Newsom's 'Green' Jet Fuel Plan Could Hike California Gas Prices

Critics warn the proposed tax credits for sustainable aviation fuel could drive up costs for drivers.

Apr. 8, 2026 at 7:23pm

Got story updates? Submit your updates here. ›

A vibrant abstract composition of overlapping triangles and circles in shades of red, blue, and yellow, conceptually representing the economic tensions and trade-offs around sustainable fuel incentives.Newsom's 'green' fuel plan could drive up costs for California drivers.Berkeley Today

California Gov. Gavin Newsom's plan to offer hundreds of millions in tax credits to encourage more 'sustainable aviation fuel' production could spike gasoline and diesel prices in the state by 10 to 15 cents per gallon, according to industry groups and economists.

Why it matters

The proposal aims to help decarbonize the aviation industry, but critics argue the environmental benefits are limited and the costs would be widely shared by California consumers already facing record-high gas prices.

The details

Newsom's trailer legislation would provide a $1 credit to fuel producers for every gallon of alternative jet fuel that emits 50% less carbon dioxide than conventional jet fuel, with the credit potentially rising to $2 per gallon for greater emissions reductions. However, the California Fuels and Convenience Alliance warned this would add 'billions in annual costs for consumers, while also reducing diesel excise tax revenues that fund road repairs.' Economists from UC Berkeley also predicted the credits could constrain the supply of renewable diesel for trucks, further driving up diesel prices.

  • The proposed tax credits would be in effect from late 2027 to the end of 2035.
  • The state Department of Finance predicted the total credits would add up to $165 million, rising to $300 million, during the credit's lifetime.

The players

Gavin Newsom

The governor of California who proposed the sustainable aviation fuel tax credit plan.

California Fuels and Convenience Alliance

A trade group representing fuel retailers that warned the tax credits could raise gasoline and diesel prices by 10 to 15 cents per gallon.

Aaron Smith

An economist at UC Berkeley who predicted the credits could encourage more production of sustainable aviation fuel over renewable diesel, constraining diesel supply and driving up prices.

Helen Kerstein

An analyst with the Legislative Analyst's Office who recommended lawmakers reject Newsom's proposal, arguing the environmental benefits are 'quite limited' and the approach is 'potentially quite an expensive' way to decarbonize.

Andrew March

A budget analyst with the California Department of Finance who defended the proposal as an important step to the state's climate goals, noting other states have similar programs.

Got photos? Submit your photos here. ›

What they’re saying

“The benefits are narrowly concentrated, but the costs are widely shared.”

— Alessandra Magnasco, Lobbyist, California Fuels and Convenience Alliance

“They're going to incentivize a whole lot more sustainable aviation fuel than they're planning.”

— Aaron Smith, Economist, UC Berkeley

“We think the environmental benefits are probably quite limited, potentially overstated, and this is a very, as we see it, a potentially quite an expensive approach to decarbonization.”

— Helen Kerstein, Analyst, Legislative Analyst's Office

“We know that this is important to help decarbonize the aviation industry, which is one of the most difficult industries to decarbonize in the nation, and that there are a number of other states that have taken the opportunity to provide sustainable aviation fuel incentives, including the state of Washington and the state of Illinois.”

— Andrew March, Budget Analyst, Department of Finance

“We must stand by this industry and our partners who have made the choice to embrace renewable fuels. Closing our refineries will have detrimental impacts in my district. This is not a regional problem. This is a statewide problem.”

— Anamarie Farias, Democratic Assemblymember

What’s next

The proposed tax credit plan is currently making its way through the California state legislature.

The takeaway

Newsom's plan to incentivize sustainable aviation fuel production aims to help decarbonize a difficult industry, but critics warn the costs could be significant for California consumers already facing record-high gas prices, with limited environmental benefits.