California Cap-and-Trade Drives Up Gas Prices... By About 3 Cents... Maybe...

California's cap-and-trade program now covers gasoline, and—surprise!—it looks like the doomsayers were wrong.

State Republican lawmakers (and even some Democrats) recently tried to delay or exempt gas from the cap-and-trade program, arguing that California residents can't afford more expensive fuel, but they couldn't have picked a worse time for the fight: the update to the law took effect on January 1st, after a six-month period in which national prices took a 50 percent nose dive. This chart sums up the new tax's impact nicely:

Fear the tail

Since the new year, prices have gone up by about 3 cents. Ahhh!!! This compares favorably to apocalyptic predictions from the California Driver's Alliance, which claimed that prices would increase from 16 to 76 cents a gallonActual experts have estimated that the cap-and-trade program will increase gas costs by about $0.10 per gallon in the long run, and it's still very early, so we'll see.

As an admitted amateur in the field of gas price prediction (though with a much better record than several former presidential nominees), I'm not going to pull a Reason and pretend that three days is enough time to fully adjust to this new reality. At the very least, though, it's reasonable to assume that the carbon tax is responsible for the small bump over the past few days.


Well, I got a little curious and looked at the same chart for some other states, it turns out that California's not the only state with a slight bump since the new year. Here are a few other states (and D.C.) with similar increases:

Oklahoma gas prices.

Washington State gas prices.

New York gas prices.

Washington, D.C gas prices.

There were also many states whose gas prices continued to slide since the 1st of the month, and even more where prices held steady, so none of this is to say that the cap-and-trade program won't result in persistently higher prices, even if the impact is slight. Maybe it just means we shouldn't jump to conclusions too quickly. Gasoline is still essential for many, many Americans, and if oil companies want to pass along the increased cost to consumers there's very little to stop them—that is, until more viable alternatives to driving are available. 

It's also important to remember that, while driving remains non-negotiable for millions of Californians today, the proceeds of the cap-and-trade program are primarily dedicated to funding projects that reduce the need for car dependence and decrease carbon emissions in the process. More than half of revenues—which are expected to reach at least $3 billion annually—will be spent on clean, energy-efficient transportation and sustainable, affordable housing. Over time, the fortunes of far fewer residents will be tethered to the price of gas; by then, hopefully, I can start sharing charts about improving environmental quality rather than a three-cent bump in gas prices.