SAN FRANCISCO Parties in a four-year-old legal
challenge to California’s emissions trading program will head to
court in Sacramento on Tuesday with a business group arguing the
billions the program collected amounts to an “illegal tax” on
California’s cap-and-trade program sets an overall limit on
greenhouse gas emissions (GHGs) and either hands out or sells a
declining number of state-issued permits, which large
manufacturers and oil refineries are required to turn in
The lawsuit by business group CalChamber argues that the
state legislature never authorized the California Air Resources
Board (ARB) to collect revenue from the program when it passed
AB 32, its landmark climate change law.
Revenue from the program funds clean energy programs,
especially in poorer communities, and helps finance the state’s
ambitious high speed rail project.
“The lawsuit does not challenge any of the provisions of AB
32, including cap-and-trade authority, nor the merits of climate
change science,” said Denise Davis of the CalChamber.
It just argues that the state has no right to sell permits
and generate revenue, she said.
The ARB prevailed in Sacramento Superior Court in 2013 after
successfully arguing that it was given broad authority to design
a program to meet emissions targets, including the sale of
CalChamber’s appeal of that ruling has kept the issue alive,
casting a shadow over the emissions trading market, which has at
times suffered a lack of participation due to uncertainty over
Despite the state’s earlier victory, the Third Appellate
District Court’s request last year for supplemental information
indicates they are taking a close look, experts said.
“The Court is taking its full examination of the legal
issues in this case very seriously,” said Allison Smith, who has
written on the case and is a partner with Stoel Rives LLP, which
is not involved in the case.
The three-judge panel is expected to render a decision
within 90 days.
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