Cap and Trade

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CARB opts to stay the course on Cap-and-Trade Program.

By Joshua T. Bledsoe, Michael Dreibelbis, and Alicia Robinson 

On May 10, 2022, the California Air Resources Board (CARB) released its Draft 2022 Scoping Plan Update for public review and comment. Assembly Bill (AB) 32, the California Global Warming Solutions Act of 2006 (AB 32), required CARB to develop a scoping plan, to be updated at least once every five years, that describes the approach California will take to reduce greenhouse gas (GHG) emissions to achieve the goal of reducing emissions to 1990 levels by 2020.  In developing the 2022 Draft Scoping Plan Update (Draft Scoping Plan), CARB evaluated four scenarios to identify the most viable path to achieve the state’s 2030 interim GHG reduction and GHG neutrality targets. Our first post on this topic discusses CARB’s ultimate selection of the third scenario, which adopts a carbon neutrality target for 2045 instead of 2035, as the best among the four. In this second post, we discuss how the Cap-and-Trade Program (the Program) features in the Draft Scoping Plan.

The Governor has issued an Executive Order with sweeping implications for the oil and gas industry and others.

By Jean-Philippe Brisson, Joshua T. Bledsoe, Nikki Buffa, and Brian F. McCall

On September 23, 2020, California Governor Gavin Newsom signed Executive Order N-79-20, which will have sweeping implications for the oil and gas industry, automakers, low-carbon fuel producers, the logistics industry, and public transit agencies, among others (the Executive Order). Newsom announced the Executive Order against the backdrop of what he called “simultaneous crises,” none of which he argued is more impactful and forceful as the climate crisis. The press conference included Mary Nichols, Chair of the California Air Resources Board (CARB), standing before a small fleet of zero-emission vehicles.

In what will likely be viewed as the most far-reaching measure, the Executive Order requires all passenger vehicle sales starting in 2035 to have zero emissions — a mandate that essentially bans sales of new internal-combustion-powered passenger vehicles in California. As discussed below, the Executive Order raises several significant issues.

Harvard professor Robert Stavins joins Latham partner Bob Wyman to review key climate change mitigation policies.

California’s climate change mitigation program is widely viewed as one of the most comprehensive of its kind — encompassing a cap-and-trade component and a series of complementary measures with specific performance targets for important sectors such as motor vehicles, transportation fuels, power plants, and emissions related to land use decisions.

In this Viewpoints video, Latham partner Bob Wyman, a leader in the firm’s…

By Michael Romey, J.P. Brisson, Michael Dreibelbis and Andrew Westgate

Yesterday, the Court of Appeals for California’s Third Appellate District issued its decision in California Chamber of Commerce, et al., vs. State Air Resources Board, et al., upholding the district court’s decision and allowing the cap-and-trade system to remain in place. The suit was filed by business groups just prior to the state’s first auction of allowances in 2012, arguing that the sale of allowances exceeded the Air Resources Board’s authority under AB 32 and is an unconstitutional tax under Proposition 13, which requires a supermajority in the legislature to pass tax increases (AB 32 did not have such a supermajority).

In the 2-1 decision, the court held that the legislature gave broad discretion to the Air Resources Board to design a distribution system to distribute allowances, and the decision to implement auctions was a valid exercise of that discretion. Turning to the Proposition 13 question, the court held that the “tax or fee” analysis in Sinclair Paint is inapplicable to the cap-and-trade system, and that purchase of cap-and-trade allowances at auction is a “voluntary purchase of a valuable commodity and not a tax under any test.” The trial court had treated the auction program as a regulatory fee.

By Jean-Philippe Brisson, Josh Bledsoe, Michael Dreibelbis and Andrew Westgate

On July 12, 2016, the California Air Resources Board (CARB) proposed amendments to the California Cap-and-Trade Program (17 CCR 95800 et. seq.) for the first time since 2014. The amendments include major substantive changes to compliance requirements as well as new program initiatives such as post-2020 caps, additional linking, and Clean Power Plan (CPP) compliance provisions.

In an unusual move, CARB has provided a “Preliminary Draft Proposed Regulation Order and Staff Report” prior to formally initiating the rulemaking. CARB will release a draft of the formal regulatory package on July 19 for Office of Administrative Law review prior to opening the formal comment period. “Final” draft documents will be posted on August 2, and the formal public comment period will begin on August 5.

2021-2031 Emission Cap

CARB has proposed to set emissions caps for 2021 to 2031. The caps decline annually at a linear rate from 2020 to 2030. CARB set the post-2020 caps by calculating the ratio of the 2020 cap in the current regulation (334.2 MMTCO2e) to the statewide GHG target for 2020 (431 MMTCO2e) as set forth in the Scoping Plan. CARB then extrapolates that ratio—77.5 percent—using the goal of 258.6 MMTCO2e established by Governor Jerry Brown in Executive Order B-30-15. The final cap for the 2030 using this methodology is 200.5 MMTCO2e.

Joshua Bledsoe and Michael Dreibelbis of Latham & Watkins, recently co- wrote a LCFS Fact Sheet with the International Emissions Trading Association (IETA). The article is available on IETA’s website and below:

The California Global Warming Solutions Act of 2006 (aka Assembly Bill 32 or “AB 32”) mandates a reduction in California statewide greenhouse gas (GHG) emissions to 1990 levels by 2020. The Low Carbon Fuel Standard (LCFS) is one of the primary Emission Reduction Measures promulgated by the California…

By Robert A. Wyman, Jr., Daniel V. Van Fleet, and Aron Potash

California’s proposed greenhouse gas (GHG) cap and trade program suffered an expected setback on May 20 when a San Francisco Superior Court issued a writ of mandate enjoining the California Air Resources Board (CARB) from any further cap and trade rulemaking until CARB complies with the California Environmental Quality Act (CEQA) by analyzing cap and trade alternatives such as a carbon fee.  ARB has surely been…