Cost effective implementation of California’s greenhouse gas reduction law, AB 32, not only has been a high priority of the California business community, but is a mandate in the law itself. Nonetheless, when designing the market mechanism to reduce GHG emissions, the California Air Resources Board (CARB) insisted on taking the costliest approach: including a revenue raising auction as part of the “cap and trade” mechanism.

Since the Board refused to remove the auction element from their cap and trade design, the California Chamber of Commerce yesterday filed a lawsuit seeking to invalidate the auction, arguing that CARB exceeded the authority granted to it under AB 32 in establishing the revenue raising program.

The complaint, filed in Sacramento Superior Court, asserts that AB 32 does not authorize CARB to impose fees other than those needed to cover ordinary administrative costs of implementing a state emissions regulatory program.  “What was not authorized by AB 32 is the Board’s decision to withhold for itself a percentage of the annual statewide greenhouse gas emissions allowances and to auction them off to the highest bidders, thus raising from taxpayers up to $70 billion or more of revenue for the state to use,” according to the complaint.

The lawsuit does not challenge any of the provisions of AB 32 nor the merits of climate change science.  The only issue addressed in the litigation is the portion of CARB’s regulatory program that seeks to permit the Board to allocate to itself GHG emission allowances and to profit by selling them to GHG emitters.  CalChamber, other members of the business community, members of the Legislature, the Legislative Analyst’s Office and CARB have all highlighted the fact that the auction is not needed to achieve the goals of AB 32.  The business community has repeatedly underscored the fact that the auction will raise energy costs significantly in the state, harm the economy and impact California’s competitiveness, without providing any additional environmental benefits.

“AB 32 gives California the opportunity to be the leader in reducing carbon emissions,” said Allan Zaremberg, President and CEO of the California Chamber of Commerce.  “Unless we adopt the most cost effective way of reducing carbon emissions, other states will not follow us.  The current CARB proposal is the most costly way to implement AB 32 and it will hurt consumers, the job climate, and the ability of businesses to expand here.”

A copy of the legal documents can be found on the CalChamber website. The Memorandum of Points and Authorities in Support of Verified Petition for Writ of Mandate and Complaint for Declaratory Relief can be found here.