California Cap & Trade Emission Offsets Program Upheld

A California Appeals Court has rejected an environmental challenge to the nation’s first economy-wide cap-and-trade system that the challengers claim allows companies to avoid carbon emission reductions.

The First District Court of Appeals upholds California’s offset protocols in a 2006 law that were incorporated into the cap-and-trade program.

The program allows polluting industries to buy greenhouse gas emission credits from entities that aren’t part of the program with the goal to cut global warming.  The program allows offset credits for voluntary reductions in greenhouse gas emissions.

Our Children’s Future Foundation and Citizens Climate Lobby sued the California Air Resources Board in 2012.

The group argued one portion of the program, which allows offset credits for voluntary reductions in greenhouse gas emissions, fails to guarantee that the reduction credits are “in addition to” any greenhouse gas emission reduction that is otherwise required by law.

The groups argued the voluntary offsets are a loophole because the projects don’t amount to new efforts to lower carbon emissions.  The lawsuit sought to repeal the offset program and to prohibit the state from using it in the cap and trade program.

San Francisco Superior Court Judge Ernest Goldsmith rejected their position saying the group was asking him to rewrite the law to eliminate the offsets, which he said he could not do.

The groups appealed in 2013.  Justice John Ruvolo wrote, “We conclude that the Legislature delegated rule-making authority to the board to establish a workable method of ensuring additionality with respect to offset credits accepted pursuant to a market-based compliance mechanism like the Cap-and-Trade program regulation.”

More than 2,000 pages of public comments and agency responses in the regulatory approval process show “extensive evidence supporting the board’s decision” to adopt the regulation “and to include offset credits as an integral component of that program,” Ruvolo said.

Among the companies joining in support of the board’s regulation were Southern California Edison Co., PG&E Corp., San Diego Gas & Electric, World Oil Corp. and the International Emissions Trading Association.

California held the first auction for greenhouse gas allowances in November  2012, offering 23 million carbon allowances for the first phase of compliance.  California’s emissions market is second in size only to the European Union’s Emissions Trading System.

Case:  Our Children’s Earth Foundation v. Calif Air Resources Board, No. A138830




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