California's Oil Companies Face a $3 Billion Cap-and-Trade Bill
(Bloomberg) -- The bill from battling climate change is just about due in California, and for some oil companies that do business in the state, it’s in the nine figures.
The Golden State’s biggest fuel suppliers, led by Tesoro Corp. and Chevron Corp., face the biggest costs under California’s carbon cap-and-trade system, with expenses that may top $3 billion a year for the whole industry, according to a Bloomberg Intelligence report released Tuesday.
The emissions-trading program, the most extensive of its kind in the U.S., requires refiners, power plants and other polluters to pay for each ton of climate-changing carbon dioxide they release in the form of allowances. They may cost Tesoro, the state’s largest emitter, more than $700 million annually, about 20 percent of its current operating expenses, according to Bloomberg Intelligence. Chevron may be on the hook for $580 million, about 9 percent of its worldwide expenses, based on 2014 emissions.
“Most of the company’s allowance costs will probably be passed along to consumers in the form of higher fuel prices, but the company may end up taking on some of the cost burden," Bloomberg Intelligence analysts including Rob Barnett said.
Carbon allowances, trading at around $13 a metric ton, add about 12 cents to the retail price of a gallon of gasoline, the analysts estimated. While more-efficient vehicles may lower the overall tab for drivers, the report showed the metric-ton cost of carbon in California is set to rise. The minimum price for allowances, known as the “floor price,” is expected to roughly double over a decade, according to the report.
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