched and examined.
Although renewable diesel fuel likely will play an important role in California’s energy future, it is important to allow the market to pursue as many options as possible instead of prematurely picking winners. Only then can the best fuel options for emission reductions be determined.
Furthermore, SB 140 would make demands on the state’s fuel transportation infrastructure that it is not equipped to meet, potentially resulting in increased transportation costs, decreased supply reliability and even damage to existing infrastructure.
SB 210 Reduces Flexibility
SB 210 limits the fuel technology that providers may use to meet the requirement for a 10 percent reduction in greenhouse gas emissions from fuels.
In order to meet increasing consumer demand, it is necessary that the fuels market be full of options and represent a mix of alternatives. Unlike the Governor’s Executive Order, SB 210 does not allow the market to determine the best emission-reduction technologies and limits the flexibility of fuel providers to meet the 10 percent reduction standard.
In addition, SB 210 prejudges the regulatory development process for AB 32 and the Governor’s Executive Order already underway at the ARB.
Market Mechanisms in Place
The low carbon fuel standard enacted by Governor Arnold Schwarzenegger in January 2007 is the world’s first such standard for transportation fuels.
It is a market-based approach that allows providers to choose how they reduce emissions while responding to consumer demand. For example, providers may purchase and blend more low-carbon ethanol into gasoline products, purchase credits from electric utilities supplying low carbon electrons to electric passenger vehicles or diversify into low carbon hydrogen as a product, among many options.
This approach refrains from picking winners and losers, responds to supply-and-demand market forces and concentrates on reducing emissions at the lowest cost to consumers and businesses throughout California.
Unforeseen Consequences
It is important to keep in mind the effects these mandates could have on the price of fuel in California. Mandates historically have led to higher, not lower, prices. They force the market to supply — and consumers to buy — products regardless of price.
The California Chamber of Commerce supports fuel efficiency and the use of renewables, but it is vital for California to continue to work on promoting policy goals that are both economical and environmentally sustainable. Although renewable diesel fuels will play a role in meeting California’s future energy demand, the state should focus on promoting all alternatives and should work with existing initiatives to ensure its energy supply for the future.
Key Vote
Both SB 140 and SB 210 passed Assembly Transportation on a vote of 8-6.
Ayes: Carter (D-Rialto); DeSaulnier (D-Concord); Karnette (D-Long Beach); Nava (D-Santa Barbara); Portantino (D-La Cañada Flintridge); Ruskin (D-Redwood City); Solorio (D-Santa Ana); Soto (D-Pomona).
Noes: Duvall (R-Yorba Linda); Galgiani (D-Stockton); Garrick (R-Solana Beach); Horton (R-Chula Vista); Houston (R-San Ramon); Huff (R-Diamond Bar).
Action Needed
Both SB 140 and SB 210 will be heard next in the Assembly Natural Resources Committee. The CalChamber urges members to contact their committee members to oppose these “job killers.”
Staff Contact: Amisha Patel