On July 12, 2016, the California Air Resources Board ("CARB") issued a Preliminary Draft Proposed Regulation Order and Staff Report, which would amend California's cap-and-trade regulations, 17 C.C.R. §§ 95801 et seq., to achieve greenhouse gas reductions of 40 percent from 1990 levels by 2030, as called for by Governor Brown in Executive Order B-30-15. Among other things, the proposed amendments would extend the major provisions of the cap-and-trade program to beyond 2020 (the program's current expiration date), establish emission caps from 2021 to 2030, enable California's compliance with federal requirements under the Clean Power Plan, allow for the extension of allowance allocation, and continue cap-and-trade linkage with other jurisdictions.
Although the amendments are not scheduled for approval until March 2017, questions are already arising with regard to whether CARB has the statutory authority to extend the cap-and-trade program (or any other provisions of A.B. 32, the California Global Warming Solutions Act). For instance, in an April 19, 2016, letter to California Senate Republicans, the nonpartisan California Legislative Counsel concluded that "[A.B. 32] does not authorize the Governor or the [C]ARB to establish a greenhouse gas emissions limit that is below the 1990 level and that would be applicable after 2020."
A bill to extend provisions of A.B. 32 to 2030, S.B. 32, is currently before the Senate Committee on Appropriations. However, it is not clear that S.B. 32 would extend CARB's authority for market-based compliance mechanisms, under which cap-and-trade was adopted. Moreover, S.B. 32, if passed without a two-thirds supermajority, is likely to encounter similar legal challenges to those that have plagued A.B. 32—that the auction program (an essential component of the cap-and-trade) is invalid because it constitutes a "tax," and A.B. 32, under which the auction was promulgated, was passed without the supermajority required to pass a tax under the California Constitution. See California Chamber of Commerce v. California Air Resources Board, Case No. C075930; Morning Star Packing Co. v. California Air Resources Board, Case No. C075954. Thus, it is likely that any extension to cap-and-trade adopted by CARB is likely to be met with legal challenges. CARB's proposed regulations are set for public comment from August 5, 2016, to September 19, 2016.
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