It’s a fee: California cap and trade passes legal challenge

November 15, 2013

California’s one-year-old system of auctioning off the right to emit carbon survived a pair of legal challenges this week. [SacramentoBee]

Sacramento Superior Court Judge Timothy Frawley rejected lawsuits filed over California’s cap and trade law, AB 32, by the California Chamber of Commerce and the Pacific Legal Foundation.

The two organizations claimed that the states quarterly carbon auctions constitute an unconstitutional tax on the state’s largest industries because the law did not pass the legislature with a two-thirds majority.

But, Frawley said in a written opinion that the carbon auctions “are more like traditional regulatory fees than taxes.”

Frawley also rejected a claim that AB 32 did not explicitly authorize the state to auction carbon credits.

Both the Chamber of Commerce and the Pacific Legal Foundation said they plan to appeal the ruling.

Lawyers for California Air Resources Board, which administers cap and trade, defended the ruling, saying carbon auctions are not taxes because buying carbon is optional.

Currently, more than 400 companies are affected by the cap and trade law. Since the beginning of the program, the sate has sold nearly $1.1 billion worth of carbon credits.

Carbon is bought and sold in one-ton increments during state auctions. One ton of carbon currently costs about $12.