AB 32: New Challenge Targets California Cap-and-Trade Law

The California Air Resources Board (“CARB”) has again been sued over its implementation of the Global Warming Solutions Act of 2006 (also known as AB 32). The lawsuit, Morning Star Packing Co. et al. v. CARB, filed on April 16, 2013, resembles an earlier action brought by the California Chamber of Commerce (“CalChamber”) in November of 2012 (discussed here). Both cases allege that the auction of allowances under the cap-and-trade amounts to an illegal tax because AB 32 was not approved by two-thirds of both houses of the state legislature, as required by the California Constitution.

Where the two cases differ is that Morning Star adds explicit examples of how the alleged unconstitutional tax is causing petitioners to bear increased costs and expenses, an important element in establishing the standing of the petitioners. For example, Morning Star Packing Company, the only petitioner that is also regulated by the cap-and-trade, has purchased nearly $400,000 worth of 2013 vintage allowances. At stake is not only the future of one critical element of the cap-and-trade, but also revenue which over the life of the cap-and-trade program is expected to be between $7 and $75 billion.  (Marten Law)