California Senate leader: Carbon tax would redistribute $3.6 billion to state's poorest

By Rory Carroll

SAN FRANCISCO (Reuters) - A carbon tax proposal outlined on Thursday by California Senate leader Darrell Steinberg would raise an estimated $3.6 billion in its first year, revenue he said would go into the pocketbooks of the state's poorest residents as well as public transportation.

The tax, which would apply to fuels like gasoline, would start at 15 cents a gallon in 2015 and rise to 24 cents a gallon in 2020, Steinberg said in a speech at the Sacramento Press Club.

Poverty in the state is growing and money raised by the tax would be returned to low- and moderate-income working people via a federal tax credit, Steinberg said. It would also help plug funding shortfalls in public transit.

The tax would halt plans to bring fuels under the state's cap and trade program next year, a policy that since the beginning of 2013 has regulated the emissions of heat-trapping greenhouse gases from large stationary sources, such as power plants and cement factories.

Cap and trade sets a gradually declining limit on the amount of greenhouse gases businesses can emit and allows for the trading of excess permits on the open market.

A carbon tax is a simper system to administer than cap and trade, but instead of setting an environmental target, it hopes to discourage driving by raising the price of gasoline.

In a speech on Thursday, Steinberg said he fears that the market could produce price volatility at the pump, a result that would hurt consumers and may undermine California's pioneering effort to combat climate change through its landmark 2006 law,

AB 32.

"If gas prices spike and fluctuate wildly, I am concerned that the climate change skeptics will use the crisis to unravel AB 32 and weaken our essential climate goals," he said.

Passage of the tax is considered a long shot given that California law requires any new tax to gain the support of two-thirds of members in both chambers of the state legislature.

The proposal was also met with resistance from environmentalists, who believe the current policies are well designed and should not be tampered with.

"We don't support pulling the rug out from something that has been carefully negotiated for going on seven years," said Alex Jackson of the Natural Resources Defense Council.

State Senator Fran Pavley, the author of AB 32, called exempting oil companies from the cap and trade program a "nonstarter."

"Letting oil companies play by different rules than other polluters would undermine all the progress we've made on climate change and send mixed signals to businesses investing in clean energy and reducing pollution in disadvantaged communities," Pavley said on Thursday.

(Reporting by Rory Carroll, editing by G Crosse)