California Drops the Hammer on First Carbon Auction Despite New Lawsuit

The California Air Resources Board (CARB) proceeded today with the inaugural carbon allowance auction for its impending “cap-and-trade” greenhouse gas (GHG) emissions regulation program, despite a lawsuit filed yesterday by the California Chamber of Commerce to challenge CARB’s auction authority.

CARB’s cap-and-trade program was developed pursuant to AB 32, the “California Global Warming Solutions Act of 2006,” which requires statewide reductions of GHG emissions to 1990 levels by 2020. Currently, entities emitting more than 25,000 metric tons GHG per year in certain industries such as petroleum, electricity generation and heavy manufacturing must acquire allowances equivalent to their GHG emissions during specified compliance periods. Each allowance permits an entity to emit one metric ton of carbon dioxide equivalent, and those allowances can be traded. The total number of allowances in circulation—the emissions “cap”—will be gradually reduced by CARB until 2020 in order to achieve AB 32’s emissions reduction goals.

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