California’s cap-and-trade system to fight global warming survived a major legal test Thursday when a state appeals court ruled that the auctions at the heart of the system do not constitute an illegal tax.
While the California Chamber of Commerce, which sued to block the auctions four years ago, could still appeal to the state Supreme Court, the latest decision erases some of the uncertainty surrounding cap and trade.
“It’s good news, when we really need some,” said Erica Morehouse, an attorney with the Environmental Defense Fund, which had participated in the lawsuit on the side of the state.
The closely watched case argued that the California Air Resources Board, which designed the cap-and-trade program, overstepped its authority when it created the auctions within the system.
Under cap and trade, the state sets an annual limit on greenhouse gas emissions, allowing fewer emissions each year. Businesses must obtain a permit, called an allowance, for each ton of heat-trapping gases that they emit. While some of those allowances are handed out by the state for free — to utility companies, for example — others are sold in quarterly auctions. Companies can also buy and sell allowances among themselves.
All three of the judges hearing the case agreed that the Air Resources Board had not exceeded its authority under AB32 in setting up the auction process.
Read the whole story in the San Francisco Chronicle