When Does the 65-Cent Gas Tax Start in California?

There is no 65-cent gas tax in California with a start date on the calendar. The 65 cents is a worst-case cost projection tied to California’s Low Carbon Fuel Standard, an environmental regulation whose amended version took effect on July 1, 2025.¹ It is not a tax, no legislator voted on it, and the actual pass-through cost at the pump has so far been a small fraction of the headline figure. Independent experts at UC Davis estimated the real-world cost at roughly 5 to 8 cents per gallon.²

Where the 65-Cent Number Came From

The figure appeared in a 2023 Standardized Regulatory Impact Assessment prepared by the California Air Resources Board.³ It was an economic forecast of what could happen under a specific set of assumptions, not a scheduled charge.

Those assumptions were aggressive. The 65-cent number assumed LCFS credit prices would spike to their maximum allowed level of nearly $270 per credit and that fuel producers would pass every cent of the cost to drivers. The same analysis included a low-end estimate of around 37 cents. Both numbers described a range of possibilities. The Governor’s office has explicitly stated that the LCFS “is not a tax.”²

The underlying program works like this: California’s Low Carbon Fuel Standard requires fuel providers to gradually lower the carbon intensity of the gasoline and diesel they sell in the state.⁴ Providers who can’t meet the targets buy carbon credits from cleaner fuel producers, and those credit costs get built into pump prices. The cost to drivers depends on where credit prices sit, not on a fixed rate.

The Date That Actually Exists: July 1, 2025

CARB voted to tighten the program’s carbon-reduction targets, and the amended regulation went through a mandatory review by the Office of Administrative Law. OAL approved it on June 27, 2025, with an effective date of July 1, 2025.⁵ The stricter compliance requirements are already in place.

Nothing switched on that date that added 65 cents to a gallon of gas. The cost impact depends on how credit markets behave, how quickly refiners adjust, and how much of the compliance expense companies absorb rather than pass along. The program tightens incrementally over the coming years, so its price effects unfold gradually rather than all at once.

What Drivers Are Actually Paying

The gap between the 65-cent projection and reality has been large. In early 2025, before the amendments took effect, the LCFS was adding roughly 20 cents per gallon to California gasoline prices. When CARB announced the July 2025 implementation, it cited independent experts projecting the pass-through cost of the amended rules at 5 to 8 cents per gallon for the initial phase.¹

The worst-case projection required credit prices to hit their regulatory ceiling, which hasn’t happened. Credit markets fluctuate based on how much renewable diesel and other low-carbon fuel is available, how fast electric vehicle adoption reduces gasoline demand, and how aggressively producers compete. When supply of clean fuel credits is healthy, prices stay well below the cap, and the cost passed to drivers drops accordingly. LCFS compliance costs are real and growing, but a flat 65-cent charge arriving on a specific date is not how the program works.

The Actual California Gas Tax That Does Have a Start Date

Separate from the LCFS entirely, California levies a state excise tax on every gallon of gasoline. This is the charge most people think of when they hear “gas tax.” Senate Bill 1, signed in 2017, restructured the tax and added an annual inflation adjustment that kicks in every July 1.⁶ The California Department of Finance calculates how much the Consumer Price Index has risen, and the rate moves up by that percentage, rounded to the nearest tenth of a cent.

For the period from July 2025 through June 2026, the state excise tax is 61.2 cents per gallon.⁷ It will adjust again on July 1, 2026, based on the prior year’s inflation data. Recent annual increases have typically been in the range of two to three cents. Excise tax revenue is restricted to transportation projects such as road repairs, bridge maintenance, and public transit.

This predictable, calendar-driven tax is the one part of California gas pricing that genuinely has a start date each year. The July 1 adjustment is announced months in advance and posted on the CDTFA website.

What Comes Next

The political fallout from the 65-cent projection has been significant. In September 2025, Governor Newsom signed a package of bipartisan legislation aimed at stabilizing gas prices and reducing energy costs.⁸ Further legislative action is possible in 2026 as the LCFS targets continue to tighten. If you want to track what you’re actually paying, watch two things: the state excise tax rate that resets each July 1, and the LCFS pass-through, which moves with credit prices rather than with the calendar.

1
California Air Resources Board. CARB Announces Latest LCFS Updates Will Be Implemented Next Month
2
Office of the Governor. Fact Check: Claims Swirling on California Gas Prices
3
California Air Resources Board. Standardized Regulatory Impact Assessment Proposed Amendments to the Low Carbon Fuel Standard Regulation
4
Legal Information Institute. California Code of Regulations Title 17 Section 95480 – Purpose
5
California Air Resources Board. 17 CCR 95480-95503 – Low Carbon Fuel Standard Regulation
6
California Department of Tax and Fee Administration. California Code Revenue and Taxation Code 7360 – Levy of Tax
7
California Department of Tax and Fee Administration. Sales Tax Rates for Fuels
8
Office of the Governor. Governor Newsom Signs Historic Package of Bipartisan Legislation Saving Billions on Electric Bills, Stabilizing Gas Market and Cutting Pollution