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California Cap-and-Trade Proves Lonely Effort

While the state picked up three Canadian provinces, California's effort to start a cap-and-trade system for greenhouse gas (GHG) emissions is proving to be a lonely, uphill battle. Legal and political challenges continue as an increasing head wind builds against the state's efforts.

Under the state's precedent-setting 2006 climate change law (AB 32) the California Air Resources Board (CARB) is the lead implementing agency. In that capacity, CARB approved the new cap-and-trade regulation that has been going through an administrative law review to prepare it to be put in effect at the start of next year. CARB Chairman Mary Nichols has called the new program "the capstone of our climate policy."

Last month CARB hit a court challenge to its efforts (see Daily GPI, March 25) and now the state has lost the backing of six other states in what is called the Western Climate Initiative (WCI), a regional approach to GHG emissions credits trading that was originally championed by former Gov. Arnold Schwarzenegger. This month WCI announced that the Canadian provinces of British Columbia, Quebec and Ontario have joined the regional cap-and-trade effort; originally four provinces and seven western U.S. states signed on to WCI.

While downplaying the court ruling, a CARB spokesperson said his agency's cap-and-trade efforts are separate from WCI; however, the agency "welcomed partners to create a larger market."

California state environmental officials told the Los Angeles Times in a report on the WCI efforts in the newspaper's edition Wednesday that they are still hoping for a broader, North American program and one that eventually becomes national in the United States. The Times reported that even though the indications are getting stronger that climate change is showing its effects, the public and elected officials are losing interest in cap-and-trade, recent polls have shown.

Nevertheless, the news report quoted experts such as Harvard economist Robert Stavins predicting that California's still-incomplete efforts eventually will lead to a national cap-and-trade program. An attempt in Congress two years ago, of course, failed to get through both houses, and there are ongoing attempts to strip the federal Environmental Protection Agency of its powers to regulate GHG emissions.

Meanwhile, CARB is still awaiting a writ (or proposed remedy) from the plaintiffs (state business interests) that challenged the cap-and-trade proposal and last month won at least a partial favorable ruling from state Superior Court Judge Ernest H. Goldsmith who determined that CARB failed to take into account public comments on the impact of proposed elements of its cap-and-trade plan before adopting it last year. The state air regulatory panel is awaiting the writ so it can appeal the court ruling.

"The court did not rule in favor of any of the plaintiffs' arguments against cap-and-trade," CARB spokesperson Stanley Young told NGI at the time of Goldsmith's ruling. Allegations of environmental harm from the proposed program have no basis, according to CARB, which is stressing that the record leading up to the cap-and-trade program was not challenged in the lawsuit, nor were the findings of health impacts analysis that was done as part of the case.

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