Calif. sued again before pollution permit auction

Steam rises from stacks at the Conoco-Phillips refinery Jan. 25, 2011, in Rodeo, Calif. / Getty Images

SAN FRANCISCO California is debuting its new, landmark cap-and-trade program with an auction of greenhouse gas pollution permits, despite an eleventh-hour lawsuit filed by the state's largest business group.

The cap-and-trade plan is a central piece of the state's 2006 global warming law, AB32, a suite of regulations meant to reduce dramatically the state's emissions of heat-trapping gases.

The program places a limit, or cap, on emissions from individual polluters. Businesses are required to cut emissions to cap levels or buy allowances from other companies for each ton over the cap that is discharged annually. If a business were to cut emissions below the cap, it could profit by selling its extra allowances.

The program's first auction on Wednesday is being closely watched, as it will essentially put a price on carbon emissions for the first time in state history. Only the European Union has implemented a similar plan in terms of scope.

• California set to auction off pollution permits

But the California Chamber of Commerce has sued, challenging the validity of the state's cap-and-trade program. The lawsuit filed Tuesday in Sacramento Superior Court was not expected to stop the auction. The group was not seeking an injunction to halt the program immediately, said Denise Davis, a chamber spokeswoman.

The suit challenges the California Air Resources Board's authority as stated under the climate-change law to sell the permits, called "allowances," for the purpose of generating revenue for the state. It is also challenging the sale of allowances as an illegal tax, arguing that taxes need a two-thirds vote by the Legislature.

"This action by an unelected state board to use regulatory statutes to raise tens of billions of dollars from taxpayers is unprecedented in our state's history," the chamber's complaint said.

The program has faced opposition from other business groups. Scott Macdonald, a spokesman for the group Californians Against Higher Taxes, told KCBS-AM the pollution reductions could be achieved by giving away the credits instead of making corporations buy them at auction.

"It's just a revenue-enhancing program for the state of California that is going to screw up the California economy," Macdonald told KCBS-AM. "You can't take multi-billions of dollars out of the system from major companies that are struggling in a recession and not have an impact."

For the first two years of the program, large industrial emitters will receive 90 percent of their allowances for free in a soft start meant to give companies time to reduce emissions through new technologies or other means. The cap, or number of allowances, will decline over time in an effort to drastically reduce greenhouse gas emissions by 2050.

The chamber's challenge is the latest lawsuit filed over the state's landmark global warming law, which so far has survived myriad legal challenges.

Stanley Young, a board spokesman, said officials were reviewing the lawsuit and expected cap-and-trade to withstand legal scrutiny.

"This market-based approach to cutting greenhouse emissions gives businesses the flexibility to best decide how to reduce their emissions," Young said.

The board estimates that about $1 billion could be raised from the sale of allowances in fiscal year 2012-13. About 23 million allowances will be sold for 2013 emissions, and 39.5 million allowances are being pre-sold Wednesday for 2015 emissions.

There is some uncertainty about how, exactly, the money will be used. But California law dictates it go into a special greenhouse gas reduction account, and any programs that use the funds be consistent with the AB32's goals.

California officials hope a successful rollout of its cap-and-trade system will embolden other states to follow suit. Currently, a much less inclusive cap-and-trade scheme that covers only electricity producers is in effect for northeastern states.

The chamber argues that California's system goes too far and will alienate other states.

"Unless we adopt the most cost-effective way of reducing carbon emissions, other states will not follow us," Allan Zaremberg, the chamber's president and CEO, said in a statement. "The current ... proposal is the most costly way to implement AB32, and it will hurt consumers, the job climate, and the ability of businesses to expand here."

[littlebuddyd]

This will be a disaster for California. Buisnesses have been leaving that state for a decade and this will be the downfall of what was once the best place in the world to live. You sorry minions of exquisite stupidity.

[GossamerWings]

I favor a carbon tax. I can tell you that the Koch brothers mandated all Tea party candidates were to stop any Cap and Trade taxes.

[sjc_1]

Everyone across the country should watch this carefully. Chevron and others may threaten to close refineries and say the prices with go up. Implement it and see what happens. I think they will keep the refineries open, try to pass along costs and the ones that run most efficiently make the most money.

[stopkillingourwilderness]

although i think that simply capping emissions (and reducing the allowances 10% every 2 years) and eliminating the "trade" piece of this would be a less corrupt, faster way to reduce emissions, it is ridiculous to pretend that Chevron, Sempra and the other super-polluters haven't been socializing their costs and privatizing their MASSIVE profits, yes, even during the recession, for a hundred years.

time for big polluters to start including the cost of killing the planet in their product so it is priced correctly, sends the right signals to the market and clean energy can compete on a level playing field. free markets 101.

[sjc_1]

I favor a carbon tax, but this has worked in Europe, we will see how it all works out. As far as the threats from business to leave, I doubt it. I have heard that before, but they stay because they are making money.