Dubbed the Low Carbon Fuel Standard, the program is designed to fight climate change by forcing oil companies to lower the “carbon intensity” of the fuels they sell in California.

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SAN FRANCISCO — Even as drivers debate repealing California’s recent gasoline-tax hike, an often-overlooked state program has quietly helped push fuel prices higher.

Dubbed the Low Carbon Fuel Standard, the program is designed to fight climate change by forcing oil companies to lower the “carbon intensity” of the fuels they sell in California.

For years, it had little effect on gasoline prices, tacking on an estimated 3 or 4 cents per gallon.

Over the past year, however, the program’s effect at the pump has been growing, because of a run-up in prices for a type of tradable credit at the heart of the program. Although the fuel standard’s exact impact on retail gasoline prices is impossible to track, the Oil Price Information Service now estimates it to be 8.5 cents per gallon.

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The gas-tax hike, signed into law in April by Gov. Jerry Brown to pay for road repairs, stands at 12 cents per gallon. California’s cap-and-trade system for limiting greenhouse-gas emissions adds another 12 cents, according to several estimates.

“The amount (of costs related to climate) in gasoline is not trivial,” said Leigh Noda, a senior associate with the Stillwater Associates fuels consulting firm and a former Arco executive. “If consumers are going to get hit with this, they should know about it.”

Now the state agency that runs most of California’s climate-change programs has proposed tweaks to the fuel standard that could take some of the pressure off prices, at least in the next few years.

Last week, the California Air Resources Board issued proposed changes that would delay some of the program’s targets, giving fuel providers more time to reach them. Instead of needing to cut the carbon intensity of their fuels 10 percent by 2020, the companies would need to reach that level in 2022.

However, the changes — to be discussed in April at a meeting of the air board — would extend the program through 2030, setting new, tougher targets for the companies to meet in 12 years. By 2030, fuel providers would need to cut carbon intensity by 20 percent, compared with 2010 levels.

“We’re strongly signaling that we’re going to be using this policy through 2030,” said Sam Wade, chief of the air board’s transportation fuels branch. “We’re strengthening the signal in the long run. In the short run, we’re making a minor course correction, I’d call it.”

Oil companies

Oil companies and business groups have fought the standard since it went into effect in January 2011.

They have, at times, predicted it could send gasoline prices soaring by more than $1 per gallon. They also have called it redundant, because oil refineries are also covered by the state’s cap-and-trade system. Even before the recent increase, California has consistently had some of the highest gasoline taxes in the country.

The program works by setting targets for reducing a fuel’s carbon intensity — a measure of the greenhouse-gas emissions associated with producing and using it.

Oil companies can comply by blending more biofuels into their products, particularly advanced biofuels such as renewable diesel and cellulosic ethanol. Or they can buy credits from companies that sell fuels with lower carbon intensity than the target. For example, utilities whose customers use electricity to charge their electric cars generate credits the oil companies can buy. So, for that matter, do Tesla and other companies that operate networks of charging stations.

The price for those credits, however, started climbing this past year.

For much of June and July, the price of a credit hovered around $75. It started rising in August, and by mid-February, it averaged $138, with individual trades as high as $150 per credit. The program caps credit prices at about $200 per credit, and the board’s own analysis predicted hitting the cap in 2020.

Impact on prices

The exact impact on retail fuel prices can’t be precisely tracked, the way taxes can, because it involves the internal pricing choices of fuel providers, who must decide how much of the credit costs they can pass on to their customers. An online price calculator from the Air Resources Board suggests that the effect on retail prices now should be about 5 cents per gallon. A separate estimate from UC Berkeley energy economist Severin Borenstein put the impact at 7 cents in January.

Noda said companies have been stockpiling credits, anticipating that meeting the targets for 2019 and 2020 will be difficult. California gasoline already contains 10 percent ethanol, and production of ultra-low-carbon cellulosic ethanol — made from crop residue or other woody materials — never took off the way the air board had expected.

In addition, under present rules, the carbon-intensity-reduction targets are set to rapidly ramp up in the next two years. In 2017, companies had to cut the carbon intensity of their fuels 3.5 percent. By 2019, that figure jumps to 7.5 percent.

“In two years you were going to try to achieve what you achieved in the first eight years of the program,” Noda said.

After the board proposed changes to the program, credit prices eased, closing the week at $125.

Catherine Reheis-Boyd, president of the Western States Petroleum Association lobbying group, said the proposals will continue to hurt consumers.

“The proposed increased target would further undermine the state’s ability to efficiently meet its climate goals,” she said.

Oregon and British Columbia have established their own versions of the Low Carbon Fuel Standard, and Washington state is considering it.

Daniel Sperling, a member of the Air Resources Board and the founding director of the UC Davis Institute of Transportation Studies, said the program has helped spur the production of renewable diesel — not something the board anticipated. It also has forced fuel companies to think long-term about how to lower the carbon intensity of their products, he said.

“It’s working in surprising ways,” he said. “You want to create an incentive for investment and innovation.”