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Appellate Court Affirms State’s Cap-and-Trade System

April 7, 2017
California’s Third District Court of Appeal on April 6 affirmed the legality of the state’s Cap-and-Trade system.
The court joined two lawsuits by the California Chamber of Commerce and Morning Star Packing Company that alleged that the California Air Resources Board (ARB) exceeded its authority by imposing the Cap-and-Trade system and that the Cap-and-Trade system itself is an illegal tax.

In its decision, the Court made two major rulings. First, it held that ARB did have the authority to impose cap-and-trade based on action the Legislature took when it passed AB 32. Further, the Legislature affirmed this when it spent the funds garnered through Cap-and-Trade auctions. Second, the Court held that the auction is not a tax; rather participation in the auction is a voluntary decision instead of reducing emissions.
In a statement in response to the ruling, ARB Chair Mary D. Nichols stated: "The Court’s decision affirms the basic purpose and structure of the program — to deliver carbon reductions in a cost-effective and flexible manner.”
Despite Thursday’s s ruling, legislative efforts to extend Cap-and-Trade beyond 2020 are expected to continue. Gov. Jerry Brown in his January budget proposal sought a two-thirds vote from the Legislature for this purpose. Senate President pro Tem Kevin de León (D-Los Angeles) made a statement on social media that “the Senate will continue work to extend/expand our climate program & ensure legal footing to meet the 2030 targets in SB 32.”

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