California Superior Court Enjoins California's Cap and Trade
Program for Greenhouse Gas Emissions," 13 petitioners,
including the Association of Irritated Residents ("AIR"),
filed suit against CARB on June 10, 2009, alleging that the Scoping
Plan did not comply with AB 32, and that CARB's approval of the
Scoping Plan did not comply with the environmental review
requirements of the California Environmental Quality Act
("CEQA").
On March 18, 2011, the San Francisco Superior Court ruled that
while the Scoping Plan did not violate AB 32, CARB had not
adequately evaluated alternative approaches to achieving greenhouse
gas reductions as required by CEQA. On May 20, 2011, the Superior
Court issued a writ of mandate prohibiting CARB from taking any
action in reliance on the Scoping Plan (including implementing the
cap and trade program) until CARB complied with CEQA. CARB appealed
the Superior Court's CEQA decision, and AIR and the other
plaintiffs filed a cross appeal on the Superior Court's
decision that the Scoping Plan complied with AB 32. On June 24,
2011, the California Court of Appeal, First Appellate District,
stayed enforcement of the Superior Court's order. While the
stay was in effect, CARB prepared and issued a supplement to its
environmental review of the Scoping Plan, which it certified under
CEQA on August 24, 2011. On December 5, 2011, the Superior Court
discharged the writ of mandate, and the Court of Appeal dismissed
CARB's appeal as moot. Thus, what remained was the
plaintiffs' cross-appeal of the Superior Court decision that
the Scoping Plan complied with AB 32.
In its June 19, 2012 opinion, the Court of Appeal determined that
adoption of the Scoping Plan fell within the scope of authority
conferred on CARB by AB 32. The Court of Appeal evaluated whether
the Scoping Plan "is reasonably necessary to effectuate the
purpose of the statute," which "requires the court to
determine only whether the Board exercised its discretion
arbitrarily and capriciously, without substantial evidentiary
support." Using this deferential standard, the court evaluated
the plaintiffs' specific challenges to the Scoping Plan,
including their assertion that CARB (i) improperly limited the
Scoping Plan to only those measures necessary to achieve the
minimum reductions required by AB 32; (ii) failed to create and
apply standard criteria for cost-effectiveness; and (iii) failed to
include feasible and cost-effective direct regulations for the
agricultural and industrial sectors (choosing only to regulate
industry though the cap and trade program, and allowing
agricultural sources to provide carbon
offsets to industry).
The Court of Appeal rejected each of these challenges. It found
that CARB "went to exceptional lengths" to develop
measures to achieve greenhouse gas reductions and that "AIR
points to no recommendation included in the plan, and no rejection
of a suggested recommendation, for which substantial evidence was
not presented and considered" by CARB. The Court of Appeal
concluded that tools are not available to compare the
cost-effectiveness of one greenhouse gas reduction approach to
others, and it was satisfied that there was support in the record
for the recommendations adopted by CARB in the Scoping Plan. The
Court of Appeal also upheld the Scoping Plan as it applied to the
industrial sector, as it did for the agricultural sector,
concluding that the record reflects "extensive analysis"
of numerous potential measures for the agricultural sector and that
CARB's inclusion of only voluntary agricultural measures in the
Scoping Plan was reasonable and supported by a sound
explanation.
Challenge to the Cap and Trade Offset Protocols
Continues
As discussed in The Climate Report,
Spring 2012, two environmental groups filed suit in San
Francisco Superior Court challenging the four offset protocols
adopted by CARB as part of the cap and trade and early action
offset credit programs. Citizens' Climate Lobby and Our
Children's Earth Foundation v. California Air Resources
Board. The challenged offset protocols, which set out
the requirements for offset projects to qualify for offset credits,
are incorporated into CARB's cap and trade regulations. Such
offset credits can be purchased and sold, and used to partially
fulfill California greenhouse gas reduction obligations. The four
challenged protocols address Ozone Depleting Substances Projects,
Livestock Projects, Urban Forest Projects, and U.S. Forest
Projects.
The lawsuit is still in its early stages. Several parties have
intervened on behalf of CARB, including the Climate Action Reserve,
the Environmental Defense Fund, and a business group that includes
(among others) major California utilities and energy companies.
Jones Day represents The Nature Conservancy, which intends to file
an amicus brief in support of the U.S. Forest Project protocol.
Briefing is to be complete by October 5, 2012, and a hearing on the
petition is scheduled for November 6, 2012.
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