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California Chamber of Commerce v. State Air Resources Board

Citation: 47 ELR 20053
No. 34-2012-80001313-CU-WM-GDS and 34-2013-80001464-CU-WM-GDS, (Cal. Ct. App., 04/06/2017)

A California Appeals Court upheld a state cap-and-trade regime against challenges from the state commerce board and affected industry players. In 2006, California passed the California Global Warming Solutions Act, which aims to reduce greenhouse gas (GHG) emissions. To achieve the goals of the act, the State Air Resources Board created a “cap-and-trade” program that includes the auction sale of some GHG emissions allowances. At trial, the challengers asserted that the auction amounted to a tax and that it exceeded the regulatory authority delegated to the Board by the legislature. The trial court rejected both assertions. The appeals court agreed, stating that the purchase of allowances is a voluntary decision driven by business judgments as to whether it is more beneficial to the company to make the purchase than to reduce emissions. Further, the legislature later ratified the auction system by specifying how to use the proceeds derived from the it.