CAPITAL STRIKE
Chevron Warns California Cap-and-Invest Changes Threaten Energy Supply
Chevron is urging California officials to reconsider proposed amendments to the state’s Cap-and-Invest (C&I) carbon market program, arguing that the changes could increase fuel costs, accelerate refinery closures, and undermine energy security across the state and the broader United States.
In a letter addressed to California Governor Gavin Newsom and state energy regulators, the company warned that revisions under consideration by the California Air Resources Board (CARB) could place severe pressure on the state’s remaining refining sector. According to Chevron, the regulatory changes risk destabilizing fuel supply while driving up gasoline prices for consumers.
The proposed amendments aim to tighten greenhouse gas emissions limits for businesses participating in California’s carbon trading system. Chevron contends that the measures could significantly increase the cost of emissions allowances, which refiners must purchase to comply with the program.
The company estimates that the policy could add more than $1 per gallon to gasoline prices by 2030 if carbon allowance prices rise toward projected levels of roughly $135 per ton. California’s existing Cap-and-Invest framework already contributes about $0.24 per gallon to gasoline costs, according to data cited from the California Energy Commission.
Chevron argues that higher compliance costs could force additional refinery closures in the state. California has already lost roughly 18% of its refining capacity in recent years due to plant shutdowns and conversions to renewable fuel production.
A further decline in refining capacity could tighten fuel supply, leading to increased price volatility and greater reliance on imported petroleum products. Imports, the company noted, can take longer to arrive during supply disruptions and may carry higher lifecycle emissions.
Beyond consumer costs, Chevron emphasized potential economic consequences. The company says the petroleum sector supports more than 536,000 jobs statewide and contributes roughly $64 billion annually in tax revenues across federal, state, and local levels.
The industry also generates an estimated $166 billion in economic value for California through direct operations and supply chains, making it a significant contributor to the state’s broader economy.
Chevron further warned that weakening California’s refining infrastructure could have implications for national security. Refineries in the state supply fuels used by more than 30 U.S. military installations and support aviation fuel production for both civilian and defense operations across the Pacific region.
A shrinking refining base could leave the West Coast increasingly dependent on imported fuels, potentially exposing the region to global supply disruptions and logistical delays during emergencies.
California has pursued some of the most aggressive climate policies in the United States, including a legally mandated transition toward net-zero emissions. The Cap-and-Invest program is a central component of the state’s strategy to reduce greenhouse gas emissions while funding climate programs through the sale of carbon allowances.
However, the debate highlights a broader tension facing policymakers: balancing decarbonization goals with concerns about energy affordability, industrial competitiveness, and supply reliability.
Chevron is calling on state leaders to revise the proposed amendments and adopt what it describes as a more balanced policy framework that maintains emissions reductions while preserving refining capacity and fuel supply stability.
By Charles Kennedy for Oilprice.com
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