California’s cap-and-trade system currently affects only industrial plants – but next year, it’s set to expand to vehicle fuels too.  Now, Senate Leader Darrell Steinberg (D-Sacramento) says he wants to exempt those fuels from cap-and-trade – and implement a carbon tax instead.

The tax would start at 15 cents a gallon, raising an estimated $3.6 billion dollars a year.  Most of the revenue would provide a tax credit for families earning less than $75,000; the rest, to mass transit systems.

Steinberg says California must respond to climate change – and that will sting.  “But I am concerned about who we sting,” Steinberg told the Sacramento Press Club Thursday.  “I say we return the majority of the money to the people who can least afford to foot the bill and who are already suffering most environmentally from the impact of climate change.”

Steinberg’s proposal drew criticism from environmental advocates.  Sen. Fran Pavley (D-Agoura Hills), who wrote California’s landmark greenhouse gas reduction law, says a carbon tax would conflict with AB 32’s overall goal of reducing climate change “… because it sends mixed signals to the major emitters – where some now are under a cap required to roll back, other people get a free pass, the motorists pay.”

The oil industry is neutral, but business groups don’t like the proposal.  They argue companies and consumers would pay more at the pump.  In fact, Steinberg acknowledges gas prices will go up regardless – under cap-and-trade or a carbon tax.  “And it may not be popular to say, but that’s necessary.  Higher prices discourage demand.”

That prompted this response from Peter DeMarco with the Senate Republican Caucus:  “At least now we’re beginning to see a transparent listing of how much AB 32 regulations are gonna cost Californians.”

As for Governor Jerry Brown, his office reiterated his opposition to new taxes this year.