There are just six major gasoline-producing refineries left in California that can influence fuel prices, and one is scheduled to close in April. This photo shows traffic on Highway 99 away from Highway 50 in August 2022.
Xavier Mascarenas
xmascarenas@sacbee.com
A coalition of key environmental groups filed a letter to Gov. Gavin Newsom on Monday urging the state to swiftly adopt a strong cap‑and‑invest proposal, as California drivers face rapidly rising gas prices amid the war in Iran.
In the letter, the groups — including the Environmental Defense Fund, Natural Resources Defense Council and NextGen California — called for the state to set stricter limits on how much covered entities can emit under the program.
“Last year, in the face of federal backtracking, California reinforced its leadership on fighting climate change by extending its Cap-and-Invest (C&I) program while prioritizing reducing high electricity bills and saving households money,” the letter read.
“However, CARB’s 2026 proposed C&I program amendments fall short of the near-term ambition needed for California to be on a consistent and affordable path to achieve its 2045 carbon neutrality goals.”
The cap-and-invest program is designed to generate revenue by auctioning emission allowances to businesses and to use that revenue to provide benefits for ratepayers through bill credits or rebates.
The current proposal would remove 118 million emission allowances from the total pool of allowances governed by the state with each allowance equal to a permit to emit one metric ton of greenhouse gases in carbon dioxide equivalent. Environmental advocates have pushed to remove about 180 million allowances instead, arguing that a stricter reduction would generate an estimate of over $860 million in net savings for low and moderate income residents.
The letter came amid gas price spikes that hit the world following the outbreak of the war in Iran, after the conflict led to the closure of the Strait of Hormuz, a vital route which carries roughly 20% of global oil. California, too, has seen a surge in gas prices, with a 55‑cent‑per‑gallon increase in just the past week. Andrew Campbell, executive director of UC Berkeley’s Energy Institute at Haas, warned that there is uncertainty about how long the spikes will last and how severe they will be.
“Obviously, the war in Iran and general geopolitical conflict contributes to energy instability at large,” said Chloe Ames, a climate policy advisor at NextGen California, noting the importance of independence from fossil fuel-powered energy.
“It contributes to overall oil price changes, and instability within our energy market. So it’s really important with the passage of this legislation that we also are supporting our energy independence as a state and as a country,” Ames continued.
Meanwhile, the oil and gas industry has opposed the environmental groups’ stance, arguing that the current proposal would discourage an already declining refinery sector from continuing to operate in California, advocating for more flexible rules on the cap. The state currently has six major refineries that can influence gas prices, and one of them, Valero’s Benicia refinery, is set to close in April.
“As we all know, the leakage that has already occurred, making California dependent on imported oil and even refined gas products, has resulted in higher prices and supply constraints that harm California’s families and employers,” Andy Walz, president of downstream, midstream, and chemicals for Chevron wrote in a letter sent to the Democrat governor on Monday. Leakage refers to emissions, or refinery operations, shifting out of state.
Emphasizing its major presence in California, with its Richmond and El Segundo refineries accounting for about 34% of the state’s refining capacity and its San Joaquin Valley operations producing roughly 25% of the state’s crude oil, Chevron warned that passing the proposal would drive more refineries out of the state and ultimately increase costs for ratepayers.
“The draft regulation currently proposed by CARB poses a direct existential threat to not only the oil and gas industry, but to the broader manufacturing industry in the state and beyond given the vital role that many California companies play in American supply chains.”
A group of state representatives, including Assemblywoman Maggy Krell, D-Sacramento, echoed the concerns of the industry in its own letter sent to CARB chair Lauren Sanchez on Monday, where they cautioned against the proposed update to the program and said “an energy transition that outpaces infrastructure readiness, market realities, and technological feasibility risks creating chronic supply imbalances and long-term market instability.”
“This proposed regulatory update would further burden an already struggling energy market across multiple sectors and compound stress on the very infrastructure that has punished California consumers with the highest energy prices in the nation,” they wrote.
Environmental groups have rejected the premise that stricter cap-and-invest rules on businesses would drive them out of California, arguing there is no evidence that the program has caused leakage. Instead, they’ve argued that oil company leaders have decided to move their refineries out of state due to more by global market conditions than by state policy.
“It’s pretty clear that the oil industry is trying to slow this process and reduce climate ambition. They’ve made that pretty explicit,” said Caroline Jones, a senior analyst on the Environmental Defense Fund’s state climate team.
“CARB should not let them dictate this process, and they should proceed with ambitious rulemaking, as they planned.”
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Chaewon Chung covers climate and environmental issues for The Sacramento Bee. Before joining The Bee, she worked as a climate and environment reporter for the Winston-Salem Journal in North Carolina.