Yesterday afternoon, PLF filed its opening brief challenging the auction provisions of the California Air Resources Board’s (CARB’s) Cap and Trade Regulation governing carbon dioxide emissions. In the regulation, CARB is not content merely to prohibit covered entities from discharging carbon dioxide without first obtaining emissions allowances. CARB also seeks to sell the allowances at auction to the highest bidders, thereby generating about $70 billion in windfall revenues for California’s coffers. It is CARB’s way of implementing a statute that the California Legislature has grandly called the California Global Warming Solutions Act of 2006, better known as AB 32.
California is the first state in the Nation to comprehensively regulate carbon dioxide emissions, and AB 32 requires covered entities to reduce their emissions to 1990 levels by the year 2020. But simply implementing AB 32’s emissions requirements was not enough for CARB. Selling emissions allowances at auction was deemed far better for the government’s bottomless pockets. Because carbon dioxide is virtually everywhere and in everything, the auctions will siphon billions from productive private use and direct the money to the addled structures of California’s bureaucracy, throwing a monkey wrench into California’s fragile economic recovery, such as it is.
Representing 12 businesses, trade associations, and individuals who for years have been emitting carbon dioxide without the need to pay for the privilege, PLF filed its brief in the case of Morning Star v. CARB, explaining that the auction provisions are illegal for at least three fundamental reasons. First, the auction constitutes an illegal tax under Proposition 13 of the California Constitution, because it was not passed by the requisite two-thirds supermajority legislative vote and does not qualify as a regulatory fee. Second, AB 32 does not authorize CARB to generate billions in revenues and, therefore, CARB has exceeded its authority. Third, four statutes enacted by the California Legislature in 2012 attempt to fix these inconvenient and embarrassing legal problems but utterly fail to do so because they run afoul of Proposition 26 of the California Constitution, which requires a supermajority vote for all revenue generating measures, regardless of whether or not they are taxes. None of the 2012 statutes passed with a supermajority vote.
Bottom line. CARB’s unconstitutional and illegal auctions strike at the heart of the California economy, calling for a legal response akin to heart surgery. The surgical scalpel is PLF’s legal brief. Though the denizens of CARB may be immune to economic reality or, some may argue, common sense, they are not immune to the law. The hearing on PLF’s legal challenge is scheduled for August 28, 2013, in Sacramento County Superior Court.