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
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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