Marten Law: California Unveils Nation's First Economy-Wide Cap-and-Trade Program

   By Dustin Till, Associate, Marten Law Group PLLC

In this Emerging Issues Commentary, Dustin Till writes that On October 29, 2010, a few days before voters went to the polls to decide whether to shelve California's trend-setting global warming law, the California Air Resources Board (CARB) issued draft rules that would establish the nation's first economy-wide greenhouse gas cap-and-trade program beginning on January 1, 2012. A ballot measure that would have effectively stripped CARB of its authority to regulate greenhouse gas emissions was defeated. The effect of another measure, which passed, on CARB's rules will likely be decided in the courts. CARB's draft rules establish a phased compliance framework designed to reduce California's emissions to approximately 15% below 2012 levels by 2020. CARB anticipates that the program will cover 85% of the state's greenhouse gas emissions.


“With the prospects for comprehensive federal climate change legislation having dimmed, there is renewed focus on state and regional trading programs. Those efforts began with California's adoption of AB 32 in 2006. California later joined with six other western states and four Canadian provinces in the Western Climate Initiative (WCI), formed with the intent of establishing a regional cap-and-trade program that will cover economy-wide greenhouse gas emissions beginning in 2012. In July 2010, the WCI released its final design recommendations for a regional cap-and-trade program.

“With the release of CARB's rules, California appears to be one of two states that will be prepared to participate in the WCI. CARB's proposal, however, does not detail how its program will be linked with the WCI. Shortly after California published its draft rules, New Mexico finalized its own regulations for implementing a greenhouse gas cap-and-trade program. New Mexico's rules condition the state's implementation of the program on having sufficient emission allowances available within the WCI to make the program efficient and cost effective—a threshold that will be easily met so long as California is participating in a regional trading program.

“CARB released its draft rules on the eve of contentious mid-term elections. California voters narrowly rejected Proposition 23, which would have delayed the implementation of AB 32 until the state's unemployment rate (currently 12.4%) dropped below 5.5% for four consecutive quarters. Voters, however, narrowly passed a second ballot measure, Proposition 26, that requires the California legislature to approve by two-thirds vote any new fee based on harm to the environment caused by the fee-payer's business. Proposition 26 is triggered by "[a]ny change in state law which results in any taxpayer paying a higher tax." CARB has taken the position that Proposition 26 will not impair its ability to implement AB 32, which was signed into law in 2006. The issue will likely be litigated.” subscribers can access the complete commentary, Marten Law: California Unveils Nation's First Economy-Wide Cap-and-Trade Program. Additional fees may be incurred. (approx. 8 pages)

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As a lawyer with the Marten Law Group, Dustin Till practices environmental and land use litigation with a special focus on climate change issues, permitting, and environmental review in the Pacific Northwest. Dustin represents clients in Washington, Oregon, Idaho and Alaska on a broad range of environmental matters, including permitting and energy infrastructure siting. Dustin shares his climate change expertise on behalf of Marten Law Group writing ongoing articles for Lexis Nexis’ Environmental Law and Climate Change Center. Dustin has appeared before the Eighth Circuit Court of Appeals, federal district court and the Washington State Court of Appeals.