Green jet fuel tax credit would set a troubling precedent

By Damon Conklin, legislative advocate (transportation)

Cal Cities and a coalition of statewide partners are calling on lawmakers to reject a sustainable aviation fuel tax credit proposal put forth by Gov. Gavin Newsom earlier this year. The group’s message is simple: Climate policy should not come at the expense of local infrastructure and public safety.

The impact would be immediate and real. The proposal would redirect up to $165 million annually in diesel excise tax revenues — growing to $300 million over time — away from constitutionally protected funding for road maintenance. For cities, that means fewer pavement repairs, delayed safety improvements, and rising long-term costs at a time when they are already struggling to keep up with basic maintenance.

The Legislative Analyst’s Office (LAO) found the proposal to be a costly and inefficient climate strategy with uncertain environmental benefits. The LAO warned that it could deliver fewer emissions reductions than expected while creating deeper-than-projected losses to transportation funding and deviating from voter-approved protections on fuel tax revenues.

A separate report by the LAO states that under current conditions, California will experience a net transportation funding decline of nearly 31% within the next decade.

Because the credit is tied to diesel tax liability, only a limited number of refiners qualify. In practice, one California facility — Phillips 66’s Rodeo refinery — is eligible to capture the benefit, alongside potential out-of-state producers. Cal Cities is concerned that the state is attempting to effectively redirect road repair funds to support a narrow segment of the fuel industry, rather than investing in broadly beneficial infrastructure.

Years of underfunding have forced communities to delay critical repairs, allowing conditions to worsen and costs to escalate. Every dollar diverted under this proposal would compound that problem.

Cities are committed to advancing California’s climate goals. But taking funding from already strained transportation systems to subsidize an expensive fuel alternative — one already supported by multiple incentive programs — is not sound policy.