SACRAMENTO — A years-long lawsuit challenging how California companies pay for the greenhouse gases they emit in the state’s cap-and-trade program is staging a comeback despite the program’s future remaining unsettled.
In 2012, the California Chamber of Commerce filed a lawsuit seeking to have the state’s emissions-trading system, known as cap and trade, deemed an illegal business tax. According to the suit, the California Chamber of Commerce and Morning Star Packing Co., a tomato-processing company, stated that the quarterly auctions run by the state amount to an illegal tax, which requires new taxes to be approved by a two-thirds vote of the Legislature to take effect, according to report by KQED Science.
In that report, the suit is not challenging the entire cap-and-trade program, but rather the method by which California distributes its greenhouse-gas permits. As the San Francisco Chronicle reported, during most of 2016 many companies appeared to be boycotting the state’s cap-and-trade program. Furthermore, during its May quarterly auction of greenhouse-gas permits, it was reported that only 11 percent had been sold. However, this number jumped up to 88 percent during the last quarterly auction last year on Nov. 15.
As KQED Science reported, the auctions for the greenhouse-gas permits have become a lucrative source of funding, with the billions of dollars generated going toward construction and energy conservation.
Yet while the cap-and-trade program may have finished relatively strong compared to the beginning of the year, the program’s long-term future remains unsettled.
The program's critics and the state’s Legislative Analyst’s Office claimed that it does not possess the legal authority to go past 2020, according to the Chronicle report. The California Air Resources Board, which is the state agency that handles much of California’s global-warming prevention efforts, disagreed with these arguments and intends on keeping the program running for the next 10 years.
However, lawmakers have already extended the cap-and-trade system beyond 2020, as stated in KQED Science report. Gov. Jerry Brown, who is working on tackling climate change as part of his legacy, had been lobbying to lawmakers to preserve the program. Brown has asked lawmakers to approve the extension to protect it from legal challenges.
When the Legislature passed Senate Bill 32, the Chronicle reported, it required the state to cut its greenhouse-gas emissions to 40 percent below 1990 levels by the year 2030. Signed into law by Brown, it does not state how California should cut its emissions. However, supporters of the bill believe that the cap-and-trade system is one choice.
“Most of the market is reasonably confident about the continuation past 2020,” Harry Horner, head of analysis for CaliforniaCarbon.info, told the Chronicle.
While the lawsuit has not terminated the cap-and-trade program, it is possible that the suit could change some elements within it, the Chronicle report added.