Compliance Offset Credits. Under
California's
cap-and-trade program, the California Air Resource Board
("CARB") awards
offset credits to operators of qualifying projects that
generate greenhouse gas ("GHG") emission reductions.
These credits can be sold to regulated entities to offset their GHG
emissions. In Our Children's Earth Foundation v. CARB,
the plaintiff environmental organizations allege that CARB's
compliance offset protocols—which establish the eligibility
criteria for offsets—fail to ensure that qualifying projects
generate additional GHG emission reductions that otherwise would
not have occurred, as required by statute. The California Court of
Appeal heard arguments on December 9, 2014, and will decide whether
to overturn the lower court's ruling that the protocols comply
with the statute.
While this challenge is pending, CARB continues developing the
offset program to meet its long-term goals. In its First Update to the Climate Change Scoping
Plan, CARB concluded that the compliance offset protocols will
not authorize enough credits to meet maximum anticipated demand.
CARB originally adopted four protocols—for forestry, urban
forestry, manure digesters, and destruction of ozone depleting
substances. In April of 2014, CARB adopted a fifth protocol for coal and trona mines. CARB
currently is developing a protocol for rice cultivation projects but will need to
further expand eligibility to meet its expected long-term
demand.
Low Carbon-Fuel Standard ("LCFS").
Rocky Mountain Farmers Union v. Goldstene, the Commerce
Clause challenge to California's LCFS, continues on remand
following the U.S. Supreme Court's denial of certiorari. The Ninth Circuit previously limited the
plaintiffs' claims but permitted some to proceed. In December
2014, the plaintiffs filed an amended complaint, alleging that the LCFS
burdens interstate commerce and discriminates against out-of-state
fuels and fuel feedstocks, in part by assigning physically
identical fuels different "
carbon intensity scores" based in part upon their places
of origin. Because the LCFS caps the carbon intensities of fuels
used in California, the plaintiffs allege that this different
treatment of physically identical fuels burdens and discriminates
against interstate commerce. The plaintiffs also have asserted new
claims challenging the 2012 amendments to the LCFS. The 2012
amendments allow California crude oil producers to calculate their
fuels' carbon intensity scores using a "California
average," which is the average of carbon emissions from
California crude oils. This method could be beneficial to a fuel
producer if its fuel's actual carbon intensity is higher than
the statewide average. The plaintiffs allege that the LCFS
amendments violate the Commerce Clause by making this averaging
approach available only for California crude oil but not
non-California crude oil. The Ninth Circuit did not consider the
2012 amendments, possibly opening the door to this new
challenge.
On January 23, 2015, the defendants filed a motion to dismiss, arguing that the amended
complaint does not allege new facts or raise new issues other than
those already decided by the Ninth Circuit: namely, that the LCFS
does not regulate extraterritorially or discriminate against
interstate commerce. The defendants also argue that they are
entitled to judgment on the plaintiffs' claims, based on the
Ninth Circuit's decision and the lower court's obligation
to execute it. The court now will need to decide the exact scope of
the Ninth Circuit's decision, and whether the plaintiffs'
amended complaint is consistent with that decision.
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