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

Proposed tax credits for sustainable aviation fuel may raise costs for consumers, economists warn.

Apr. 8, 2026 at 8:20pm

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An abstract composition of overlapping triangles and circles in shades of blue, red, and yellow, conceptually representing the competing factors of fuel supply, tax incentives, and consumer costs at play in California's sustainable aviation fuel program.A bold geometric illustration captures the complex economic tradeoffs behind California's push for greener jet fuel.Berkeley Today

California Governor Gavin Newsom's proposal to offer tax credits for sustainable aviation fuel production could lead to a 10-15 cent per gallon increase in gasoline and diesel prices, according to fuel industry groups. Economists warn the credits may constrain the supply of renewable diesel for trucks, further driving up diesel prices.

Why it matters

The plan aims to decarbonize the aviation industry, but the costs would be widely shared by California consumers already facing record-high gas prices. Critics argue the environmental benefits may be limited compared to the significant taxpayer costs.

The details

Newsom's proposal would provide a $1-2 per gallon tax credit to fuel producers for alternative jet fuel that reduces carbon emissions by 50% or more. The state's finance department estimates the total credits could reach $300 million over the program's lifetime from 2027-2035. However, the Legislative Analyst's Office warns the costs could exceed $1 billion if companies import alternative fuel to take advantage of the credit.

  • The proposed tax credit program would run from late 2027 through the end of 2035.
  • The California Fuels and Convenience Alliance predicts the credits could raise gas and diesel prices by 10-15 cents per gallon.

The players

Gavin Newsom

The Governor of California who proposed the tax credit program to encourage sustainable aviation fuel production.

Alessandra Magnasco

A lobbyist for the California Fuels and Convenience Alliance, which represents fuel retailers and warned of the potential price increases for consumers.

Aaron Smith

An economist at the University of California, Berkeley who predicted the tax credits could constrain the supply of renewable diesel, further 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 limited compared to the high costs.

Andrew March

A budget analyst with the California Department of Finance who defended the proposal as important for decarbonizing aviation.

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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, University of California, 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.”

— 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 program must still be approved by the California state legislature before it can be implemented.

The takeaway

Newsom's plan to incentivize sustainable aviation fuel production faces criticism from economists and industry groups who warn the costs will be passed on to California consumers through higher gas and diesel prices, while the environmental benefits may be limited.