Tentative Ruling Issued in California Cap and Trade Auction Lawsuit

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A tentative ruling was issued yesterday in the related cases California Chamber of Commerce v. California Air Resources Board (ARB)  and  Morning Star Packing Co. v. ARB, pending before the Sacramento County Superior Court.  The cases challenge the legality of ARB's cap and trade auctions under two theories:  (1) the cap and trade auctions exceed ARB's authority under AB 32, and (2) the auctions amount to an illegal tax adopted without the requisite two-thirds approval of the California Legislature.  The Court tentatively ruled in ARB's favor that the agency's implementation of a cap and trade auction system is within the scope of AB 32, which delegated ARB authority to design the distribution of emissions allowances.  The Court did not rule on whether the allowance auctions constitute an illegal tax.  The tentative ruling outlined questions on this topic for oral argument, which was heard yesterday.  A ruling on the tax challenge is expected in the next 90 days.

ARB held its most recent quarterly auction on August 4, 2013.  2013 vintage allowances sold for $12.22.  In the advance auction of 2016 vintage allowances, held concurrently, allowances sold for $11.10.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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