California’s Climate Change Law Suffers Legal Setback

California’s measures to combat climate change have suffered a temporary setback last week as Judge Ernest A. Goldsmith of San Francisco Superior Court enjoined California’s Air Resources Board (CARB) from further rule-making to implement the California Global Warming Solutions Act (A.B. 32) in Association of Irritated Residents v. California Air Resources Board . The main crux of the opinion is that the Air Resources Board, which is tasked with preparing and approving a “Scoping Plan” to reduce carbon emissions to 1990 levels by 2020 by A.B. 32, did not consider any alternatives to the cap and trade scheme it eventually decided on.  The Court stated that “the A.R.B. seeks to create a fait accompli by premature establishment of a cap-and-trade program before alternatives can be exposed to public comment and properly evaluated by the A.R.B. itself.”

Some commentators have found it ironic that after surviving a multi-million dollar campaign backed by primarily by oil interests, A.B. 32 has received such a setback due to a challenge by the “leftier edges of the environmental movement”.  However, cap-and-trade schemes like the one adopted by California Air Resources Board have always been a controversial issue in the environmental community.  A common criticism of such schemes is their potential to create “hot pockets” of pollution in certain areas, which seems to have been one of the motivations for the plaintiffs in this case, the Association of Irritated Citizens.

Cap-and-trade has been a favored strategy for many, notably the EU which established the EU-ETS scheme to fulfill its obligations under the Kyoto Agreement.  In the U.S., ten northeastern and Mid-Atlantic States established the Regional Greenhouse Gas Initiative (RGGI) which adopts a similar scheme.  However, notable economists such as Nobel laureate Joseph Stiglitz of Columbia University, Gilbert Metcalf of Tufts University, and former Secretary of Labor Robert Reich, have favored a direct carbon tax as opposed to the market-based cap-and-trade strategy.  The Court emphasized the lack of meaningful discussion concerning this alternative by the Air Resources Board in its decision:

“Most notably, the scoping plan fails to provide meaningful information or discussion about the carbon fee (or carbon tax) alternative in the scant two paragraphs devoted to this important alternative. This brief 15-line reference to the carbon fee alternatives consists entirely of bare conclusions justifying the cap-and-trade decision. Informative analysis is absent.”

The Court’s decision in Association of Irritated Residents v. California Air Resources Board enjoins the Board from further rule-making until “ARB amends the environmental review document in accordance with this decision.”  The injunction mainly speaks to the cap-and-trade scheme and leaves intact the previous rules already adapted pursuant to A.B. 32.  The Air Board says that it will appeal the decision and present a 500 page document which demonstrates a detailed analysis of the carbon tax alternative.

The complete text of the Court’s decision in Association of Irritated Residents v. California Air Resources of Board (sometimes referred to as AIR v. CARB) is available here.  Further discussion about the issue may be found in the NY Times article by Felicity Barringer, and the information note about the case in Stoel Rives LLP’s website.

Written by: Sinan Diniz, GIELR Staff