UPDATE – US: California Senator proposes transport fuels exclusion from cap and trade

This story has been updated to reflect that the proposal has been unveiled, and to add details.

California’s Senate president pro tempore proposed on Thursday to replace the inclusion of transportation fuels in the state’s cap-and-trade programme with a carbon tax.

Emissions from the transport sector are scheduled to be included from 2015 in the scheme as part of a major expansion.

The announcement of Senator Darrell Steinberg came ahead of the 21 February deadline to submit bill proposals for 2014.

“I am concerned that bringing fuels under cap and trade leaves consumers vulnerable to anti-competitive behaviour and Wall Street traders, which have led to unpredictable price spikes and shortages in the past,” he said in a statement.

Two-thirds of the revenues from the $25/tonne of CO2 equivalent (tCO2e) tax would be returned to poor and middle-income California residents who make less than $75,000, he said.

In order to become law, the bill would have to be voted and approved by members of the California legislature by 31 August.

However, Governor Jerry Brown has the power to veto any bill approved by the state legislature until 30 September.

The Air Resources Board (ARB) did not comment on the issue, nor did the American Petroleum Institute and the American Fuel & Petrochemical Manufacturers.

UC Davis Economics Professor James Bushnell said the proposed carbon tax would limit the flexibility and could increase the risk of volatility in the cap-and-trade programme.

Traders said it was too preliminary to determine the impact of the proposed bill.  Dan X McGraw