Description: Challenge to auction of greenhouse gas allowances.
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California Chamber of Commerce v. State Air Resources Board
Case Documents:
Filing Date Type File Action Taken Summary 06/28/2017 Order Denying Petition for Review Petitions for review denied. California Supreme Court Denied Petitions to Review Ruling That Upheld Cap-and-Trade Program. The California Supreme Court declined to review an intermediate appellate court’s decision upholding the statewide greenhouse gas cap-and-trade program. The plaintiffs in lawsuits challenging the cap-and-trade program had argued that it was not authorized by the Global Warming Solutions Act of 2006 and that the requirement to purchase emissions allowances constituted a tax that required approval by a two-thirds majority of the State legislature. The California Supreme Court denied three petitions for review. 06/12/2017 Answer Download Answer filed by CARB. 06/12/2017 Answer Download Answer filed by intervenors and respondents Natural Resources Defense Council and Environmental Defense Fund. 05/16/2017 Petition for Review Download Petition for review filed by Morning Star Packing Co. 05/16/2017 Petition for Review Download Petition for review filed by National Association of Manufacturers. 05/15/2017 Petition for Review Download Petition for review filed by California Chamber of Commerce. Parties Sought California Supreme Court Review of Decision Upholding Greenhouse Gas Cap-and-Trade Program. Three petitions were filed in the California Supreme Court seeking review of the California Court of Appeal decision that upheld the state’s cap-and-trade program for greenhouse gas emissions. The lead parties for the petitions were the California Chamber of Commerce, the National Association of Manufacturers, and Morning Star Packing Company. All three petitions asked the Supreme Court to review the question of whether the auction of greenhouse gas emissions constituted a “tax” that would need the approval of two-thirds of the California legislature under Proposition 13. The California Chamber of Commerce also asked the Supreme Court to review whether the California Air Resources Board’s design of the cap-and-trade system was outside the authority granted to it by AB 32, the Global Warming Solutions Act. -
California Chamber of Commerce v. California Air Resources Board
Case Documents:
Filing Date Type File Action Taken Summary 04/06/2017 Opinion Download Opinion issued upholding cap-and-trade program. California Appellate Court Upheld Cap-and-Trade Program; Parties Planned Appeal to California Supreme Court. In a split opinion, the California Court of Appeal upheld California’s cap-and-trade program for greenhouse gas emissions. The court ruled that the state legislature had given the California Air Resources Board “broad discretion” to design a system for reducing emissions and that the auction of emissions allowances did not exceed the scope of CARB’s delegated authority. The court further found that the legislature’s subsequent specification of how to spend the auction proceeds ratified use of the auction system. The court also held that auction sales of the emissions allowances were not a tax (which would have been barred unless approved by a two-thirds supermajority of the legislature) because purchase of the allowances was voluntary and because the allowances were “valuable, tradable commodities, conferring on the holder the privilege to pollute.” The purchase of allowances therefore did not bear the “hallmarks” of a tax. One justice dissented from the holding that the sale of the allowances did not constitute a tax. The dissenting justice contended that the purchase of allowances was not voluntary, that the allowances did not confer property rights, and that the court should have considered the use of the auction proceeds as relevant to the question of whether the sales were a tax. The dissenting justice further indicated that he was not convinced by the State’s labeling of “wide and varied uses” of the auction proceeds as “uses that address (not necessarily reduce), however tangentially, greenhouse gas emissions.” Counsel for one set of plaintiffs indicated that its clients would appeal to the California Supreme Court. 04/08/2016 Order Order issued requiring additional briefing. The California Court of Appeal ordered additional briefing in an appeal concerning the legality of California’s auction of greenhouse gas allowances in its cap-and-trade program. A California Superior Court upheld the auction in 2013. The appellate court asked the parties to address specific questions related to the argument that the auction constitutes an unconstitutional tax. -
California Chamber of Commerce v. California Air Resources Board
Case Documents:
Filing Date Type File Action Taken Summary 11/12/2013 Decision Download Joint ruling issued. The California Superior Court issued a ruling denying the two petitions. The court was not persuaded by the petitioners’ argument that the text, structure, and legislative history of AB 32—the statute creating California’s greenhouse gas reduction program—showed that the California Legislature did not intend to authorize the sale of allowances. The court instead found that AB 32 broadly delegated to the California Air Resources Board the authority to design a system for distributing emissions allowances. The court also rejected the contention that the sale of allowances constituted an unconstitutional tax because AB 32 was not passed by a supermajority of the legislature. The court held that “[o]n balance” the charges for emissions allowances “are more like traditional regulatory fees than taxes, but it is a close question.” Having found that the charges were more like a fee than a tax, the court held that the charges were valid fees because their primary purpose was regulation (i.e., GHG emissions reduction), not revenue generation; the total fees would not exceed the costs of the regulatory programs they supported because AB 32 required the proceeds to be spent in furtherance of AB 32’s regulatory purposes; and there was a “reasonable relationship” between the charges for the allowances and the regulated entities’ collective responsibility for the harmful impacts of GHG emissions. The Pacific Legal Foundation, which represented the Morning Star Packing Co. petitioners, announced that it would appeal the ruling. 08/27/2013 Decision Download Joint tentative decision and order for appearances issued. The court issued a joint tentative decision and order for appearances. The court tentatively held that the auction provisions of the cap-and-trade regulations were within the scope of authority that AB 32 delegated to CARB. The court heard oral argument on August 28, 2013 on the question of whether the sale of allowances constituted a tax requiring approval by a two-thirds supermajority of the California State Legislature under Proposition 13. In its tentative ruling, the court identified six sets of questions to be addressed at oral argument, including whether the auction of allowances regulated greenhouse gas emissions in ways that free distribution of allowances would not, and whether the planned or actual use of the auction proceeds mattered for purposes of determining whether the sale of allowances was a tax. 11/13/2012 Petition for Writ of Mandate Petition for writ of mandate and complaint filed. The California Chamber of Commerce filed a lawsuit seeking to invalidate the state’s auction of greenhouse gas emissions allowances, alleging that the California Air Resources Board (CARB), which runs the auctions, lacked authority to do so under AB 32, the Global Warming Solutions Act. The lawsuit alleged that the allowances were illegal taxes and that, in adopting AB 32, state lawmakers did not intend for CARB to raise revenue through an auction mechanism. The suit was filed the day before the auction took place, and no injunctive relief was sought. -
Morning Star Packing Co. v. California Air Resources Board
Case Documents:
Filing Date Type File Action Taken Summary 07/23/2013 Order Download Order issued denying motion for leave to intervene. The court denied the National Federation of Independent Business’s motion to intervene in the case on the grounds that its application was too late, that it lacked a direct interest in the case, and that its interests in the litigation were adequately represented by other parties. 04/16/2013 Petition for Writ of Mandate Download Petition for writ of mandate and complaint filed. California residents, businesses, trade associations, and advocacy groups, sought an order enjoining and requiring California to rescind the “revenue-generating auction provisions” of its greenhouse gas emissions cap-and-trade program and a declaration that the cap-and-trade program’s auction provisions were not authorized by statute or, alternatively, that they constituted illegal taxes under the California Constitution.