Appeals Court Hears Challenge To California's Cap-And-Trade Program

While Governor Jerry Brown was praising California’s efforts to combat climate change in his State of the State speech, his signature program to reduce greenhouse gases was being challenged in court. 

California’s cap-and-trade program is a central part of the state’s effort to reduce carbon emissions. It requires companies to buy, at auction, permits to emit the heat-trapping gases. Morning Star Packing, a tomato processing company that falls under the regulations, claims that requiring companies to purchase permits is unconstitutional. 

“They are not valid regulatory fees. They were not approved by a two-thirds vote of the legislature," says Tony Francois with the Pacific Legal Foundation, which represents the company and other businesses in the lawsuit.  

Francois says the permits amount to an illegal tax. So far, the cap-and-trade auctions have raised $4.4 billion. 

The state and the Natural Resourcs Defense Council are defending the program. 

“The government is not setting the price, you’re getting something of value in return, and you have other means of complying other than going to the auction for emission allowances," argues Alex Jackson, an attorney with the NRDC. "Those are typical hallmarks that courts rely on to distinguish taxes from other bona fide regulatory charges.”

Judges from the California 3^rd District Court of Appeal heard arguments, but have 90 days to issue a decision in the case.

In 2013, a Sacramento County Superior Court judge upheld the constitutionality of the program. 

Whatever the outcome, the case will likely head to the California Supreme Court. 

Jackson says the case strikes at the heart of how the cap-and-trade program operates.

"Certainly California's climate leadership is not entirely condensed into this one program, but I think this case will have broad ramifications depending on its outcome," says Jackson.