Cap-and-Trade Setback In California

by Marlo Lewis on May 22, 2011

in Blog, Features

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California Superior Court judge Ernest Goldsmith ruled on Friday that the state’s Air Resources Board (ARB) must halt “any futher rulemaking and implementation of cap-and-trade” until the agency examines alternatives policies to meet the greenhouse gas-reduction targets established by Assembly Bill 32, the Global Warming Solutions Act. ARB must also, pursuant to the California Environmental Quality Act (CEQA), complete a review of the environmental impacts of its preferred regulatory strategy before adopting it.

Note: The ruling does not challenge AB 32 itself, and petitioners in the case are greenies who think ARB’s plan to curb greenhouse gas (GHG) emissions doesn’t go far enough. Nonetheless, this is a setback to California politicians and cap-and-taxers throughout the land. ARB has 15 months to provide the requisite analyses. ARB says it will appeal the decision. Rots of ruck!

AB 32 requires ARB to establish a statewide GHG emissions tonnage limit for 2020 equivalent to the state’s emission levels in 1990, and to develop a regulatory path, known as a Scoping Plan, to achieve “maximum technologically feasible and cost-effective reductions in greenhouse gas emissions from sources or categories of sources of greenhouse gases by 2020.” Judge Goldsmith ruled that ARB “committed a prejudicial abuse of discretion when it failed to proceed in a manner required by law by inadequately describing and analyzing Project alternatives [other ways of reducing GHG emissions] sufficient for informed decisionmaking and public participation.”

Judge Goldsmith more extensively discussed the issues in his Jan. 24, 2011 Tentative Statement of Decision. Petitioners, led by the Association of Irritated Residents (AIR), asserted that  ARB “failed to meet the mandatory statutory requirements of AB 32 and the California Environmental Quality Act (CEQA) by essentially treating the Scoping Plan as a post hoc rationalization for ARB’s already chosen policy approaches.” Specifically, petitioners argued that ARB violated AB 32 by:

(1) excluding whole sectors of the economy from GHG emission controls and including a cap-and-trade program without determining whether potential reduction measures achieved maximum technologically feasible and cost-effective reductions; (2) failing to adequately evaluate the total cost and benefits to the environment, the economy, and public health before adopting the Scoping Plan; and (3) failing to consider all relevant information regarding GHG emission reduction programs throughout the United States and the world, as required by AB 32, prior to recomending a cap-and-trade regulatory approach.

The significance for national politics? This is another nail in cap-and-trade’s coffin. AB 32 was a point of pride for both former Gov. Schwarzengger and California Democratic legislators. Indeed, one purpose of the statute was to place California “at the forefront of national and international efforts to reduce emissions of greenhouse gases.” AB 32 became the much-vaunted “California model” that Rep. Henry Waxman (D-Calif.) and Sen. Barbara Boxer (D-Calif.) invoked during their multi-year campaign to sell cap-and-trade on Capitol Hill.

Cap-and-trade has been on the skids since its day in the Sun back in June 2009, when the House narrowly passed the Waxman-Markey bill. After passage, the bill became politically radioactive and never came to a vote in the Senate. The December 2009 Copenhagen climate conference ended in failure, producing no agreement on a successor treaty to the Kyoto Protocol.

In February 2010, Arizona Gov. Jan Brewer issued an executive order stating that Arizona would not implement the Western Climate Initiative (WCI) cap-and-trade plan, scheduled to begin on January 1, 2012. Aside from California, none of the other WCI states (Arizona, New Mexico, Oregon, Washington, Montana, and Utah) is close to implementing cap-and-trade. Yet in August 2010, ARB Chair Mary Nichols said that California would not go it alone: “We won’t launch this program without partners to trade with. It doesn’t make sense for an economy even as big as California, to try to do this all by ourselves.”

In November 2010 the Chicago Climate Exchange emissions trading pilot program announced it would shut down “for lack of legislative interest.”

And now, thanks to the Irritated and Judge Goldsmith, ARB may not be able to implement cap-and-trade even if Ms. Nichols wants to fly solo.

Political movements fizzle without momentum. Judge Goldsmith just put the Golden State’s cap-and-trade plan on ice.

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