California lawmakers are weighing whether to fund a push for green jet fuel by shifting money away from California’s existing road-repair financing, setting up a high-stakes fight that pits climate and jobs arguments against warnings of budget strain and higher fuel costs.
Newsom’s proposal would create a tax-credit mechanism for producers of sustainable aviation fuel. The credits would be tied to diesel excise taxes the producers owe, with the amount of the credit increasing as the fuel is rated cleaner—according to the proposal’s framework, credits range from $1 to $2 per gallon.
Supporters of the measure, including lawmakers and labor groups, argue it preserves jobs at facilities such as Phillips 66’s Rodeo refinery in Contra Costa County and helps California meet its climate objectives. Phillips 66 has publicly confirmed that it would qualify for the credit, after converting its Rodeo refinery to produce biofuels.
Phillips 66 officials and lawmakers backing the plan have said the company’s projects have faced pressure after the loss of federal incentives and because California’s low carbon fuel program was not generating enough revenue. Assemblymember Anamarie Ávila Farías said what she and other lawmakers learned about the Rodeo plant “alarmed” them, and she later wrote that the facilities are “on the brink of closure” in 2026 without the incentive.
Critics challenge the premise that a jet-fuel subsidy will deliver climate benefits efficiently or without harming transportation funding. UC Berkeley economists warn the credit could cause diesel tax receipts to fall sharply—one analysis estimated the receipts could drop by as much as 75%—and that the policy could also raise gas prices for most drivers.
The state’s nonpartisan Legislative Analyst’s Office raised similar concerns, arguing the credits could be set so high that firms outside California might buy California companies with diesel tax liabilities or route renewable fuels to California to claim credits. Helen Kerstein, who evaluates climate programs for the Legislative Analyst’s Office, said that if more companies claim credits than expected, diesel tax revenues could fall more sharply, driving up the program’s cost.
In response, the governor’s finance budget analyst Andrew March disputed the magnitude of the projected fuel-price impact. March said the Berkeley analysis assumes an 8-to-10-fold surge in sustainable aviation fuel entering California and argued that other states with similar credits have not seen that kind of growth, adding that the program is designed to expand over time as more producers become eligible.
At hearings, lawmakers have focused on whether transportation funding protections could be undermined by redirecting road dollars toward fuel credits. In March 11 testimony, Assembly transportation committee chair Lori Wilson said, “We don’t have sustainable funding for our transportation system,” and she described the plan as a “cause for concern.” Kerstein argued the program would create a “trade-off,” saying, “Every dollar that goes to this credit is one fewer dollar that goes to local streets and roads, and the state highway system.”
Supporters and opponents also dispute the emissions-cost tradeoff. The Berkeley analysis described in the reporting contends the plan would cut emissions at more than 10 times the cost that economists consider cost-effective, and it argues the credits could shift limited feedstocks—such as used cooking oil and animal fats—into jet fuel rather than displacing fossil fuel in the most efficient way. March said the state has backed similarly priced and more expensive policies in earlier efforts to support emerging technologies.
Environmentalists and other critics argue California should prioritize proven emissions-reducing investments such as electric vehicles and mass transit. Christina Scaringe of the Center for Biological Diversity said the plan “We’re not funding the low-hanging fruit,” and the measure’s opponents say the program’s emphasis on jet biofuel is constrained by what they describe as limited money for alternatives.
For workers, the debate is framed around the future of the Rodeo refinery. Joe Jawad, president of United Steelworkers Local 326, said, “If this incentive passes, it’s my understanding this place stays here for years to come,” describing what workers are looking for. But nearby environmental justice advocates expressed worry that increased production of biofuels could still affect local air quality. Community organizer Daphney Saviotti-Orozco said, “There’ll be more pressure to make even more.”
The bill is expected to return for a final legislative hearing on Thursday, after attracting support from labor and some lawmakers and drawing criticism from oil-industry representatives, the state’s legislative analyst, environmental groups, and economists who warn of broader budget and fuel-cost consequences.