Chevron Cautions That Modifications to California's Cap-and-Invest Program Could Jeopardize Energy Availability

Chevron Raises Concerns Over California’s Carbon Market Reforms

Chevron has called on California authorities to rethink proposed changes to the state’s Cap-and-Invest carbon market, warning that the revisions could drive up fuel prices, lead to more refinery shutdowns, and threaten both state and national energy security.

In a letter sent to Governor Gavin Newsom and state energy officials, Chevron cautioned that the California Air Resources Board’s (CARB) suggested updates could put significant strain on the state’s remaining refineries. The company argued that these regulatory changes might destabilize fuel supplies and result in higher gasoline costs for consumers.

The amendments under consideration would impose stricter greenhouse gas emission limits on companies participating in California’s carbon trading program. Chevron maintains that these adjustments could sharply raise the price of emissions permits, which refineries are required to purchase to comply with the system.

According to Chevron’s projections, the policy could add over $1 per gallon to gasoline prices by 2030 if carbon credit prices reach the anticipated $135 per ton. Currently, the Cap-and-Invest program already accounts for about $0.24 per gallon in gasoline costs, based on figures from the California Energy Commission.

The company further contends that escalating compliance expenses could prompt additional refinery closures. In recent years, California has seen about 18% of its refining capacity disappear due to plant closures and conversions to renewable fuel production.

Chevron warns that a further reduction in refining capacity could tighten fuel supplies, causing greater price fluctuations and increasing dependence on imported petroleum. The company notes that imports may take longer to arrive during supply disruptions and could have a larger carbon footprint over their lifecycle.

Economic and Security Implications

Beyond the impact on consumers, Chevron highlighted broader economic risks. The company states that the petroleum industry supports more than 536,000 jobs across California and generates approximately $64 billion in annual tax revenue at the federal, state, and local levels.

Additionally, the sector is estimated to contribute $166 billion in economic value to California through its operations and supply chains, underscoring its importance to the state’s overall economy.

Chevron also emphasized that weakening California’s refining network could have national security consequences. Refineries in the state supply fuel to over 30 U.S. military bases and provide aviation fuel for both civilian and military operations throughout the Pacific region.

A shrinking refinery sector could leave the West Coast increasingly reliant on fuel imports, making the region more vulnerable to global supply shocks and logistical challenges during emergencies.

Balancing Climate Goals and Energy Stability

California has adopted some of the most ambitious climate policies in the country, including a legal mandate to achieve net-zero emissions. The Cap-and-Invest program is a cornerstone of the state’s efforts to cut greenhouse gases while funding climate initiatives through the sale of carbon credits.

However, the ongoing debate underscores the challenge for policymakers: how to pursue aggressive decarbonization while ensuring energy remains affordable, industries stay competitive, and supplies remain reliable.

Chevron is urging state leaders to reconsider the proposed amendments and adopt what it describes as a more balanced approach—one that continues to cut emissions but also safeguards refining capacity and fuel supply stability.

By Charles Kennedy for Oilprice.com

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