AB 32 Standstill? California’s Cap-and-Trade Market on Hold until State Assesses Viable Program Alternatives

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California’s landmark Global Warming Solutions Act, Assembly Bill 32 (“AB 32”), suffered a major setback on Friday, March 18, when a California superior court judge ruled that the state did not adequately consider alternatives when developing its implementation plan. The decision in Associated Irritated Residents v. California Air Resources Board (CARB) closely mirrors the court’s February tentative ruling.

The court concluded that CARB failed to meet the procedural requirements of the California Environmental Quality Act (“CEQA”) in adopting its cap-and-trade regulations, which are scheduled to go into effect in 2012. In particular, the court held that CARB failed to adequately describe and analyze alternatives in its Scoping Plan, specifically with regard to its justification for a cap-and-trade program; and (2) improperly began implementing the Scoping Plan prior to completing its CEQA-required environmental review process. The court held in favor of CARB on all substantive challenges to promulgating its regulations in compliance with AB 32.

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