Judgment Day for AB32 and it’s not Rapture

San Francisco Superior Court Judge Ernest Goldsmith enjoined the State of California from “engaging in any cap and trade-related activity.”

After ruling in March 2011 that the California Air Resources Board (CARB) failed to properly consider options to its cap and trade program in conducting its environmental review under the California Environmental Quality Act (CEQA) the state said it would appeal and continued to work on its implementation plans for AB32.

Judge Goldsmith’s ruling May 20th put a stop to that telling CARB that California must remedy the flaws in its environmental review process and consider other alternatives before it can do any more work on the current illegitimate plan.  CARB has been working feverishly to revise its AB32 implementation plan enforcement rules, oversight procedures and reporting requirements for the state’s 500 largest polluters to overcome the problem in the Judge’s March ruling by doing an analysis of alternatives to cap and trade.

Do it over! Do it Right!

Essentially, Judge Goldsmith is telling CARB he will not permit them to flaunt the intent of CEQA by cutting and pasting alternatives into a decision already made.  The state would not tolerate such flagrant violation of the law by private parties and thus cannot do so itself.

The California Global Warming Solutions Act (AB32) is a cap and trade program to limit the amount of carbon emitted and create allowances that can be bought and sold on an open market. Under the proposed plan CARB would set the price for the emission allowances. Companies that reduce emissions below their authorized limit would sell unused allowances to companies that need more permits to comply. AB32’s cap and trade plan was set to start in January 2012, but Goldsmith’s order to stop work will delay that start date unless California prevails on appeal.

Work on the rest of AB32’s provisions including a low-carbon fuel standard for automobiles and the 33% renewable portfolio standard for utilities to buy renewable energy by 2020 remain in effect.

The cruel irony in this ruling for the State is the lawsuit was brought by disgruntled environmental groups, Association of Irritated Residents, et al. v. California Air Resources Board, that felt CARB had not gone far enough in reducing emissions.  Their action has now put the entire project at risk.  The market for emissions credits is achieving the same outcome elsewhere as the largest other emission trading scheme in the United States, the Regional Greenhouse Gas Initiative covering ten Northeast states s experienced falling prices which is stalling out the plan.  CO₂ allowance auctions are undersold with emission allowance prices at auction falling to the floor price of $1.86 per ton for auctions 8-10. The highest sale price, $3.51 in auction 3 (March 2009) was supposed to project  prices to $10-$15 per ton levels, but that was when a national cap and trade bill was still alive. Despite recent New Hampshire legislative action to keep the state in RGGI, the market believes that cap and trade is on life support so industry support is waning.