California Appeals Court Questions Don't Bode Well For Cap-And-Trade

A state appeals court is considering a challenge to the constitutionality of California’s cap-and-trade system for reducing greenhouse gases. Some legal experts say the questions the court is asking in a recent document could imply a ruling against the state. 

The California Chamber of Commerce and Morning Star Packing Company filed a suit that claimed that the auction portion of the state’s cap-and-trade program is an unconstitutional tax.

The cap-and-trade system forces polluters to reduce their greenhouse gas emissions or pay for carbon emission allowances at auction. 

In 2013, a lower court sided with the state and the California Air Resources Board. The issue is now in the appellate court.  

Rick Frank, director of the California Environmental Law and Policy Center at UC Davis School of Law, says the court is now asking questions that don’t look good for the Air Resources Board.

“If the court is asking the parties to provide legal arguments as to how the court implements a decision against the ARB should it choose to do so, that definitely doesn’t bode well for ARB it would seem,” says Frank.

Cara Horowitz, with the UCLA School of Law, says some of the questions should trouble the state.

“The questions suggest that the court might be inclined to use a standard for judging whether the auction is a tax that the state had argued against applying,”says Horowitz.

Horowitz filed a brief for the Nature Conservancy supporting the state’s view that the auction is not a tax.

She points out that the court also asks if the auction system can be looked at not as a tax, but something more akin to commerce. 

The state's cap-and-trade auction has raised more than $4 billion to date. 

Regardless of how the appeals court rules, legal experts say it will likely end up in the California Supreme Court.