Group challenges California's cap-and-trade setup

Published online: Jul 25, 2013

REDDING, Calif.-An attorney challenging California's new cap-and-trade program says it is only the beginning of what could be drastic regulatory steps as the state embarks on an ambitious goal of eliminating most fuel emissions by 2050.

To achieve across-the-board reductions in greenhouse gas emissions from electricity, gasoline, propane and other energy sources, state officials have floated such ideas as a ban on private ownership of timberland and a requirement that all farmers and ranchers cede conservation easements to the state, asserts Tony Francois, an attorney for the Pacific Legal Foundation.

"These are pretty dramatic proposals," Francois said July 23. "Some of these ideas are not new. ... The thing worth bearing in mind is the 2050 goal is so far out there that folks will argue that's going to require some extreme measures."

California Air Resources Board officials "routinely talk about their charge" to facilitate "a fundamental reshaping of the state's economy," Francois said.

Air board spokesman Dave Clegern said afterward he is unaware of such measures involving timberland or farmland. He said the state isn't placing a burden on any one industry to meet emissions goals but has regulated fuel manufacturers, automakers and utilities and set targets for communities.

"The way we look at it is for much of what we're putting in place here, the initiative is already going and the momentum is already there," Clegern said. "We're simply trying to direct it in an orderly fashion to achieve goals for the entire state. I don't think anybody is going to argue it's to California's disadvantage to look for a more sustainable economic model."

The cap-and-trade program is a key element in California's climate plan, setting a statewide limit on sources responsible for 85 percent of the state's greenhouse gas emissions and establishing marketable credits aimed at encouraging long-term investment in cleaner fuels and more efficient use of energy, according to the air board's website.

As part of the program, the ARB holds allowance auctions and reserve sales to enable participants to purchase credits from businesses that didn't exceed their cap. The first reserve sale was held in March.

A similar nationwide proposal sputtered in Congress in 2010 after critics found it would have cost agriculture hundreds of millions of dollars a year in increased fuel costs and billions of dollars in farm gate revenues. However, President Barack Obama has said he plans to make it a priority in his second term.

The PLF filed suit in April in Sacramento Superior Court, arguing the state's cap-and-trade system amounts to a tax that wasn't approved by a required two-thirds majority in the Legislature. Further, the organization argues the auctions of emissions allowances goes beyond the scope of Assembly Bill 32, the climate change measure passed in 2006.

AB 32 requires emissions statewide to be reduced to 1990 levels by 2020, and the air board has established an additional goal of reducing those emissions by 80 percent by 2050, Francois said.

Francois said the cap-and-trade system is already placing a financial burden on family-owned businesses that own fleets of trucks as well as large dairies. One business it's representing in the lawsuit is the Morning Star Co., a Woodland, Calif., tomato processor that had to spend more than $200,000 in recent auctions for emissions credits, he said.

AB 32 was sold as way to require big business to mitigate its impact on the environment, said Robert Rynearson, land department manager for W.M. Beatty and Associates, a timber company.

"The actual effect is going to be on small businesses, and disproportionally," Rynearson said.

The air board's Clegern counters that most of the emissions allowances the state issues are free of charge, and those who participate in auctions receive something that can be resold or traded for value. He said businesses can avoid paying high prices for credits by reducing emissions.

"The cap comes down 2 or 3 percent a year, so it's not like they have to do this all at once," Clegern said. "It gives businesses the flexibility to put these reductions into their business plans. Many of these places are already contemplating new equipment. ... This is just a means for them to space that along their timeline."

The workshop at the McConnell Foundation's ranch here was one of a series of meetings the PLF has been holding around the state to discuss its lawsuit and future regulations. Many people aren't fully aware of the impacts of cap and trade, said Robert Krauter, a PLF spokesman.

"These briefings have opened the eyes of a lot of people," Krauter said. "There's some pretty scary stuff coming after 2020. I think people need to know that."