In November, the California Chamber of Commerce filed a lawsuit challenging the legality of the revenues generated by the California Air Resources Board (CARB) for the state’s cap-and-trade greenhouse gas program. Today, we took action to join the suit. The NAM filed papers to intervene in the litigation, focusing not on the legality of the cap-and-trade program itself or the merits of climate change science, but on the extraordinary revenues generated by the auction and reserve sale provisions adopted by CARB.

The effectiveness of the cap-and-trade program comes from the state’s ability to ratchet down greenhouse gas emissions from year to year.  CARB may not go beyond this authority to generate a huge income stream for the state. The first quarterly auction of greenhouse gas allowances in November raised nearly $289 million for California, substantially more than the $62 million required to implement the law. Moreover, that revenue is projected to increase to as much as $3 billion this year and $70 billion over the life of the program.

That income goes far beyond simply paying for the costs of administering the program, and thus exceeds the legal authority of CARB. Alternatively, even if the fees are authorized, they constitute a massive new tax that must be approved (but were not) by a 2/3 majority of the California legislature under the state constitution.

CARB’s income scheme will significantly raise energy costs in the state and further harm its competitiveness, providing limited or no environmental benefit.

A hearing in Superior Court in Sacramento County is scheduled for May 31.

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